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 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.
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About the Author
M. Pattabiraman is the co-author of two books: You can be rich too with goal based investing and Gamechanger. “Pattu” as he is popularly known, publishes unbiased, promotion-free research, analysis and holistic money management advice. Freefincal serves more than one million readers a year with numbers based analysis on topical issues and has more than a 100 free calculators on different aspects of insurance and investment analysis, including a robo advisory template for use by beginners. Contact information: freefincal {at} Gmail {dot} com He conducts free money management sessions for corporates (see details below). Previous engagements include World Bank, RBI, BHEL, Asian Paints.Content Policy
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its also to be noted that index fund ‘never’ beats the index… and even 14 funds of 34 beating the index is significant for any middle class investor like me who is willing to spend time and pick up one of the good funds.
“its also to be noted that index fund ‘never’ beats the index…” Brilliant! Nice to know you will always be able to find a good fund that will beat the index in future