Five worst-performing equity-based mutual fund categories since October 19
The worst-performing funds are those who have given the best returns recently.
The Indian equity market after out-performing most of the global indices in the last one year has started to fizzle out. In the last 40 days, frontline Indian equity indices are down by almost 8.5 per cent. Some of the indices such as the Nifty Bank are down in double digits. The same is reflected in the returns of mutual funds dedicated to such categories.
The worst-performing funds are those who have given the best returns recently. So funds based on themes such as PSU, Energy and Bank are the worst performers from October 19 till November 29.
Following table gives a glimpse of the worst-performing category of mutual funds since October 19.
| Category |
Average Return(%) |
| Energy |
-10.54 |
| PSU |
-9.68 |
| BANK |
-8.52 |
| DIV Y |
-6.99 |
| Value |
-6.96 |
There are various factors suddenly realized by investors, which is putting a brake on marching of the equity indices ahead. And the first among them is stretched valuation. Nifty 50 is trading at a forward PE of more than 22 times, which is almost 29 per cent higher than its long-term average. This coupled with muted earnings growth has spoiled the party. Besides all these, rising concern about inflation and continuous profit-booking by foreign portfolio investors has dented the market movement.
We believe the volatility is likely to remain here as a new variant of covid-19 has emerged, which will keep the market on tenterhooks. In such a condition, we advise readers to check their asset allocation.
If your equity allocation has gone beyond your tolerance limit, bring it down to the original that suits your risk profile. Nevertheless, if you are a new investor and were waiting for a correction to enter, my advice will be to go with a balanced advantage fund, which invests in both equity and debt, based on market dynamics. This is also not a time to discontinue your investment through SIP.
Always remember volatility is part and parcel of investment and you should not miss the woods for trees. If you are a long-term investor, these volatilities should not perturb you and you should stay the course.