Only 39% of MFs outperform benchmarks in July, small cap a complete washout | Personal Finance

Only 39 per cent of the 283 open-ended equity diversified mutual funds managed to outperform their respective benchmarks during July 2024. This is a significant drop compared to the previous month when 57% of the schemes outperformed their indices, showed a study by PL Capital – Prabhudas Lilladher’s wealth management arm.

For the month ended July, 2024, monthly returns of Nifty 50 TRI, Nifty Midcap 150 TRI & Nifty Small Cap 250 TRI were 4.00%, 5.04% & 5.01% respectively. 

Assets under management of equity mutual funds has surged by 5.37% sequentially to Rs 25,12,845.59 crore in July 2024 from Rs 23,84,727.69 crore in June 2024.(excluding Sectoral / Thematic Funds)  The cumulative total of funds that outperformed stood at 109 during the month ending July 2024 (one month). 

Source: ACE MF, Prabhudas Liladhar

Focused funds, with their concentrated bets on a select few stocks, and value contra funds, which typically invest in undervalued stocks, were the standout performers. 

Value Contra Div. Yield Funds was the best performing category where 78% of the schemes outperformed the benchmark. It was followed by schemes of Large Cap funds and Multi Cap funds which outperformed their respective benchmarks by 58% and 40% respectively during the month of July 2024. 

Large & Mid Cap Funds were the least performing fund category with only 24% of funds outperforming the benchmark.

ELSS funds, known for their tax-saving benefits, also delivered decent returns. Around 36% of these schemes managed to outperform the Nifty 500 – TRI. 

The situation was drastically different for mid and small cap funds. While mid cap funds showed some resilience with 38% of schemes outperforming their benchmark, the small cap category was a complete washout. Not a single small cap fund could beat the Nifty Smallcap 250 – TRI. This suggests that the euphoria surrounding these segments might be tapering off.

For the 1-year ended July, 2024, returns of Nifty 50 TRI, Nifty Mid Cap 150 TRI & Nifty Small Cap 250 TRI returns were 27.84%, 55.53% & 59.11% respectively. 

“Investors are advised to stick to their SIP investments and keep a long-term focus. SIPs over the past 3-years have yielded a return in excess of 11% to 12% p.a. on an average for the top quartile equity funds,” said Pankaj Shrestha

Head – Investment Services at PL Capital.

First Published: Aug 20 2024 | 10:54 AM IST