Despite recent underperformance, MNC funds have delivered over longer time frames.
Retail investors now own a larger share of smallcap companies than they did a year ago, thanks to their conviction in mutual fund (MF) schemes focused on this segment. Data from Capitaline shows that MFs' average holding in the National Stock Exchange Nifty Smallcap 250 Index stood at 9 per cent at the end of the October-December quarter of 2023-24 (FY24), up from 7.76 per cent in the same quarter of 2022-23.
In contrast with their strong performance in 2020 and 2021, pharmaceutical and healthcare funds experienced a decline in 2022, with returns plummeting by an average 9.8 per cent. This trend has continued in the current year, with year-to-date return remaining in the negative (-4.9 per cent). In the past three months, pharma funds have been hit hard, experiencing a 7.9 per cent decline.
'Auto, pharma, and industrials have delivered well in the recent quarter, while businesses like quick-service restaurants, consumer staples, and durables have underperformed in volume growth.'
Active largecap funds, which have the toughest job in terms of outperforming the benchmark, did better in 2023 as their bets in the mid and smallcap stocks paid off.
'Investors should ideally consider equity allocations from a medium-to-long term perspective.'
Actively-managed large-cap mutual fund (MF) schemes have managed to regain some lost sheen this year after faring poorly in the 2022 calendar year (CY22). At the end of the first six months (H1) of CY23, 78 per cent of the active large-cap schemes were ahead of the Nifty50 index funds as against just 26 per cent in 2022. When compared to the Sensex index funds, 61 per cent active funds have delivered better returns, shows an analysis of Value Research data.
Enter multi-cap funds only if you can stay invested for the long term.
While mid-cap and small-cap funds have given category average returns of 73.3 per cent and 89.8 per cent respectively over the past year, large-cap funds' returns have been lower at 53.9 per cent, points out Sarbajeet K Sen.
'Continue with your SIPs to get the benefit of lower average prices in this challenging market environment.'
Many investors want to exit equities now and re-enter when they begin to rise. Such timing is difficult to pull off.
'Given the worries about sluggish growth, rising interest rates and likely volatility, it's quite logical to infer that the SIP route could be the preferred way of investing.'
