Mutual fund performance highlights the impact of market volatility on investor portfolios | Image:
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The past 18 months have been challenging for India’s mutual fund industry, with the most popular schemes delivering negative returns amid heightened market volatility. Data from leading large-cap and flexi-cap funds shows that while losses were widespread, large-cap funds demonstrated relatively stronger resilience compared to their flexi-cap counterparts.
Large-Cap Funds Show Stability
Large-cap mutual funds, which typically invest in established blue-chip companies, managed to weather the turbulent period better than other categories. The category recorded an average return of -6.98% over the last 18 months, highlighting the defensive nature of large-cap portfolios during market corrections.
Among the funds analysed, Motilal Oswal Large Cap Fund emerged as the most resilient performer, declining just -1.16% over the period. On the other hand, Quant Large Cap Fund was the weakest performer in the category, posting a -12.33% return, reflecting the broader drawdown seen in some actively managed portfolios during the downturn.
Flexi-Cap Funds Face Volatility
Flexi-cap funds, widely popular among retail investors for their flexibility to allocate across market capitalisations, faced deeper declines. The category delivered an average return of -8.67% over the same period, underscoring the higher volatility that comes with dynamic allocation strategies. However, a small number of schemes managed to remain in positive territory.
Both HDFC Flexi Cap Fund and Parag Parikh Flexi Cap Fund emerged as rare winners, posting modest gains of +0.33% and +0.32% respectively since September 2024. At the other end of the spectrum, Samco Flexi Cap Fund recorded the steepest fall, with a -23.38% decline, nearly three times worse than the category average.
Wide Performance Gap Highlights Importance of Fund Selection
The data reveals a significant dispersion in fund performance, particularly within the flexi-cap segment.
The gap between the best and worst performers in the category reached nearly 23.7 percentage points, illustrating how fund management strategy, stock selection, and asset allocation decisions can dramatically influence outcomes during volatile market phases.
Key Takeaways for Investors
1. Blue-chip exposure provided stability: Large-cap funds, with an average decline of -6.98%, protected capital better than flexi-cap funds, which averaged -8.67% losses.
2. A few funds stood out: HDFC Flexi Cap Fund and Parag Parikh Flexi Cap Fund were the only schemes in the dataset to generate positive returns, demonstrating relative strength amid the downturn.
3. Active management mattered: The wide divergence in returns, especially the sharp difference between HDFC Flexi Cap Fund (+0.33%) and Samco Flexi Cap Fund (-23.38%), highlights how crucial fund selection has been during this period.
While short-term drawdowns have impacted most mutual funds, the data reinforces a long-standing investment principle: portfolio composition and fund management style play a critical role in navigating market cycles. For investors, the recent slump shows that diversification, long-term discipline, and careful fund selection remain essential strategies in volatile markets.