Last Updated on December 29, 2021 at 5:33 pm
After the Feb-March 2020 market crash, 80% of active large cap mutual funds have outperformed Nifty 50 and Nifty 100 total return indices. This is likely due to the two-year imbalance among Index stocks that was destroyed due to the crash. A performance report on active large cap funds. Have they returned? Will they do better in the future?
After 1st Feb 2018, the equity market went in two different directions. A few stocks with the most weight in the Nifty/Sensex moved up while the rest of the market – the remaining Nifty stocks, Nifty Next 50, midcaps and small caps started moving down. As a result, the outperformance of several actively managed mutual funds, especially in the large cap category became prominently visible. This trend seems to have reversed now.
![Normalized movement of Nifty 50 and Nifty 50 Equal-weight indices indicating the departure in movement after 1st Feb 2018](https://freefincal.com/wp-content/uploads/2020/05/Normalised-movement-of-Nifty-50-and-Nifty-50-Equal-weight-indices-indicating-the-departure-in-movement-after-1st-Feb-2018.jpg)
If you have checked the past 1-year returns in the large cap category just a few months ago, Sensex and Nifty index funds would have dominated the table (prior Feb 2018 Nifty Next 50 funds were on top). Today all these index funds are closer to the bottom of the table.
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! 🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
All trailing returns were calculated wrt May 15th 2020. We looked at these 27 active large cap funds:
- Canara Rob Bluechip Equity Fund(G)-Direct Plan
- Axis Bluechip Fund(G)-Direct Plan
- BNP Paribas Large Cap Fund(G)-Direct Plan
- JM Large Cap Fund(G)-Direct Plan
- IDBI India Top 100 Equity Fund(G)-Direct Plan
- LIC MF Large Cap Fund(G)-Direct Plan
- IDFC Large Cap Fund(G)-Direct Plan
- Invesco India Largecap Fund(G)-Direct Plan
- Baroda Large Cap Fund(G)-Direct Plan
- Kotak Bluechip Fund(D)-Direct Plan
- HSBC Large Cap Equity Fund(G)-Direct Plan
- UTI Mastershare(G)-Direct Plan
- Edelweiss Large Cap Fund(G)-Direct Plan
- L&T India Large Cap Fund(G)-Direct Plan
- PGIM India Large Cap Fund(G)-Direct Plan
- Mirae Asset Large Cap Fund(G)-Direct Plan
- Essel Large Cap Equity Fund(G)-Direct Plan
- SBI BlueChip Fund(G)-Direct Plan
- Taurus Largecap Equity Fund(G)-Direct Plan
- DSP Top 100 Equity Fund(G)-Direct Plan
- ICICI Pru Bluechip Fund(G)-Direct Plan
- Indiabulls Blue Chip Fund(G)-Direct Plan
- Aditya Birla SL Frontline Equity Fund(G)-Direct Plan
- Franklin India Bluechip Fund(G)-Direct Plan
- Tata Large Cap Fund(G)-Direct Plan
- HDFC Top 100 Fund(G)-Direct Plan
- Nippon India Large Cap Fund(G)-Direct Plan
Over the last seven years, 22/27 (81%) funds beat the NIfty and Nifty 100 TRI. Note all returns are after expenses. Over the last year too, 22/27 funds (not the same ones!) outperformed the two indices. This is what happened in the middle!
![Percentage of active large cap funds that outperformed Nifty 50 TRI and Nifty 100 TRI](https://freefincal.com/wp-content/uploads/2020/05/Percentage-of-active-large-cap-funds-that-outperformed-Nifty-50-TRI-and-Nifty-100-TRI.jpg)
Clearly the overvaluation of a few NIfty stocks (which we have not seen at least since the 2000s) and the subsequent correction has impacted how well active funds fared before and after the crash.
What does this mean to the investor? Does this mean active large cap funds are back?
No. In Dec 2018 only Five Large Cap funds had comfortably beaten Nifty 100 and this was a thorough study based on rolling returns. Using the same criterion on the May 2020 Equity Mutual Fund Performance Screener we get only three funds!
Even if we use regular large cap funds and investigate bet April 2006 to Dec 2017 (before the onset of this market homogeneity) only 9/22 fund have consistently beaten NIfty 100 TRI over 3,5,7 and 10 years (over 70% of all rolling return data points).
So clearly even before the “80% from Nifty 100” SEBI mandate, active large cap funds had trouble beating the Nifty 100.
So why are you confusing us with data then? There is always going be some data like this. Some Yes Bank, some Vedanta, some index fund moving up the star rating ladder, moving down etc. If you chose index funds because that is going to outperform active funds “in the long run” then you are likely to be disappointed at least from time to time.
Choose passive funds only because of the additional risk in active funds – loss of performance risk, star ratings change risk, fund manager losing it risk, fund manager quitting-risk. If you think you will get better returns from index funds then behavioural risks could sabotage your investments!
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
![Follow Freefincal on Google News Follow Freefincal on Google News](https://freefincal.com/wp-content/uploads/2023/07/Follow-Freefincal-on-Google-News.jpg)
![Subscribe to the freefincal Youtube Channel Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.](https://freefincal.com/wp-content/uploads/2023/07/Subscribe-to-the-freefincal-Youtube-Channel.jpg)
![Follow freefincal on WhatsApp Channel Follow freefincal on WhatsApp Channel](https://freefincal.com/wp-content/uploads/2023/09/Follow-freefincal-on-WhatsApp-Channel-300x83.jpg)
![Listen to the Lets Get Rich with Pattu Podcast Listen to the Lets Get Rich with Pattu Podcast](https://freefincal.com/wp-content/uploads/2023/07/Listen-to-the-Lets-Get-Rich-with-Pattu-Podcast.jpg)
![Lets Get RICH With PATTU podcast on YouTube Lets Get RICH With PATTU podcast on YouTube](https://freefincal.com/wp-content/uploads/2023/08/Lets-Get-RICH-With-PATTU-podcast-on-YouTube-644x362.jpg)
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Have a question? Subscribe to our newsletter using the form below.
- Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
About The Author
![Pattabiraman editor freefincal](https://freefincal.com/wp-content/uploads/2019/11/Pattabiraman-author-freefincal-article-bottom.jpg)
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
![Both boy and girl version covers of Chinchu gets a superpower](https://freefincal.com/wp-content/uploads/2021/02/Article-bottom-Chinchu-gets-a-superpower-front-cover-for-girls-and-boys.jpg)
![Feedback from a young reader after reading Chinchu gets a Superpower (small version)](https://freefincal.com/wp-content/uploads/2021/02/For-bottom-Feedback-from-a-young-reader-after-reading-Chinchu-gets-a-superpower.jpg)
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our YouTube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
![You can be rich too with goal based investing](https://freefincal.com/wp-content/uploads/2016/11/You-can-be-rich-243x300.jpg)
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
![Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you want](https://freefincal.com/wp-content/uploads/2017/05/2-mini-Cover-pink.jpg)
Your Ultimate Guide to Travel
![Travel-Training-Kit-Cover-new](https://freefincal.com/wp-content/uploads/2019/11/Travel-Training-Kit-Cover-new.jpg)