S&P Dow Jones Index-backed SPIVA report shows that 50% of Indians equityLarge cap funds outperformed the S&P BSE 100. Meanwhile, in the second half of 2021, 54.55% of large-cap funds underperformed the mentioned benchmark.
Over the long term, 70% of large-cap funds underperformed the benchmark BSE 100 in the 3-year period ended December 2021, while 82.26% of these funds underperformed the benchmark in the five-year period. Notably, 67.61% of the actively managed large-cap equity funds in India underperformed the BSE 100 benchmark in the 10-year period ended December 2021.
The SPIVA report said that over the same period, Indian large-cap funds witnessed a lower survival rate of 69.01%. Asset-weighted fund returns were 16 basis points higher than similar-weighted fund returns over the 10-year period, and the return between the first and third quartile breakpoints of fund performance for the same period was 2.79%.
“The rally in Indian equities continued in the second half of 2021, with more than half of the active funds in the large-cap category lagging the S&P BSE 100 benchmark. Funds active in the ELSS and mid-/small-cap categories remained active at 39.02% and 37.25%. Outperformed with funds that were underperforming their respective benchmarks,” the SPIVA report said.
Further, the report stated that “Mid-/Small-cap was the best-performing fund category among the equity categories included in this scorecard; the S&P BSE 400 Mid-Smallcap Index underperformed 51.77% in the one-year period ended December 2021.” Although this category of investors would have noticed a wide spread in fund returns (the difference between the first and third quartile was 19.57%), highlighting the fund selection risk challenges.
For Indian ELSS funds, the SPVA report noted that in the one-year period ending December 2021, the S&P BSE 200 ended in the green, returning 29.11%, with 26.83% of the funds underperforming the benchmark . During the second half of 2021, 39.02% of the fund underperformed the benchmark.
Meanwhile, in the 3, 5, and 10 year periods ended December 2021, 63.41%, 79.07%, and 58.33 ELSS funds outperformed the BSE 200 benchmark, respectively. It said, “Over the 10-year horizon, the return between asset-weighted and equal-weighted returns was -78 bps. The return between the first and third quartile breakpoints of the fund’s performance was 2.71%.”
With regard to Indian equity mid-/small-cap funds, the report noted that the S&P BSE 400 Mid-Smallcap Index was up 51.77% in the one-year period ended December 2021. In the second half of 2021, the fund underperformed the benchmark at 37.25%.
Among all the categories assessed in the SPIVA India Scorecard, the Indian Equity Mid-/Small-Cap category performed the best for active funds, with 56.06% of active funds underperforming the S&P BSE 400 MidSmallCap Index over the 10-year period. December 2021. However, over the same period, the survival rate was lower, at 75.76%. SPIVA said in its note, “For the same period, asset-weighted fund returns were 132 bps lower than similar-weighted fund returns, and the return between the first and third quartile breakpoints of the fund’s performance was 4.01%, which was Highest among equity categories.”
Throwing light on Indian government bonds, the SPIVA report reported that the S&P BSE India Government Bond Index returned 3.54% in the one-year period ended December 2021. In the 6-month and 1-, 3-, 5-, and 10-year periods ending in December 2021, 80.77%, 79.17%, 53.85%, 76.19%, and 88.00 of the actively managed funds in this category, respectively % lagged behind the benchmark. In the 10-year period ending December 2021, the survival rate was only 40.00%. For the same period, asset-weighted fund returns were 121 bps higher than similar-weighted fund returns, and the return between the first and third quartile breakpoints of the fund’s performance was 1.68%.
As far as Indian composite bond funds are concerned, the SPIVA report said that in the 12-month period ending December 2021, the S&P BSE India Bond Index closed in the black with a gain of 3.96%. During the 3-, 5- and 10-year periods ending December 2021, about 90% or more of the funds underperformed the benchmark. Over the 10-year period, the survival rate was 74.74%. For the same period, asset-weighted fund returns were 137 bps higher than similar-weighted fund returns, and the return between the first and third quartile breakpoints of the fund’s performance was 1.49%.