Active mutual funds struggle to beat Nifty 50 for last seven years!

Published: October 17, 2020 at 11:54 am

Last Updated on August 22, 2022 at 11:27 pm

We present the result of SIP returns comparison: Nifty 50 vs active mutual funds (large cap, large and mid cap, mid cap, small cap and multi-cap) over the last fifteen years. The dramatic drop in outperformance seems to have started seven-eight years ago and not just from Feb 2018 as earlier believed.

We had earlier shown that Nifty 50 long term SIP returns are barely 10% (before tax). This put the difficultly of active funds to beat the Nifty in tough to digest perspective. For a SIP started 15Y ago, the Nifty 50 return would be 10.14%.  There are 31 active funds with a better return and 26 funds with a lesser return. Some prominent underperformers are:  HDFC Equity Fund;  HDFC Top 100 Fund and
Franklin India Bluechip Fund.

If someone had invested 24Y ago via SIP (this simply means investment each month) then the Nifty 500 TRI would have produced 13.95% return (Nifty 50 data was not available for this period). The 24Y SIP returns of HDFC Equity, HDFC Top 100 and Franklin Bluechip would have been 19.2%, 17.2% and 17.4% respectively. The drop in performance of the funds is quite dramatic.

Yes, the Nifty has barely produced double-digit SIP returns aside from the last 1Y. This is the table. Index investors or active fund investors, it is better to assume only 10% (before tax). Even that seems to be an overestimate from the table below.

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! 🔥

For a SIP started 14Y ago, the Nifty 50 return would be 9.9%.  There are 37 active funds with a better return and 26 funds with a lesser return. We tabulate the rest of the durations to enable better appreciation.

SIP TenureNIFTY 50 – TRI return %No of funds with more returnNo of funds with less return

Notice how the no of funds with less return than Nifty 50 increased to 50% nine years ago (at which point it became a coin toss if your fund would beat the “market” or not). At the seven-year mark, there was a dramatic increase in underperformance. There has been an improvement over the last three years with the no of outperformers going up from 13 to 40.

What do these results mean? The decrease in Nifty 50 returns (see: Ten-year Nifty SIP returns have reduced by almost 50%) and the decrease in the number of funds able to beat it is a double-whammy. At the very least these results mean that even in an emerging economy like India it is not easy to pick funds that would consistently beat the market. Has the Indian stock market rewarded its investors for the extra risk they take? Far from clear!

So what should investors do? Whether you invest in active or passive funds, do not expect returns from your mutual fund investments! Do not define your success in terms of returns. Instead, use a low return expectation as a guideline to invest for your goals. For example, if you use a 10% return (before tax) from your 60% equity allocation and 7% return (before tax) from your fixed-income investment, the initial portfolio return (before tax) expectation = (60% x 10%) + (40% x 7%) is about 8.8%. You can easily calculate the monthly investment with any standard online calculator.

So the first step is to try and invest as much as possible and as close to this amount as possible – those who find it hard should focus on improving skills, reducing their expenses and increasing their income. Time management is the key to achieve this. The amount invested should also be increased each year by as much as possible.

The next step is to plan for reducing equity allocation gradually (not in the last few years and some advisors “believe”) and plan this reduction right now as it would increase the investment amount.


Do share this article with your friends using the buttons below.

🔥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
Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.
Subscribe to the freefincal Youtube Channel.
Follow freefincal on WhatsApp Channel
Follow freefincal on WhatsApp
Podcast: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! 
Listen to the Lets Get Rich with Pattu Podcast
Listen to the Let's Get Rich with Pattu Podcast
You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.
Lets Get RICH With PATTU podcast on YouTube
Let's Get RICH With PATTU podcast on YouTube.
🔥Now Watch Let's Get Rich With Pattu தமிழில் (in Tamil)! 🔥
  • 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 freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
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
Both the boy and girl-version covers of "Chinchu Gets a superpower".
Most investor problems can be traced to a lack of informed decision-making. We made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So, in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it, as well as teaching him several key ideas of decision-making and money management, is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!
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
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
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 wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)