India’s top performing mutual fund schemes in June 2024

30 Jun 2024 , 09:02 AM

EQUITIES WERE BACK TO BUSINESS IN JUNE 2024

If May 2024 was the month of uncertainty, June 2024 was when the government got back to business. The political lead may have been slender and the government may need coalition support. However, the bottom line is that the NDA government is back for the third time, and has also promised that not much will change on the pace of reforms. That is like manna from heaven to the market players and the FPIs, who were worried that coalition pressures may start to weigh on the reforms process. What will favour the government is a set of very favourable macros. GDP for FY24 had grown at 8.2% in real terms; making India the fastest growing large economy for the third year in a row. In addition, the fiscal deficit for FY24 came in 20 bps lower at 5.6%, while the current account reported a surplus in Q4, the first normal time surplus in last 20 years. Full year CAD was just about 0.7% of GDP.

Amidst the slew of positive macro data flows, how did the stock markets perform? Let us look at the principal indices for the month of June 2024. Nifty closed June 2024 with gains of 6.57%, Sensex closed with gains of 6.86%, and the Nifty Next 50 with gains of 5.92%. In addition, the mid-cap index showed gains of 7.80% while the small cap index gained 9.71%. In short, the gains have been evenly spread across various capitalizations. There was also a sharp turnaround in FPI flows, which led the Nifty and the Sensex to close at lifetime highs. For June 2024, FPIs infused $3.19 Billion into equities; which included $2.92 Billion into secondary markets and $266 Million into IPOs. FPIs, overall, were net buyers in India to the tune of $5.01 Billion with the balance $1.82 Billion coming in as debt market flows of FPIs.

BOND YIELDS CLOSE JUNE 2024, WHERE IT STARTED

For June 2024, the 10-year bond yields opened the month at 7.008% and closed exactly at the same level. In May 2024, the bond yields had dipped below 7% after the ₹2.11 Trillion dividend by the RBI to the government. However, towards the end of May, the political uncertainty and the prospects of a coalition government pushed the markets to worry about the fiscal deficit and the level of borrowings. While, the bond yields in June 2024 may have closed where it started, it glosses over a rather volatile month.

Towards the middle of June 2024, the bond yields again fell below 7%, after it became clear that a stable government would be in place and reforms would go on as planned. In addition, the Fed also hinted at rate hikes in September, raising hopes that the RBI may also follow suit and cut rate in August. However, the rates were volatile in the last week and again bounced back above 7%. This was after the dollar strengthened sharply against the Euro, raising the spectre of imported inflation. Delayed monsoons is another concern for food inflation. Volatile bond yields impacted performance of the debt funds in June 2024. Let us now turn to how the equity, debt and hybrid funds performed as of end June 2024.

1. Equity Large-Cap Funds

Top performing Direct Plans (Growth Option) on 5-year returns (as on 28th Jun-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Baroda BNP Paribas Large (G)	44.440%	21.230%	20.352%
JM Large Cap (G)	49.170%	22.798%	20.183%
Nippon India Large Cap Fund (G)	42.081%	25.670%	20.070%
Category Average	36.280%	17.683%	17.311%
Data Source: Morningstar

2. Equity Multi-Cap Funds

Top performing Direct Plans (Growth Option) on 5-year returns (as on 28th Jun-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Quant Active Fund (G)	54.513%	26.866%	32.267%
Mahindra Manulife Multi (G)	52.247%	26.067%	27.496%
Nippon India Multi Cap (G)	53.085%	32.640%	24.094%
Category Average	49.074%	24.011%	23.528%
Data Source: Morningstar

3. Equity Flexi-Cap Funds

Top performing Direct Plans (Growth Option) on 5-year returns (as on 28th Jun-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Quant Flexi Cap Fund (G)	62.833%	27.827%	34.154%
JM Flexi Cap Fund (G)	68.369%	32.624%	27.845%
PPFAS Flexi Cap Fund (G)	39.416%	22.150%	25.752%
Category Average	42.510%	19.964%	19.695%
Data Source: Morningstar

4. Equity Mid-Cap Funds

Top performing Direct Plans (Growth Option) on 5-year returns (as on 28th Jun-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Quant Mid-Cap Fund (G)	73.967%	34.852%	37.325%
Motilal Oswal Mid-Cap(G)	66.615%	40.800%	32.236%
Edelweiss Mid-Cap Fund (G)	61.629%	29.137%	30.363%
Category Average	55.190%	26.082%	26.560%
Data Source: Morningstar

