80% of Indian large-cap funds underperformed benchmarks in 2020: Report

Four-fifths of Indian large-cap funds have underperformed when compared to benchmark indices in 2020, a report said on Thursday.

In the equity-linked saving schemes (ELSS) and mid/small-cap funds, the performance was marginally better with the underperformance of 65 per cent and 67 per cent as against the benchmarks, S&P Indices Versus Active (SPIVA) said.

S&P Dow Jones Indices' associate director for global research and design Akash Jain said the performance was worse if one were to consider the recovery after the markets hit the trough in April.

"During this recovery period, we saw that the second half of 2020 has been a particularly challenging period for Indian equity active funds where 100 per cent of the Large Cap funds, 80 per cent of the ELSS funds and 53 per cent of the Mid-/Small-cap funds underperformed their respective benchmarks," he said.

Overall, 2020 had extraordinary volatility and India joined the rest of the world in this aspect, Jain added.

There was a strong rebound that began at the start of the second quarter of 2020, which continued into the second half of 2020, with the S&P BSE 100 finishing the six-month period with gains of 36.48 per cent, he said.

In the second half of 2020, the asset-weighted returns lagged their respective benchmark returns in each of the Indian Equity categories, including large-cap funds (by 2.73 per cent), ELSS funds (by 3.18 per cent) and mid/small-cap funds (by 2.30 per cent), a statement said.

The Indian equity mid/small-cap category fared the best for active fund managers over a 10-year investment horizon among all the categories, which were evaluated for the SPIVA India Scorecard, it added.

In the same time frame of 10 years, 68.42 per cent of the actively managed large-cap equity funds in India underperformed the benchmark, it said.

The 'survivorship rate' was low for both large-cap and small/mid-cap funds categories at 70.68 per cent and 71.43 per cent, respectively, the statement noted.