Mutual fund schemes deliver on strong market performance, shows data

Here're top-performing MF schemes in the past two years

In March 2020, stocks hit rock bottom following the outbreak of the Covid-19 pandemic. The Nifty50 Index had crashed below 8,000, individual stocks slumped to multi-year lows, impacting the returns of several mutual fund (MF) schemes, industry assets dropped, and asset management companies (AMCs) stared at an uncertain future.

However, aggressive stimulus measures from global central banks, mainly the US Federal Reserve, helped stock markets the world over stage a remarkable comeback.

In India, measures undertaken by the Reserve Bank of India (RBI) and the Centre helped support the economy, individuals, and businesses. The sharp up move in the market and the spurt in retail interest helped the domestic MF industry grow rapidly.

In March 2020, the average net assets under management (AUM) of equity schemes had declined to Rs 6.5 trillion. In two years, they have more than doubled to Rs 13.15 trillion. Equity scheme folios went up from 62.9 million to 85.9 million in the past two years.

The solid historical performance of equity schemes and easy liquidity ensured that investors moved in hordes to invest in MFs through systematic investment plans (SIPs). In financial year 2019-20 (FY20), SIP investment was Rs 1 trillion, which declined to Rs 96,080 crore in FY21. However, in the last fiscal it again increased to Rs 1.24 trillion.

The inflows into the equity funds have not ebbed despite intense volatility in equity markets in the last few months. In the last two years, equity funds have seen net inflows of Rs 1.38 trillion, despite witnessing outflows for eight consecutive months in FY21. While structural changes propelled the industry’s growth, its sustainability will depend on schemes’ performance. We present here the best-performing schemes in various categories over a two-year period. Thanks to a low base, the two-year performance has been encouraging, but it remains to be seen how the industry performs when the base normalises.