The percentage of open-ended equity funds that were able to outperform their respective benchmarks declined in March. According to data from PL Capital, 38.64% of 298 open-ended equity diversified funds were able to outperform their respective benchmarks over the past one month, compared to 54.08% in February – a drop of 16%.
Pankaj Shreshtha, head of investment services at PL Capital, explained that the rally in the indices in March was led by a few stocks that performed exceptionally well while a majority of stocks has fallen.
Pranav Haldea, MD of PRIME Database Group, said fund managers’ ability to outperform their respective benchmarks has been a concern for quite some time not just in India, but globally as well. The trend is being reflected in rising assets under management of passive funds. Experts believe that if this trend continues, Indian investors may prefer to put money in index funds, rather than actively-managed ones.
Data reveal that 57.56% of 271 open-ended equity diversified funds were able to outperform respective benchmarks in the previous fiscal, against 67.02% delivering benchmark-beating returns in the 12 months ended February.
In comparison, the Nifty 50 returned 6.31% in March, Nifty 500 rose 7.35%, Nifty Midcap 150 gained 7.73% and Nifty Smallcap 250 advanced 9.1%. In the one-year to March, these indices rose in the range of 6% to 8.2%.
According to NSE data, the overall AUM of passive funds, including index and exchange traded funds, rose to Rs 11.22 lakh crore in March, from Rs 10.51 lakh crore in February and Rs 9.38 lakh crore in April 2024.
The number of new fund offers increased to 21 in March from 5 in January.
Shreshtha’s advises new investors to invest in an index fund, but a well- informed investor can opt for actively-managed funds. “Flexicap is a good category to be in, along with large-caps,” he said.
According to Juzer Gabajiwala, director of Ventura Securities, if an investor is chasing alpha, active funds should be chosen. Passive funds should be picked if they are looking for market-related returns.