NEW DELHI: Over half of Indian equity large-cap funds failed to beat the benchmarks, with 52% of actively managed funds underperforming the S&P BSE 100 for the year ending December 2023, as per the S&P Indices Versus Active Funds (SPIVA) report released by S&P Dow Jones Indices (S&P DJI) on Thursday.
The S&P BSE 100 gained 23.2% in 2023, and 51.6% of active managers underperformed the benchmark over that period. Underperformance rates were significantly high over the three- and five-year periods, at 87.5% and 85.7%, respectively. Active managers produced relatively better results over the 10-year period, with the underperformance rate dropping to 62.1%. The report said only 30% of Indian ELSS funds underperformed their benchmark, the S&P BSE 200 and is the only category where the majority of funds outperformed the relevant benchmark last year. The S&P
BSE 200 rose by 24.5% in 2023. Fund performance deteriorated over the 10-year period, as 67.6% of funds underperformed the benchmark.
The report further noted that the benchmark for Indian equity mid-/small-cap funds, the S&P BSE 400 MidSmallCap Index, rose 44 % in 2023, and 74% of active managers underperformed in this index over that period. This funds category also fared the worst in the long run, with 75% of them lagging the S&P BSE 400 MidSmallCap Index over the 10-year period ending December 2023.
According to the report, the S&P BSE India Government Bond Index increased by 7.9% in 2023 and less than a fifth of active managers beat the benchmark in this category in 2023, bringing the underperformance rate to 82%.
Similarly, the S&P BSE India Bond Index rose 8%, while the underperformance of Indian Composite Bond fund managers was the highest across all categories in the SPIVA India Scorecard, at 96%. An interesting aspect that came to light was how over a 10-year period just 1 of 116 Indian Composite Bond funds outperformed the index, corresponding to an underperformance rate of 99.1%, the highest underperformance rate across all categories over any time horizon.
“The macroeconomic backdrop of stabilising interest rates and commodity prices created major corporate winners in 2023 that raced well ahead of overall market,” the report noted. “In the large-cap space, overweighting real estate, utilities and consumer discretionary and underweighting IT, materials and financials would have paid off in particular; there was 80% performance differential between best-performing realty and laggard financials.”
30% of ELSS funds didn’t perform
According to the report, only 30% of Indian ELSS funds underperformed their benchmark, the S&P BSE 200, and is the only category where the majority of funds outperformed the relevant benchmark last year. The S&P BSE 200 rose by 24.5%
in 2023. Fund performance deteriorated over the 10-year period, as 67.6% of funds underperformed the
benchmark