Markets at 18600: Top mutual fund gainers and losers of last one year

Nifty 50 was around 18,600 in October 2021, and remains at 18,600 in November 2022. But some funds have performed better than market. Who are they and why

Padmaja Choudhury   /   December 5, 2022

In the last one year, when the market stayed at the same levels, a few funds like Nippon PSU Bank BeES, quant Quantamental, quant ESG Equity, CPSE ETF, ICICI Prudential Infrastructure Fund have outperformed the index.

However, we don’t believe in looking at funds from a year’s performance point of view, this is relevant when investors get drawn to investing in funds who have shown better near-term performance.

In the case of equity funds, we need to look at the performance over the long-term horizon, such as five years or more. Looking at one-year returns and making an investment decision based on these returns might not be the wise thing to do.

But for academic reasons, it is interesting to check the funds topping the charts and understand the reasons behind their performance, especially when the broader market hasn’t moved much. Nifty 50 was around 18,600 in October 2021 and again at 18,600 on November 2022.

If you are a first-time or new investor, it is essential to remember that the ranking of funds across different time horizons tends to vary, and the same fund might not lead the returns table year after year.

Let us dive into the top five mutual funds in the last year.

For this article, we are looking at the chart shared by Manoj Nagpal on Twitter.

Nippon PSU Bank BeES

As the name suggests, the fund is a passive fund that invests in PSU banks and tracks the underlying index. The attractive one-year return of 45.09% is mainly on account of the stellar performance of the PSU Bank Index.

PSU Bank stocks have rallied in the past couple of weeks.

In the last few years, these PSU banks have been in the news for all the wrong reasons after the RBI’s asset quality review. Lending to various corporates led to the accumulation of severe NPAs. However, since FY18, the sector has been slowly getting better, and gross NPAs have gone down from their highs.

PSU banks have worked hard to improve how they lend money to businesses. This is clear from the fact that credit growth in the corporate segment has slowed down and that corporates’ credit ratings have improved significantly.

As a result, PSU Bank Index has given a return of 58.7%* in this calendar year, and if we look at the top fund category that has generated the highest return in the past year, it is the PSU thematic category. This fund category also considers funds that invest in PSU banks and other PSU companies.

Quant Quantamental

Quant Quantamental Fund is second on the list, with 20.16% returns in the last year. The gains may be due to its high portfolio allocation to Adani Enterprises and ITC, whose stocks have given attractive returns in the last year.

Also, the fund has recently added Sun Pharmaceutical Industries to its portfolio.

Quant ESG Equity

Quant ESG Equity is another fund from the Quant house to feature in the top five funds in terms of its one-year returns. Its performance can be attributed to its top constituents, such as Adani Ports and Special Economic Zone, Trent and SBI. However, it is essential to remember that the fund turnover is high. This means that the portfolio undergoes regular churn to deliver attractive returns.

CPSE ETF

Central Public Sector Enterprises Exchange Traded Fund invests in PSUs. This fund was introduced as a part of the government’s disinvestment program in 2017.

PSU-based funds across the board have experienced significant gains in the past year. The CPSE ETF has had strong gains due to this surge in PSU equities. In the last year, the CPSE ETF had gains of 18.60%.

The fund also belongs thematic PSU fund category.

ICICI Infrastructure

The next fund on the list is ICICI Infrastructure Fund, a sectoral fund that invests predominately invests in companies related to the infrastructure sector. The fund gained 17.24% in the past year.

The fund’s top constituents, NTPC and L&T, have given stellar returns in 2022.

The sector has gained on the back of the government’s ongoing drive for infrastructure, which we can see from the performance of the infrastructure funds.

The fund category was the third-best performing equity category, with 14.13% returns in one year.

Our Take:

One year’s return is a very short span to consider the performance of equity mutual funds. We suggest that you not make hasty decisions based on one year’s performance. Also, we can see that these funds are mainly sectoral and thematic funds. Sectoral and thematic funds carry the highest risk out of all the equity mutual fund categories. These funds have the potential to give attractive returns and also lag behind other funds when the theme is no longer in the picture. So, these funds are suitable for investors who can take high risks. Also, these funds should not be a part of the core portfolio. However, if you can take high risk and understand market trends, you might allocate up 10-15% of your equity portfolio to sectoral and thematic funds.

*as on 2nd December


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