INSUBCONTINENT EXCLUSIVE:
MUMBAI: Investors investing money in equity mutual funds through systematic investment plans (SIPs) have earned an average return of 10.26%
in the last five years since the Narendra Modi-led NDA government came to power
The study done by NJ Wealth is on the basis of average performance of 133 equity mutual funds in large-, mid- and small-cap categories in
the last five years.
These returns are lower than their benchmark indices in this period
In the last five years, the benchmark Nifty returned 11.58% on a compounded basis every year
The Nifty Midcap index gained 16.28% and the Nifty Smallcap index rose 12.48% on a compounded basis during this period.
About half of these
funds have performed better than the average returns
The best performing fund was Mirae Emerging Bluechip, returning 17.77% on a compounded basis every year, while the worst performer was
Baroda Midcap, which returned 3.58% in this period
The analysis is based on an investor who started an equity SIP in April 2014 and continued it for five years.
SIPs have been the preferred
mode of investment for retail investors with monthly mobilisations through this route moving up from 1,206 crore a month in March 2014 to
8,055 crore in March 2019
Investors flocked to equity mutual funds post demonetisation, shifting money from assets such as gold, fixed deposits and real
Historically, if you hold on to your equity investments for 7 years, the probability of making a loss is zero
Investors are convinced about this and hence are doing long-term investments through SIPs to meet their life goals be it buying a house,
through SIPs would be better for investors who had put money into equity mutual funds before April 2014
This is because the stock market had begun rallying almost eight months before Narendra Modi became the Prime Minister late in May 2014
The Nifty gained 32% between September 1, 2013 and May 30, 2014
The stock market and the rupee was in freefall before September 2013 as India was weighed down by widening current account and fiscal
deficits, resulting in the economy being clubbed in the 'Fragile Five'.
Investors, who had put money through SIPs in the period before
September 2013, would have benefited the most from the almost an uninterrupted five-year rally.
In the last year or so, equity mutual funds
have struggled to outperform their benchmark indices because the rally has been driven by a few stocks
With equity schemes having investment restrictions in every stock, the skewed performance has also hurt the returns of equity schemes.
Some
investor with a combination of active, passive investing and some addition of international funds, could have generated a little bit higher
Dhawan points out even though the SIP time is 5 years, since money comes in every month, the average time period for which the investor is
invested is only 2.5 years
Given this, he believes returns from equities have been very good.
