Despite the mutual funds industry’s heavy bets on many Indian companies, nearly 70% of the top-held stocks have largely underperformed their peers.
Of the top 50 companies in terms of stake held by mutual funds, 34 have delivered returns below their Nifty 500 peers’ year-to-date average.
Nifty 500 companies have delivered an average return of 23.05% on a year-to-date basis, but the average return of these top 50 companies is comparatively muted at 3.52%.
Many stocks such as Kalpataru Projects International Ltd., V-Guard Industries Ltd. and Blue Star Ltd. have been standout performers, but the overall trend of underperformance is exacerbated by the underperformance of several blue-chip stocks, including HDFC Bank Ltd., ICICI Bank Ltd., and Axis Bank Ltd., in which mutual funds hold 24%, 29% and 23% stake respectively, according to data from Bloomberg.
Cyient Ltd., in which mutual funds hold 23% stake, leads the pack with a year-to-date decline of 25.02%, followed closely by Equitas Small Finance Bank Ltd.’s 23.63% drop. Birlasoft Ltd. and Sonata Software Ltd., with mutual fund stake of 19% each, declined over 15% year-to-date.
High mutual fund stake did not equate with good returns for PVR Inox Ltd., IndusInd Bank Ltd., and JK Lakshmi Cement Ltd. either, which saw negative returns of 14.54%, 12.12%, and 9.79%, respectively.