Majority Of Large-Cap Equity Mutual Funds Underperformed Benchmark In 2022

Majority of Indian Large-Cap equity mutual funds failed to beat the benchmark, with 88 per cent of actively managed funds underperforming the S&P BSE 100 in 2022, according to new study by S&P Dow Jones Indices released on Tuesday. In the same period, the benchmark for Indian Equity Mid-/Small-Cap funds -- the S&P BSE 400 MidSmallCap index -- rose 2 per cent in 2022, and 55 per cent of active managers underperformed the index over that period.

Further, S&P BSE 200 grew by 6 per cent in 2022, and 77 per cent of Indian ELSS (equity linked saving schemes) funds underperformed the index. According to S&P Indices Versus Active (SPIVA) Funds India Scorecard for 2022, Indian Composite Bond funds fared the best, with 45 per cent underperforming the S&P BSE India Bond index. 

"Indian markets fared far better than most global markets in 2022, although main equity and fixed income benchmark indices dropped in H1, they staged a remarkable recovery in the second half of the year. Tightening lending standards weighed more heavily on smaller firms, with the S&P BSE 500 MidSmallCap index underperforming the S&P BSE 200 by 4 per cent, the most since 2019," Benedek Voros, Director - Index Investment Strategy at S&P Dow Jones Indices, said. 

As per the report, the S&P BSE India Government Bond index gained by almost three per cent in 2022. Interestingly, less than one-third of active managers beat the benchmark in 2022, with an underperformance rate of 68 per cent. In the long run, the scorecard further noted that among all categories, Indian Equity Mid-/Small-Cap funds fared the best with 50 per cent of them beating the S&P BSE 400 MidSmallCap Index over the 10-year period ended December 2022. Over the 10-year time horizon, more than 60 per cent of funds underperformed in all categories outside of Indian Equity Mid-/Small-Cap.

The report on actively managed mutual funds by S&P Dow Jones Indices noted that Indian ELSS funds achieved the second-highest long-term survival rates across all categories in SPIVA India Scorecard, with 78 per cent of them still surviving after 10 years.