Large Cap Equity Funds Underperform Their Benchmark

Mumbai: According to latest data released by S&P Indices Versus Active (SPIVA) India Scorecard, the Indian Equity Large Cap funds, Equity-linked saving scheme (ELSS) funds and Indian Equity mid/small cap funds over the last five-year period ending December 2019, have underperformed in their indices by 82.29 per cent, 78.38 per cent and 40.91 per cent respectively.  Further over the one-year period ending December 2019, the S&P BSE 100 surged 10.92 per cent as 40 per cent of the Indian Equity Large-Cap funds underperforming the benchmark. 

Sharing his views on the same, Akash Jain, Associate Director, Global Research & Design, S&P Dow Jones Indices says, “Over longer horizons, majority of the actively managed large-cap equity funds in India underperformed the S&P BSE 100 with 64.80 per cent large-cap funds underperforming over the 10-year ending in December 2019. During this period the large-cap funds witnessed a low survivorship rate of 68.80 per cent.” 

On the flip side, among all the categories evaluated in SPIVA, India Scorecard, the Mid-/Small-category fared the best for active funds and managed to beat the S&P BSE 400 Mid Small Cap Index across different time horizons studied in the report. 

The asset-weighted return for large-cap equity funds was 36 basis points(bps) higher as compared to equal-weighted return over the10- year period. “For the same period, in the mid/small cap equity funds category, the asset-weighted fund return was 26 bps lower than the equal-weighted fund return, and the return spread between the first and the third quartile break points of the fund performance was 3.64 per cent,” notes the SPIVA India Scorecard. 

Similarly, over the same period 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 per cent.