India's broader equity market seems to have hit a glass ceiling and is drifting down after reaching its previous high. In fact, the benchmark BSE Sensex hasn’t moved in the last six months.
The index closed at 59,411 on Wednesday, down 0.2 percent while it was 59,537 at the end of August 2022. This stagnation in the broader market is making it tough for mutual fund managers to deliver positive returns to their investors. Not surprisingly, the majority of diversified equity MF schemes are underperforming the benchmark indices.
In fact, 70 percent (255 out of 366) of the diversified open-ended equity mutual funds have delivered zero or negative returns in the last six months, according to data from ICRA Analytics.
Another 21 percent of the equity schemes (79 out of 366) in our sample delivered less than 3 percent returns (in absolute terms) in the six months. In other words, every nine out of 10 (70 percent plus 21 percent) of the equity schemes are performing worse than bank and post-fixed deposits. This is a troubling development for mutual fund investors.
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Top equity mutual funds
But it’s not all gloom and doom. There are equity MFs and fund managers who have managed to defy the weakness in the broader market and have delivered positive returns to their investors. Our analysis is based on the performance of regular growth schemes of diversified equity mutual funds across all categories and segments.
Here are the top 10 equity mutual funds that have delivered the best and the most consistent returns in the last six months.
1. Franklin India Smaller Companies Fund is on the top our list based on its blended performance in the last six months, three months and one month. The small-cap-oriented fund with an asset under management (AUM) of Rs 7174 crore has delivered 6.42 percent absolute returns in the last six months.
The fund has also managed to stay in the green zone in the last three months and one-month periods, proving its consistency. It has a highly diversified portfolio with exposure to stocks in banks & financials, chemicals and FMCG.
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2. Kotak Infrastructure & Economic Reform Fund is next on our list. A relatively smaller fund with an AUM of Rs 672 crore, it has delivered 4.7 percent returns in the last six months and is up nearly 4 percent in the last one-month. It remains in the green on three months basis as well. It’s a multi-cap fund with big exposure to construction, engineering, capital goods and infrastructure-related stocks.
3. HDFC Small Cap Fund is one of the biggest small-cap funds. With an AUM of Rs 14,630 crore, the fund has delivered 4.8 percent returns in the last six months and is up 2.1 percent in the last one-month. The fund's top exposure is in sectors such as banks & financials (BFSI), IT, capital goods & construction and consumer durables.
4. ICICI Prudential FMCG Fund is the next on our list. A sectoral fund with an AUM of Rs 1223 crore, it has delivered 3.4 percent returns in the last six months and is also in the green on a one-month basis. A large cap-oriented fund, it invests in FMCG stock and its portfolio is dominated by ITC, Hindustan Unilever and Nestle India in that order.
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5. Motilal Oswal Mid-Cap Fund has an AUM of Rs 3662 crore. It has delivered 3.4 percent returns in the last six months and is also in the green on a one-month basis. Its portfolio is currently dominated by stocks in capital goods, BFSI and real estate sectors.
6. Nippon India Power & Infra Fund is next on the list. A multi-cap fund with an AUM of Rs 1896 crore, it has delivered 5 percent returns in the last six-month and is also in the green in the last one month. As the name suggests its portfolio is dominated by stocks in power, construction, capital goods & infrastructure segments which are doing relatively better currently.
7. Parag Parikh Tax Saver Fund is next on our list with 4.7 percent returns in the last six months. A large cap-oriented fund with an AUM of Rs 1046 crore, its portfolio is currently dominated by banks and financial stocks.
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8. Tata Small Cap Fund is next on our list with 5 percent absolute returns in the last six months. A small-cap fund with an AUM of Rs 3185 crore, its portfolio is dominated by stocks from sectors such as capital goods, financial, IT services and other services.
9. SBI Contra features next on our list with 4.1 percent returns in the last six months and its returns are in the green in the last one month as well. A multi-cap fund with an AUM of Rs 7936 crore, its portfolio is dominated by banks & financials, oil & gas, power and current assets and government bonds.
10. HSBC Value Fund with an AUM of Rs 7838 crore is the tenth mutual fund on our list. The fund has delivered 3.4 percent returns in the last six months and is also in the green zone on a one-month basis. It’s a thematic fund and its portfolio is dominated by large-cap stocks in sectors such as banks, IT services, pharma and capital goods.
(Disclaimer: This article is for information purpose only. Readers are advised to consult a certified financial advisor before making investment in any of the funds or securities mentioned above.)
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(Karan Deo Sharma is a Mumbai-based finance and equity markets specialist).