80% of Indian large-cap funds underperformed benchmarks in 2020: S&P

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Four out five of Indian large-cap funds have underperformed when compared to benchmark indices in 2020, S&P wrote in its latest SPIVA India Scorecard report.

In the equity-linked saving schemes (ELSS) and mid/small-cap funds, the performance was slightly better as 3 out of 5 funds underperformed against the benchmarks, the note added.

S&P Dow Jones Indices’ associate director for global research and design Akash Jain said the performance was worse if one were to consider the recovery after the markets hit the trough in April.

“During this recovery period, we saw that the second half of 2020 has been a particularly challenging period for Indian equity active funds where 100% of the Large Cap funds, 80% of the ELSS funds and 53% of the Mid-/Small-cap funds underperformed their respective benchmarks,” he said.

Overall, 2020 had extraordinary volatility and India joined the rest of the world in this aspect, Jain added.

In the second half of 2020, the asset-weighted returns lagged their respective benchmark returns in each of the Indian Equity categories, including large-cap funds (by 273 basis points), ELSS funds (by 318 basis points) and mid/small-cap funds (by 230 basis points), a statement said.

The Indian equity mid/small-cap category fared the best for active fund managers over a 10-year investment horizon among all the categories, which were evaluated for the SPIVA India Scorecard, it added.

In the same time frame of 10 years, 68.42% of the actively managed large-cap equity funds in India underperformed the benchmark, it said.

The story was similar in the fixed income category. Half of the Government Bond funds underperformed the S&P BSE India Government Bond Index while over 90% of Composite Bond funds lagged the performance of the S&P India Bond index.