Investors in mutual funds (MFs) have little to cheer about as the year 2022 winds down. It has been an extended period of low returns, sobering assumptions and different acknowledge. It was challenging for numerous mutual fund categories and schemes.
The performance of MFs was significantly impacted by stock-specific rallies in large caps and global events-induced volatility in the Indian stock market. Simultaneously, esteem stocks beat development stocks and as needs be classes like worth assets (8%) outperformed other value shared store classifications in 2022.
According to Saurav Basu, Head – Wealth Management at Tata Capital, large-cap heavy categories like flexi cap performed poorly (delivering 2%), whereas mid- and small-cap oriented categories like multicap (delivering 6%) performed better.
“In the case of sectoral/thematic funds, IT funds lost the most (-21%), while FMCG (22%), Banking & Financial Services (16%), and FMCG funds outperformed. Credit risk, short-term and medium-term funds have performed well thus far in the debt category. As of December 19, 2022),” Basu told CNBC-TV18.com.
Debt funds also performed poorly, with only modest returns and repo rates rising by 225 basis points. Realizing that excessive liquidity infusion does result in inflation, global central banks acted quickly by raising interest rates and decreasing liquidity.
Here are MF scheme returns in 2022:
| MF scheme returns – CY 2022 | |
| Equity – Large cap | 3.80% |
| Equity – Mid Cap | 4.24% |
| Equity – Small Cap | 3.11% |
| Arbitrage Funds | 3.55% |
| Credit funds | 3.70% |
| Gilts Fund | 1.85% |
| Short Term Fund | 4.18% |
| Liquid Fund | 4.65% |
| Overnight Fund | 4.50% |
However, the fact that overnight and liquid funds performed the best made people aware that safety sometimes performs as well.
Details of new SIPs registered and discontinued during FY 22-23 are as under : (SIP Count in Lakh)
| Month | Total No. of outstanding SIP Accounts | No. of New SIPs registered | No. of SIPs discontinued/ tenure completed | SIP AUM₹ crore | SIP Contribution₹ crore |
|---|---|---|---|---|---|
| Apr 22 – Nov 22 | 604.57 | 163.21 | 86.37 | 6,83,852 | 1,00,581 |
| Nov 22 | 604.57 | 21.77 | 10.50 | 6,83,852 | 13,306 |
| Oct 22 | 593.30 | 19.73 | 10.20 | 6,64,781 | 13,041 |
| Sep 22 | 583.77 | 23.66 | 11.50 | 6,35,286 | 12,976 |
| Aug 22 | 571.61 | 21.13 | 11.46 | 6,39,787 | 12,693 |
| Jul 22 | 561.94 | 17.42 | 10.37 | 6,09,296 | 12,140 |
| Jun 22 | 554.89 | 17.93 | 11.45 | 5,51,189 | 12,276 |
| May 22 | 548.41 | 19.75 | 10.36 | 5,65,706 | 12,286 |
| Apr 22 | 539.02 | 21.82 | 10.53 | 5,78,086 | 11,863 |
| Apr 21– Mar 22 | 527.73 | 266.36 | 111.17 | 5,76,358 | 1,24,566 |
“Investors can take exposure to mid and small cap stocks through the multicap category, which appears to be more appealing for allocation in the future than large cap.” However, investors can also look into Balanced Advantage Funds, which dynamically manage equity allocation, to combat volatility,” Basu stated.
Because yields are at attractive levels and markets have already priced in much of the incremental rate change, he believes that debt funds are also advantageous. Investors can look into including funds with a longer duration—such as corporate bond funds and funds with a medium duration—in their debt portfolios. They can also look into products like target maturity funds to get higher yields, but they should make sure that their investment horizon matches the duration of the fund.
In the meantime, asset allocation is just as important.
The CEO of TRUST Mutual Fund, Sandeep Bagla, asserts that stocks are overpriced and that the highest rates of earnings growth are already reflected in market prices.
Equity returns are likely to be severely hampered by rising interest rates and tighter liquidity, both locally and globally. Bond yields have increased, offering investors a high accrual yield and the possibility of capital gains in the event that inflation begins to fall. Investors may therefore face difficulties this year.
Bagla stated to CNBC-TV18.com, “It is advisable to allocate more toward debt funds and create a proper asset allocation portfolio with moderate return expectations.”
