India’s equity markets have been in a correction phase over the past five months, influenced by high valuations, geopolitical tensions, and persistent foreign institutional investor (FII) selling. The BSE Sensex has declined by 12.2%, BSE Midcap by 18.6%, and BSE Smallcap by 20.5% since their peaks. Amid this downturn, equity mutual funds have experienced varying performances, with some managing to limit their NAV declines significantly.
In February, the majority of equity mutual funds saw negative returns, with losses of up to 25%. Out of the 542 funds analyzed during this period, 487 experienced negative returns while only 55 funds showed positive returns. The Samco Flexi Cap Fund had the largest loss, at approximately 24.59% year-to-date. Similarly, the Motilal Oswal ELSS Tax Saver Fund recorded a negative return of around 23.89% in the same timeframe.
During the period, Parag Parikh Flexi Cap, Motilal Oswal Large Cap, and Motilal Oswal Multi Cap exhibited strong resilience by mitigating the market downturn, showing a comparatively lower decrease in their values of -7%, -10%, and -10.2%, respectively.
Parag Parikh Flexi Cap Fund: Among the equity mutual funds, Parag Parikh Flexi Cap Fund has demonstrated notable resilience. Employing a value-centric approach, it focuses on quality stocks with a significant margin of safety. Over the past five months, the fund’s NAV declined by only 4.3%, outperforming the Flexi Cap Fund category average decline of 14.9%. This result is largely attributed to its strategic asset allocation, which includes a substantial exposure to large-cap stocks and international equities.
As of January 31, 2025, the allocation breakdown of Parag Parikh Flexi Cap Fund’s assets is as follows:
61.5% allocated in large caps
2.6% allocated in mid caps
2.6% allocated in small caps
13.7% allocated in overseas equities
10% allocated in debt instruments
The remaining balance is held in cash.
Its top stock holdings comprise
HDFC Bank,
Bajaj Holdings & Investment,
Power Grid Corporation of India,
Coal India, and
ITC.
Motilal Oswal Large Cap Fund: Floated in February 2024, Motilal Oswal Large Cap Fund is one of the most recent additions to the Large Cap Fund category. The fund focuses on investing in a concentrated portfolio of approximately 40 high-quality stocks with attractive growth potential and fair valuations. Over the past 5 months, the NAV of Motilal Oswal Large Cap Fund has decreased by 6%, outperforming the category average decline of 13.1%.
As of January 31, 2025, the fund has maintained a fully invested position in equities, with 87.5% of its assets allocated to large caps, 3% to mid caps, 7.3% to small caps, and the remaining portion in cash.
Motilal Oswal Large Cap Fund has a significant exposure to blue-chip stocks such as
HDFC Bank,
ICICI Bank,
Reliance Industries,
Infosys, and
Bajaj Holdings & Investments.
Motilal Oswal Multi Cap Fund: Motilal Oswal Multi Cap Fund has also maintained a robust performance amidst market volatility. Launched in June 2024, the fund aims to balance exposure across market caps with a high-conviction portfolio approach. Its NAV has dropped by 6.4% over the past five months, significantly better than the Multi Cap Fund category average decline of 15.3%. This performance highlights the fund’s effective management and stock selection in a challenging market environment.
The fund’s current asset allocation stands at 24% in large caps, 28.4% in mid caps, 25.6% in small caps, with additional exposure in Derivatives – Futures, and the remaining balance in cash.
The fund has its highest investment allocations in
Coforge,
Polycab India,
Trent,
Shaily Engineering Plastics, and
Persistent Systems.
HDFC Focused 30 Fund: HDFC Focused 30 Fund was introduced in September 2004 with the goal of investing in a portfolio of 30 carefully selected stocks that demonstrate strong potential for outperforming the market over the medium to long term. The fund focuses primarily on high-conviction stocks across various market caps and sectors, with a preference for large-cap companies.
Over the past 5 months, the net asset value (NAV) of HDFC Focused 30 Fund has decreased by 8.2%, outperforming the category average returns of -14.5%. As of January 31, 2025, the fund has allocated 66.2% of its assets in large cap stocks, 3.8% in mid cap stocks, 13.9% in small cap stocks, 3% in REITs & InvITs, and the remaining balance in cash.
The top stock holdings of HDFC Focused 30 Fund include
ICICI Bank,
HDFC Bank,
Axis Bank,
Maruti Suzuki India, and
SBI Life Insurance Company.
DSP Value Fund: Launched in December 2020, the DSP Value Fund seeks to invest in fundamentally strong domestic and international equities that are trading below their intrinsic value. The fund utilises a combination of quant filters and the expertise of the fund manager to craft its portfolio.
Over the past 5 months, the NAV of the DSP Value Fund has decreased by 5.9%, which is significantly lower than the average drop in the Value Fund category of 14.6%. As of January 31, 2025, the fund has allocated 44.3% of its assets in large caps, 6.5% in mid caps, 14.9% in small caps, 21.1% in overseas mutual fund units, 9.8% in overseas equities and ADRs & GDRs, with the remaining balance held in cash.
The fund actively manages its portfolio and currently holds bullish positions in
HDFC Bank,
Berkshire Hathway Inc,
Infosys,
L&T, and
ITC
In contrast, certain funds have been more severely impacted. For example, Samco Flexi Cap, Mahindra Manulife Small Cap, and HSBC Small Cap registered declines of -29%, -26%, and -25%, respectively. These funds faced greater challenges due to their focus on smaller market caps, which were more affected during the correction. This disparity in performance underscores the importance of strategic fund management and diversification in navigating market downturns.
Experts have cautioned that that while some funds have shown resilience during the recent correction as the market is volatile. It is crucial to adhere to a well-thought-out asset allocation strategy tailored to one’s risk profile and long-term financial goals.
With a number of stocks currently trading at more reasonable valuations, there is an opportunity for fund managers to identify stocks with strong long-term prospects. Continued investment through SIPs or staggered lump-sum contributions is advisable for those with a long-term outlook.