One-year returns for 75% equity funds now negative as market drags

International funds have given negative returns of 17% in the last one year, while pharma and banking funds are down by 12.5% and 8.1% respectively

Equity funds, which had delivered robust returns in the past few years, are facing turbulence amid the latest rout in the market.

The data from Value Research reveals that of a total of 513 equity schemes, around 372 have given negative returns in the past year. 

There are around 14 schemes which have fallen more than 20 per cent in the past year, largely in the international category of funds.

Apart from international funds, the stragglers include funds from small-cap, equity-linked saving schemes, and pharmaceutical (pharma) categories.

On average, international funds have given negative returns of 17 per cent in the past year. Pharma and banking funds are down 13 per cent and 6.78 per cent, respectively.

In the past few months, equity markets have seen sharp correction over liquidity tightening concerns, yoked with surging crude oil prices and central banks hiking interest rates.

Says Trideep Bhattacharya, chief investment officer-equities at Edelweiss Asset Management, “After a strong year of equity returns in 2021, equity markets are currently in a consolidation phase. This is in sync with our view that we expect 2022 to be an investment year from an investor point of view as equity markets are adjusting to change in interest-rate regime globally, supply-chain challenge-driven inflation, and geopolitical issues.”

Prior to the current consolidation in the markets, domestic equities were on a roll as cheap liquidity fuelled the rally.

In 2020, the S&P BSE Sensex was up 15.75 per cent. In 2021, it increased nearly 22 per cent. In the past three months, the index is down 10.83 per cent.

Market participants say investors should stay the course and not cash in investments at a loss.

“With so much happening around, this is a bad time for investors to get adventurous. They should instead use this opportunity to clean up their portfolios and devise a better way to manage their investments. To be successful, investors must have a long-term investment horizon, meaningful diversification, and disciplined process,” says Vaibhav Porwal, co-founder, Dezerv Investments (dezerv.) - a wealth management company.

On the other side, top-performing funds have been the central public sector enterprise exchange-traded funds, which have given returns of 23.38 per cent in the past year, followed by Canara Robeco Small Cap Fund, which is up 16.97 per cent.

Equity funds have so far continued to see net inflows for the past few months. Even the systematic investment plan book has remained puissant. But with weak returns and an unpredictable future, market players are worried about the flows into equity funds in the months to come.