The Indian equity market started the financial year (FY) 2025 on a strong note. Equity markets witnessed a broad-based rally till September 2024 with stocks across the market cap range touching record high levels.
The re-election of the NDA government at the centre assured stability in terms of reform measures. Moreover, a favourable monsoon boded well for the agricultural sector, while the US Federal Reserve announced a 50 bps rate cut, which attracted foreign inflows in emerging markets like India. Besides, a growing number of new retail investors ensured that the resource mobilisation through Initial Public Offerings (IPOs) remained robust.
5 Equity Mutual Funds with rising cash holdings amid market volatility
However, the market sentiments turned bleak in the latter half of the year. The bellwether Nifty 50 index has plunged 12% from its peak of September 2024, marking its most prolonged losing streak since 1996.
This downturn is primarily attributed to intense outflows by foreign investors amid a slowdown in corporate earnings growth, a relatively slow GDP growth, global uncertainties caused by US tariff announcements, and stretched valuations, to name a few.
Overall for FY 2025, Sensex gained 3.7%, with BSE 500 at 3.5%, BSE Midcap at 5.2%, and BSE Smallcap at 7.4% so far (as of March 20, 2025).
Despite sharp volatility in the market, a vast majority of equity mutual funds across sub-categories not only delivered positive returns but also generated an alpha over their respective benchmark indices. Among the 229 diversified equity mutual fund considered, 164 schemes did better than their benchmarks, an outperformance rate of about 72%. The top performing scheme rewarded investor with a gain of 24.9%, while the bottom performer lost 16.1% in value.
Mid Cap Fund was the top performing category with average returns of 10.1% with 23 out of the 30 schemes in the category outperforming their benchmarks. Invesco India Mid Cap Fund delivered the highest return among its peers generating absolute gains of 18% while the bottom performing scheme Quant Mid Cap Fund delivered negative 2.9% returns.
The Contra Fund and Large & Midcap Fund category followed with average returns of about 9%. All three schemes in the Contra Fund category outpaced their benchmarks.
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