The SPIVA India Scorecard reports on the performance of actively managed Indian mutual funds versus that of their benchmarks, showing equal-weighted peer averages. The mid-year 2014 scorecard, the latest SPIVA India report, has revealed that while active funds may be able to outperform their benchmarks in the short term, it becomes more likely for active funds to be outperformed by their benchmarks over the three- and five-year periods.
Some of the key findings from the report including the following.
- The Indian stock market has remained bullish over the one-year period ending in June 2014. During this time horizon, the S&P BSE 100, the S&P BSE 200 and the S&P BSE MID CAP gained 35.37%, 36.43% and 59.93%, respectively. Over the same one-year period, 34.18%, 22.22% and 44.93% of the active funds in the Indian equity large-cap, Indian ELSS and Indian equity mid-/small-cap categories underperformed their respective benchmarks.
- Over the five-year period ending in June 2014, 54.36% of the active funds in the Indian equity large-cap category underperformed their benchmark, and close to 17% of the funds were merged or liquidated.
- Over the same five-year period, active funds in the Indian equity mid-/small-cap category had a survivorship rate of only 77.33%, given the higher volatility of this market segment. In contrast, the active funds in the Indian ELSS category had a survivorship rate of 97.14%, which is not surprising given the fact that there is a lock-in period of three years for this group.
- The S&P India Government Bond Index and the S&P India Bond Index gained 3.78% and 4.24%, respectively, over the one-year period ending in June 2014. Over the same one-year period, 59.62% and 29.82% of the active funds in the Indian government bond and the Indian composite bond categories underperformed their respective benchmarks.
- The percentage of active funds in the Indian government bond category that underperformed the benchmark over the five-year period ending in June 2014 was 78.18%, which can partly be attributed to higher interest rates.
- Over the same five-year period, the survivorship rate of the active funds in the Indian composite bond category was 92.86%, but the number of funds that underperformed the benchmark was 53.01%.
Let’s also look at shorter time periods ending in June 2014.
- Most of the active funds in the Indian equity large-cap category and the Indian ELSS category were able to outperform their benchmarks over the one-, three- and six-month periods, and they outperformed the benchmark over the one-year period ending in June 2014, as well.
- Active funds in the Indian mid-/small-cap category lagged the benchmark over the one- and three-month periods.
- As interest rates remain high, most active funds in both the Indian government bond and Indian composite bond categories underperformed their benchmarks over the three- and six-month periods.
- The survivorship rate was 100% only for the Indian ELSS and the Indian government bond funds over the six-month period.
- The number of funds available to investors in the Indian composite bond category has increased by almost 7% over the six-month period ending in June 2014.
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