Many mutual fund equity schemes have underperformed their benchmark indices despite the huge rebound of equity markets from the Covid-19 impact.

97% of the large-cap funds have underperformed their benchmark indices even though they produced an average return of 59.62% during the Covid-19 induced bear market between February 2020 and March 22, 2021. Likewise, 91.3% of the small-cap funds and 88.3% of multi-cap funds have underperformed their benchmarks. On average, these funds have produced a return of 91.52% and 64.10% each. Other category funds like large, mid, and Equity Linked Savings Schemes also underperformed under-delivering their respective benchmarks. According to Gaurav Misra, Co-Head Equity, Mirae Asset Investment Managers India, as strong foreign institutional investors’ inflows have been the key factor in the market, there was a bit of a dislocation in the short term. Yet, beyond the medium-term, businesses will get sorted on fundamentals of growth and quality of growth, and outcomes will be determined by proper stock selection.

According to the experts, though mutual funds have seen a massive outflow over equity schemes on profit-booking in the past few months, fund flows into equity schemes have kept pace in last year's second half except during the lockdown and truncated economic activity in the months between March and May.