5. Equity Small-Cap Funds

Top performing Direct Plans (Growth Option) on 5-year returns (as on 28th Jun-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Quant Small Cap Fund (G)	67.873%	34.271%	44.135%
BOI Small Cap Fund (G)	54.843%	29.547%	36.561%
Nippon Small Cap Fund (G)	57.768%	34.856%	34.956%
Category Average	50.841%	27.610%	30.266%
Data Source: Morningstar

6. Equity Linked Savings Schemes (Tax Saving)

Top performing Direct Plans (Growth Option) on 5-year returns (as on 28th Jun-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Quant Tax Plan (G)	60.534%	28.885%	35.441%
BOI ELSS Tax Saver (G)	60.840%	25.570%	28.730%
SBI Long Term Equity Fund (G)	59.734%	28.355%	24.876%
Category Average	41.883%	20.349%	19.874%
Data Source: Morningstar

7. Index Funds (Equity)

Top performing Direct Plans (Growth Option) on 5-year returns (as on 28th Jun-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
UTI Next 50 Index Fund (G)	65.584%	23.261%	21.718%
ICICI Pru Nifty Next 50 Fund (G)	65.004%	23.199%	21.569%
LIC MF Nifty Next-50 Fund (G)	64.602%	23.242%	21.555%
Category Average	46.996%	18.779%	17.187%
Data Source: Morningstar

8. Balanced Funds (Aggressive Allocation)

Top performing Direct Plans (Growth Option) on 5-year returns (as on 28th Jun-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Quant Absolute Fund (G)	40.610%	21.827%	26.651%
JM  Aggressive Hybrid Fund (G)	59.066%	26.091%	24.949%
ICICI Pru Equity & Debt (G)	39.522%	24.809%	21.876%
Category Average	32.370%	16.728%	16.607%
Data Source: Morningstar

9. Balanced Funds (Conservative Allocation)

Top performing Direct Plans (Growth Option) on 5-year returns (as on 28th Jun-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Kotak Debt Hybrid (G)	18.236%	12.332%	13.140%
BOI Conservative Hybrid (G)	14.936%	14.935%	12.870%
SBI Conservative Hybrid (G)	15.365%	11.331%	11.809%
Category Average	13.672%	9.517%	9.368%
Data Source: Morningstar

10. Dynamic Asset Allocation Funds (BAF)

Top performing Direct Plans (Growth Option) on 5-year returns (as on 28th Jun-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
HDFC BAF (G)	42.548%	24.826%	19.665%
Baroda BNP Paribas BAF (G)	28.443%	16.465%	17.900%
Edelweiss BAF (G)	26.978%	14.886%	16.970%
Category Average	26.478%	13.697%	13.577%
Data Source: Morningstar

11. Multi-Asset Allocation Funds (MAAF)

Top performing Direct Plans (Growth Option) on 5-year returns (as on 28th Jun-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Quant Multi-Asset Fund (G)	49.051%	25.624%	30.573%
ICICI Pru Multi-Asset Fund (G)	34.875%	24.044%	20.763%
HDFC Multi-Asset Fund (G)	25.449%	15.556%	16.498%
Category Average	28.224%	16.711%	17.030%
Data Source: Morningstar

12. Arbitrage Funds (Cash-Futures)

Top performing Direct Plans (Growth Option) on 5-year returns (as on 28th Jun-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Tata Equity Arbitrage (G)	8.517%	6.426%	6.179%
Invesco Arbitrage Fund (G)	8.498%	6.753%	6.136%
Edelweiss India Arbitrage (G)	8.520%	6.575%	6.120%
Category Average	7.853%	5.915%	5.416%
Data Source: Morningstar

13. Government Securities Funds (Gilt Funds)

Top performing Direct Plans (Growth Option) on 5-year returns (as on 28th Jun-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
DSP Gilt Fund (G)	9.266%	6.674%	7.985%
ICICI Pru Gilt Fund (G)	8.197%	6.800%	7.955%
Bandhan G-Sec Fund (G)	10.098%	6.392%	7.828%
Category Average	7.749%	5.730%	6.621%
Data Source: Morningstar

14. Corporate Bond Funds

Top performing Direct Plans (Growth Option) on 5-year returns (as on 28th Jun-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
ICICI Pru Corporate Bond (G)	7.784%	6.347%	7.387%
ABSL Corporate Bond (G)	7.732%	6.072%	7.338%
HDFC Corporate Bond (G)	7.810%	5.984%	7.286%
Category Average	7.068%	5.443%	6.695%
Data Source: Morningstar

