Why you should not exit funds based on a year's underperformance

Narrowness of the current rally and recategorisation have affected performance. Give your fund manager some time before you decide to switch

Large-cap funds have underperformed their benchmarks by a wide margin over the past year. Even funds in the large- and mid-cap category and the multi-cap category (most funds in these categories currently have high exposure to large-cap stocks) are also underperforming their benchmarks by wide margins (see table). Experts say that investors should avoid reacting hastily to what is essentially a short-term spell of underperformance, and should be guided by the long-term performance of their funds.   

A key reason for the current bout of underperformance is the nature of the rally. "The current rally in the Nifty 50 has