Only Five Large Cap funds have comfortably beat Nifty 100!

Published: December 26, 2018 at 10:00 am

Here are 5 large cap funds that have beat the Nifty 100 Total Returns Index. Rather, only 5 out of 36 large cap funds studied in the Dec 2018 freefincal equity fund screener have managed to beat Nifty 100 consistently over 3, 4, 5 years in terms of risk and reward. I am quite surprised more than half the active large cap funds have difficulty in offering consistent downside protection!

Screening steps

  • Download the screener from the above link
  • Select category as “large cap”
  • For this study, I have removed all Sensex and Nifty based index funds as the comparison is with Nifty 100 and it would not be fair. I have retained 2 Nifty Next 50 Index funds (you don’t have to do this). This leaves us with 36 funds or 34 active funds.
  • Demand: a downside protection consistency score of greater than or equal to 90% with regard to the Nifty 100 Total Returns Index. So here we compare the monthly returns of the fund with the index over every possible 5Y. The fund should have fallen less than the index when the index monthly return was negative with a consistency of 70% or more. See the screener download post for a technical definition.

 

  • If we apply this downside filer for 5Y, the number drops from 36 to 20!
  •  Apply the same downside filter for 4Y (in addition to 5Y), the number drops from 20 to 15.
  • Apply the same downside filter for 3Y (in addition to 5Y and 4Y), the number drops from 15 to 14.
  • This is a bit surprising that less than half the no of funds studied is able to deliver consistent downside protection!!!

 

  •  With these filter on, ask how many funds have a rolling return outperformance score of greater than or equal to 70% with regard to the Nifty 100 Total returns index. This means that suppose we compute the return over 3Y in 700 different periods, the fund (direct plan) should have beat the index at least 490 times or more.
  • Apply the rolling return filter over 5Y then the 14 funds drop to 6!!!
  • Apply the rolling returns filter over 4Y and 5Y, the number remains at 6.
  • Apply over 3Y,4Y and 5Y, we finally get 5 funds!!

Five Large Cap funds that have comfortably beat Nifty 100

Five Large Cap funds that have comfortably beat Nifty 100 TRI

ICICI Prudential Bluechip Fund – Direct Plan – Growth
Reliance Large Cap Fund – Direct Plan Growth Plan – Growth Option
SBI BLUE CHIP FUND-DIRECT PLAN -GROWTH
Edelweiss Large Cap Fund – Direct Plan-Growth option
Motilal Oswal Focused 25 Fund – Direct Plan
  • These 5 funds have beat Nifty 100 TRI at least 70% of 634 to 720 3Y returns studied with at least 70% downside protection consistency
  • These 5 funds have beat Nifty 100 TRI at least 70% of 388 to 478 4Y returns studied with at least 70% downside protection consistency
  • These 5 funds have beat Nifty 100 TRI at least 70% of 146 to 246 5Y returns studied with at least 70% downside protection consistency

If we ignore downside protection

Suppose we ignore the downside protection filer and only require rolling return outperformance consistency of 70% or above over:

  • 5Y. We get 20 funds
  • 4Y and 5Y, we still get 20 funds
  • 3Y, 4Y and 5Y, we get 17 funds. Not bad, but two of then are Nifty next 50 index funds. So only 15 of the 34 active large cap funds qualify. Again less than half!
HDFC Top 100 Fund -Direct Plan – Growth Option
Aditya Birla Sun Life Focused Equity Fund – Growth – Direct Plan
Aditya Birla Sun Life Frontline Equity Fund – Growth – Direct Plan
Axis Bluechip Fund – Direct Plan – Growth
Axis Focused 25 Fund – Direct Plan – Growth Option
ICICI Prudential Bluechip Fund – Direct Plan – Growth
ICICI Prudential Nifty Next 50 Index Fund – Direct Plan – Growth
IDBI Nifty Junior Index Fund Growth Direct
Indiabulls Bluechip
Invesco India Largecap Fund – Direct Plan – Growth
Kotak Bluechip Fund – Growth – Direct
Reliance Large Cap Fund – Direct Plan Growth Plan – Growth Option
SBI BLUE CHIP FUND-DIRECT PLAN -GROWTH
JM Core 11 Fund (Direct) – Growth Option
Canara Robeco Bluechip Equity Fund – Direct Plan – Growth
Edelweiss Large Cap Fund – Direct Plan-Growth option
Motilal Oswal Focused 25 Fund – Direct Plan

Summary

I am surprised that only 14 out of 34 active large cap funds have managed to provide downside protection with respect to Nifty 100 TRI. Forget about beating the index, downside protection is the bare minimum a fund manager should do! If you do want to shift from large cap funds to 50% nifty 50 + 50% nifty next 50, I think it is time to consider aggressive hybrid or balanced advantage funds or combine active funds with nifty next 50. At least they provide pretty much guaranteed downside protection (wrt Nifty 100). Readers must keep in mind that even if you assume downside protection is not necessary, the results are promising enough. Only 50% beat the index consistently and this does not bode well for the future.

Do share if you found this useful
Share your thoughts on this topic at the  Reddit freefincal_user_forum

Reach your financial goals like a pro! Join our 1600+ Facebook Group on Portfolio Management! You can now reduce fear, doubt and uncertainty while investing for your financial goals! Sign up for our lectures on goal-based portfolio management and join our exclusive Facebook Community. The 1st lecture is free!
Want to check if the market is overvalued or undervalued? Use our market valuation tool (will work with any index!) or you buy the new Tactical Buy/Sell timing tool!
About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association. For speaking engagements write to pattu [at] freefincal [dot] com
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. Follow us on Google News Freefincal serves more than one million readers a year (2.5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any kind of paid articles, promotions or PR, satire or opinions without data. All opinions presented will only 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, seek the right answers and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.
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 low cost! Get it or gift it to a young earner

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, 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 199 (instant download)
Free android apps