15. Credit Risk Funds

Top performing Direct Plans (Growth Option) on 5-year returns (as on 28th Jun-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
DSP Credit Risk Fund (G)	16.292%	11.794%	8.515%
Baroda BNP Credit Risk Fund (G)	8.298%	9.890%	8.506%
ICICI Pru Credit Risk Fund (G)	8.567%	7.121%	8.251%
Category Average	8.523%	7.682%	6.303%
Data Source: Morningstar

16. Liquid Funds

Top performing Direct Plans (Growth Option) on 5-year returns (as on 28th Jun-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Quant Liquid Plan (G)	7.212%	5.884%	5.755%
Mahindra Manulife Liquid (G)	7.428%	5.879%	5.360%
Edelweiss Liquid Fund (G)	7.446%	5.861%	5.358%
Category Average	6.541%	5.208%	4.930%
Data Source: Morningstar

Having the seen the returns for various categories of fund for different periods of time for the period ended June 2024, let us turn to whether these returns actually had an impact on the flows into various categories. While the returns and flows may not have a direct correlation, they should ideally converge into a single logical flow in the long run.

CORRELATION OF FLOWS AND CATEGORY PERFORMANCE

Are the flows and returns of various categories of funds related? One must appreciate that returns are as of the latest month and the flows as shown in the table below are with a lag of one month. However, that is more of an academic distinction and the broad trends should be visible. The table below captures the AUM of various categories of funds and how they have moved over the last one year.

Month	Debt AUM (₹ Trillion)	Equity AUM (₹ Trillion)	Alternate AUM (₹ Trillion)	Total AUM (₹ Trillion)
May-23	13.49	16.57	12.85	43.20
Jun-23	13.48	17.43	13.22	44.39
Jul-23	14.17	18.25	13.69	46.38
Aug-23	14.00	18.60	13.74	46.64
Sep-23	13.05	19.08	14.17	46.58
Oct-23	13.54	18.79	14.10	46.72
Nov-23	13.58	20.33	14.87	49.05
Dec-23	12.91	21.79	15.78	50.78
Jan-24	13.77	22.50	16.17	52.74
Feb-24	14.50	23.12	16.62	54.54
Mar-24	12.62	23.49	17.02	53.40
Apr-24	14.59	24.74	17.66	57.26
May-24	15.12	25.40	18.13	58.91

Data Source AMFI

As can be seen in the above table, the overall AUM has grown by 36.4% yoy to ₹58.91 Trillion as of the close of May 2024. This has been triggered by 12.1% growth in debt fund AUM, 53.3% growth in equity AUM and 41.1% growth in alternative assets. For equity funds and for hybrids and passives to some extent AUM accretion is more a result of index value accretion. In the case of debt funds, it is entirely about flows. Flows have been gravitating towards equities and hybrids in search of greater diversification, higher returns, and a better fit into the asset allocation goals of investors. Obviously, when active strategy looks like the low-hanging fruit, passive funds have temporarily taken a backseat in terms of flows.

WHAT WE READ FROM THE JUNE 2024 MUTUAL FUND RANKINGS

Here are some key trends we could decipher from the rankings of various categories of mutual funds over different time periods as of end of June 2024.

1. Let us look at the equity oriented funds first. While mid-cap funds and small cap funds have outdone the large caps; what is more interesting is the equity index funds doing much better than large caps. That also partially explains the shift. Index funds are outperforming the large cap funds across time frames. That should be music to the ears of passive fund managers. Multi-cap and flexi-cap are at par in the long run.
2. In debt, the long end funds are finally seeing a return of risk-on. However, at the short end, the volatility in equity markets is resulting in above 8% returns on arbitrage funds; making it a real struggle for the liquid funds to keep up with them to compete for flows.
3. On the hybrid side, the flexible allocation funds like Dynamic Allocation Funds (BAFs) and Multi-Asset Allocation Funds have gone better than conservative or balanced allocation funds. That is entirely due to the ability to enhance the equity component in a big way.
4. The final point is something we have been reiterating over the months. The winners across categories are consistent; meaning leaders are there more out of habit. So, past returns become a good barometer for future performance. This is an important takeaway for mutual fund investors, asset allocations and also for financial planners.

As political stability returned, the big gainer was the India equity story. That is evident in the mutual fund returns as of the period ended June 2024.