Most active funds beat benchmark indices last year: Motilal Oswal Study

Mumbai: Actively managed mutual funds, where a fund manager builds and maintains the portfolio, have outperformed their benchmark indices, shows a study by Motilal Oswal Private Wealth. The study shows over the last one year, 94% of large cap funds, 70% of midcap funds, 83% of small cap funds, 75% of flexicap funds and 84% of multicap funds outperformed their benchmark indices.

"Volatile macro conditions create an ideal environment for bottom-up, style-agnostic fund managers to generate alpha," Trideep Bhattacharya, president & CIO-Equities, Edelweiss Asset Management says.

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Large caps lost 1.4% compared to their Nifty 50 TRI that lost 5.4%, the midcap universe gained 5.4% against the Nifty Midcap 150 TRI gain of 4%, while the small cap universe gained 6.4% against the Nifty Smallcap 250TRI that gained 0.1%.

The flexicap universe gained 1.1% against the Nifty 500 TRI that lost 1.7%, while the multicap universe gained 3.2% compared to its benchmark Nifty 500 Multicap 50:25:25 TRI that lost 0.6%.

Bhattacharya of Edelweiss believes active fund managers can capitalise on market dislocations by selectively investing in fundamentally strong businesses at attractive valuations while avoiding weaker companies amid heightened market dispersion. Fund managers point out stock picking helped in the last year due to a choppy market on account of news flows from tariffs and the West Asian crisis.

While sectors like defence, capital markets, data centre stocks moved up, private sector banks and large cap IT stocks lagged on account of FII selling due to a weak rupee and fears of AI hitting IT revenues and profitability. Given the large number of active schemes and fund houses, careful scheme and fund selection is important.