Equity mutual fund schemes have seen negative returns in the last six months due to recent market turmoil caused by foreign investors exiting India. Small and mid-cap funds have experienced a drop of 22% and 19% respectively, while value funds were down by 17%. Sectoral and flexi-cap funds also saw a decrease of 19% and 16% in the same period.
Actively managed equity mutual funds have struggled over the past year, with value funds delivering just 0.34% returns and ELSS at 0.70%. Mid-cap and focused funds managed to deliver 3% and 2% returns over the one-year period.
Despite the sharp fall in small-cap indices, small-cap funds have shown resilience, delivering returns of 21% and 25% over the 3-year and 5-year periods. Mid-cap and value funds have also performed well, returning 23% and 21% in three years, and 21% and 20% in five years.
The Nifty benchmark has declined by nearly 16% from its peak, mainly due to high valuations and significant FII outflows totaling ₹1.12 lakh crore in just two months of the year. However, strong inflows through mutual funds have provided support and stabilized market sentiments.
Tanmay Shah, Managing Director of stockbroking firm SIHL, highlighted the resilience of equity MF inflows, with SIP contributions exceeding ₹26,000 crore in the past two months. Despite market volatility, he noted that historical trends suggest that equity inflows tend to remain stable even after a 17-18% market fall.
Kavitha Narayan, Vice President and Head of Research and New Initiatives at Capricorne Mindframe, emphasized the importance of not trying to time the market by entering or exiting strategies at the wrong time. She advised investors to periodically review their portfolios every six months and make adjustments based on forward-looking views of the market.
Overall, experts advise investors to be conscious of market cyclicality and not to exit funds based on short-term underperformance. Despite the current challenges, the long-term outlook for equity mutual funds remains positive, and investors should focus on maximizing returns through portfolio rebalancing.
