82% of equity largecap funds underperformed their benchmarks in 5-year period to Dec-19

The latest S&P Indices Versus Active (SPIVA) India scorecard reveals that over the five-year period ending December 2019, 82.29 percent of Indian equity largecap funds, 78.38 percent of equity linked saving schemes (ELSS) funds and 40.91 percent of Indian equity mid/smallcap funds underperformed their respective indices.

Over the one-year period ending December 2019, the BSE 100 surged 10.92 percent with 40 percent of the Indian equity largecap funds underperforming the benchmark.

The SPIVA India scorecard compares the performance of actively managed Indian mutual funds with their respective benchmark indices over 1-, 3-, 5-, and 10-year investment horizons.

In this scorecard, S&P Dow Jones Indices studies the performance of three categories of actively managed equity funds and two categories of actively managed bond funds over the 1-, 3-, 5-, and 10-year periods ending December 2019.

Akash Jain, Associate Director, Global Research & Design, S&P Dow Jones Indices, said, “Over longer horizons, majority of the actively managed largecap equity funds in India underperformed the BSE 100 with 64.80 percent largecap funds underperforming in the 10-year period ending December 2019. During this period, largecap funds witnessed a low survivorship rate of 68.80 percent.”

Among all the categories evaluated in the SPIVA India Scorecard, the mid-/smallcap category fared the best for active funds with majority of them managing to beat the S&P BSE 400 Mid/Smallcap indices across different time horizons studied in the report. Though the survivorship rate was low at 64.04 percent over the 10-year period.

The asset-weighted return for largecap equity funds was 36 basis points higher than the equal-weighted return over the 10-year period. The return spread between the first and the third quartile break points of the fund performance was 2.99 percent for the same period.

For the same period, in the mid/smallcap funds category, the asset-weighted fund return was 26 bps lower than the equal-weighted fund return. The return spread between the first and the third quartile break points of the fund performance was 3.64 percent.

Over the 10-year horizon, the return spread between asset-weighted and equal-weighted returns was negative 43 bps for Indian ELSS funds. In the same category, the return spread between the first and the third quartile break points of the fund performance was 2.53 percent.