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Here are twenty mutual funds (out of 144) that have consistently outperformed Nifty Next 50 total returns index. I did the short-listing using the same criterion followed in the freefincal equity mutual fund consistency screener. Readers may recall a List of Equity Mutual Funds with most consistent performance (Feb 2019) published with the respective category benchmarks based on this screener.
In this post, I compare ELSS, Large and mid cap, mid cap, small cap and value oriented funds with Nifty Next 50 TRI. This as we have seen before is one hard benchmark to beat as it has a concentrated mix of large and mid cap stocks (although officially considered as a large cap index). As discussed earlier: Nifty Next 50 is NOT a large cap index, it is a more mid-cap like fund.
Articles on Nifty Next 50
- What is the best way to invest in Nifty Next 50 Index?
- Eight ways to combine Nifty Next 50 with active funds
- Combine Nifty & Nifty Next 50 funds to create large, mid cap index portfolios
- Can I start Index investing with 50% Nifty 50 and 50% Nifty Next 50?
- Are Nifty Smart Beta (strategic) Indices better than the Nifty Next 50?
Criterion used for short listing
We expect a fund to beat Nifty Next 50 Total Returns Index over 3,4 and 5-year periods. Since we consider every possible 3,4 and 5 year periods from Jan 2013 to Feb 2019, we expect 70% or higher outperformance. This means, if we compare 100 index and fund returns, the fund must have beat the index at least 70% of the time.
Twenty mutual funds that have outperformed Nifty Next 50 Index
| Category | Fund |
| EQ-ELSS | Quant Tax Plan-Growth Option-Direct Plan |
| EQ-L&MC | Mirae Asset Emerging Bluechip Fund – Direct Plan – Growth |
| EQ-L&MC | Principal Emerging Bluechip Fund – Direct Plan – Growth Option |
| EQ-L&MC | Canara Robeco Emerging Equities-Direct Plan-Growth Option |
| EQ-MC | Kotak Emerging Equity Scheme – Growth – Direct |
| EQ-MC | HDFC Mid Cap Opportunities Fund -Direct Plan – Growth Option |
| EQ-MC | L&T Mid Cap Fund-Direct Plan-Growth |
| EQ-MC | Sundaram Mid Cap Fund – Direct Plan |
| EQ-MC | DSP BlackRock Midcap Fund – Direct Plan – Growth |
| EQ-MLC | Quant High Yield Equity Plan – Growth Option-Direct Plan |
| EQ-SC | DSP BlackRock Small Cap Fund – Direct Plan – Growth |
| EQ-SC | SBI Small Cap Fund – Direct Plan – Growth |
| EQ-SC | HSBC Small Cap Equity Fund – Growth Direct |
| EQ-SC | Reliance Small Cap Fund – Direct Plan Growth Plan – Growth Option |
| EQ-SC | Franklin India Smaller Companies Fund – Direct – Growth |
| EQ-SC | Aditya Birla Sun Life Small Cap Fund – Growth – Direct Plan |
| EQ-SC | Kotak Small Cap |
| EQ-VAL | L&T India Value Fund-Direct Plan-Growth |
| EQ-VAL | Tata Equity P/E Fund -Direct Plan Growth |
| EQ-VAL | Invesco India Contra Fund – Direct Plan – Growth |
Funds (from above 20) with poor downside protection
If you want your actively managed fund to beat Nifty Next 50, consistent downside protection may have to be sacrificed. You cannot consistenly expect your fund to beat NN50 during months when NN50 falls (-ve return). However funds with consistently poor downside protection is a problem.
Sundaram Mid Cap Fund – Direct Plan (read review here) has consistently les than 50% downside protection consistency. The following funds have < 50% downside protection over 3Y.
| Invesco India Contra Fund – Direct Plan – Growth |
| DSP BlackRock Midcap Fund – Direct Plan – Growth |
| Kotak Small Cap |
Funds (from above 20) with 70% or more downside protection
These ten funds (or I should say only these ten) funds have 70% + return outperformance and 70%+ downside protection wrt NN50 TRI
| EQ-L&MC | Mirae Asset Emerging Bluechip Fund – Direct Plan – Growth |
| EQ-L&MC | Principal Emerging Bluechip Fund – Direct Plan – Growth Option |
| EQ-MC | Kotak Emerging Equity Scheme – Growth – Direct |
| EQ-SC | DSP BlackRock Small Cap Fund – Direct Plan – Growth |
| EQ-SC | SBI Small Cap Fund – Direct Plan – Growth |
| EQ-SC | HSBC Small Cap Equity Fund – Growth Direct |
| EQ-SC | Reliance Small Cap Fund – Direct Plan Growth Plan – Growth Option |
| EQ-MLC | Quant High Yield Equity Plan – Growth Option-Direct Plan |
| EQ-SC | Franklin India Smaller Companies Fund – Direct – Growth |
| EQ-ELSS | Quant Tax Plan-Growth Option-Direct Plan |
Download the full data set
Summary
Nifty Next 50 TRI should be a benchmark for mid-cap and small cap fund investors as it is readily available as an index fund. If your mid cap or small cap fund has a poor track record wrt NN50, and you do not care about downside protection you can consider switching to NN50, If you like volatility managed better, then an aggressive hybrid fund would be a better choice: Why Aggressive Hybrid (balanced) Mutual Funds score over diversified funds
Before you make changes, use the Freefincal Robo Advisory Software Template, create an automated plan for investing and then consider my Handpicked Mutual Funds January 2019 (PlumbLine)
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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. 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
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Sir,
I have a couple of queries.
1) When you consider 70% outperformance, how much % higher returns did these funds achieve compared to NN50 index during that time.
2) The other funds that under performed or outperformed less than 70% times (say 60% times) what was the returns then? Outperformance could be by 10% for the 50% times but underperformance could only be by 1%. It still is a good deal.
I think direct plans will show better returns going forward due to dramatic reduction in expenses in the last 6 months. I have seen funds expenses have halved which will mean additional returns and good chance that more funds will make the 70% outperformance cutoff.