52% Indian Large-Cap Equity Funds Underperform Benchmark In 2023, Bonds Fare Worse In Long Run

The S&P Dow Jones Indices data for year 2023 show that besides large-cap equity funds performing poorly, mid-and-small funds fared the worst over the 10-year period, while the performance in the bond index was extremely poor at 82 per cent, though the growth was well over 8 per cent.
Large-Cap Equity Funds, 
Bond fare
Large-Cap Equity Funds, Bond fare

Over half of the large-cap Indian equity funds have underperformed their benchmarks in 2023, according to data released by the S&P Indices Versus Active Funds (SPIVA) India Scorecard. Over 52 per cent of actively managed funds underperformed the S&P BSE 100 index, while 30 per cent of equity-linked savings schemes (ELSS) underperformed S&P BSE 200 for the year ending December 2023.

Incidentally, the S&P BSE 200 is the only category where majority of the funds outperformed their relevant benchmark last year, according to the SPIVA India Scorecard.

In contrast, the mid-and-small cap funds fared the worst in the long run. Even as the S&P BSE 400 MidSmallCap Index rose 44 per cent, 75 per cent of the funds in this category lagged the index over the 10-year period ending December 2023. On a one-year performance, a huge 74 per cent of active managers underperformed this index.

The performance in the bond index was worse. The S&P BSE India Government Bond Index increased by 7.9 per cent in 2023 and less than a fifth (20 per cent) of active managers beat the benchmark in this category in 2023. The underperformance rate was a whopping 82 per cent.

Likewise, the S&P BSE India Bond Index rose 8 per cent, while the underperformance of Indian Composite Bond fund managers was the highest across all categories in the SPIVA India Scorecard, at 96 per cent. On a 10-year period, only one out of 116 Indian Composite Bond funds outperformed the index, corresponding to an underperformance rate of 99.1 per cent, the highest underperformance rate across all categories over any time horizon, according to the report.

The report also took into account the global market conditions and noted that the Indian bond market had a strong year, with annual returns in the high single digit (8 per cent).

Benedek Voros, Director, Index Investment Strategy, S&P Dow Jones Indices said in a statement; “As we reflect on the past year, the market’s vigour is unmistakable, with the S&P BSE 100 and S&P BSE 200 indices posting gains of 23.2 per cent and 24.5 per cent, respectively. This performance underlines a pivotal year for Indian markets, sustained by a macroeconomic environment that has seen interest rates and commodity prices stabilising.”

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