Indian Equity Market Continued Downhill Rally In Second Half of 2021: S&P Report

The Indian equity market continued with its downhill rally well into 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. Active funds in the ELSS and mid- and small-cap categories fared better, with 39.02 per cent and 37.25 per cent of the active funds underperforming their respective benchmarks, according to the SPIVA India Scorecard report released by S&P 

The SPIVA India Scorecard compares the performance of actively-managed Indian mutual funds with their respective benchmark indices over one-, three-, five- and 10-year investment horizons. 

According to the report, about 55 per cent of the equity funds in the large-cap category underperformed the S&P BSE 100 benchmark. Over longer horizons, about 67.61 per cent of large-cap funds underperformed the 10-year period benchmark. The funds also witnessed a low survivorship rate of 69.01 per cent over the period, according to the report. The asset-weighted fund return was 16 bps higher than the equal-weighted fund return over the 10-year period, and the return spread between the first and third quartile breakpoints of fund performance was 2.79 per cent for the same period, the report said. 

In the mid- and small-cap category, about 56.06 per cent of the active funds underperformed the S&P BSE 400 MidSmallCap Index over the 10-year period ending in December 2021. Over the same period, the survivorship rate was 75.76 per cent, the report said. Over the second half of 2021, 37.25 per cent of the funds underperformed the benchmark. For the same period, the asset-weighted fund return was 132 bps lower than the equal-weighted fund return, and the return spread between the first and third quartile breakpoints of fund performance was 4.01 per cent, which was the highest among the equity categories. 

Among equity-linked savings schemes (ELSS), about 26.83 per cent of funds underperformed the benchmark in the one-year period ending in December 2021. Over the three-, five- and 10-year periods ending in December 2021, 63.41 per cent, 79.07 per cent, and 58.33 per cent of funds underperformed the S&P BSE 200, respectively. Over the 10-year horizon, the return spread between asset-weighted and equal-weighted returns was -78 bps. The return spread between the first and third quartile breakpoints of fund performance was 2.71 per cent, the report added.