Active funds weather market storm better than the benchmark indices

Actively managed midcap and smallcap schemes that have struggled to beat the benchmark indices in the past year have managed to outperform the indices during the downturn phase. 

Barring a few schemes, all active funds in the two categories have managed to arrest the decline vis-a-vis the key benchmarks.

Active midcap funds were down 2.5 per cent on average during the one-month time frame ending March 13, according to data from Value Research.

During the same period, the Nifty Midcap 100 index is down 3.9 per cent. In the case of smallcaps, active funds are down 6 per cent vis-a-vis 8.6 per cent decline in the Nifty Smallcap 100 index.

 

According to experts, active MF schemes' focus on qualitative factors, which was the main reason behind their underperformance during the 10-month rally that began in March 2023, proved to be an advantage during the downturn phase.

Active smallcap schemes' better performance was also boosted by a lower decline in largecap and midcap segments, where they have substantial exposure. 

While the inclusion of stocks in key indices is largely a function of momentum, active funds buy stocks on the back of numerous fundamental and qualitative factors.

Most active smallcap and midcap funds have outperformed the indices during the longer time frames.