India’s top performing mutual fund schemes in February 2024

1 Mar 2024 , 11:09 AM

How equity markets panned out in February 2024

The month of February 2024 was relatively better compared to January 2024, as FPIs had sold $3.10 billion in equities in January. In comparison, February 2024, saw infusion of $186 million into equities. If you break up the data, the secondary markets flows continued to be negative while the positive flows came from IPOs. However, the real story of February was not equity but debt flows. FPIs have been gorging on Indian debt on the expectation of the Indian bonds being included in the JP Morgan global bond indices. For the month of February 2024, the total FPI net inflows stood at $3.84 billion, with 95% of the flows coming into debt and just 5% into equities.

Let us now turn to the stock market performance in the month of February 2024. The Sensex closed with gains of +1.04% for the month of February 2024. The monthly returns of the NSE indices in February 2024 were; Nifty 50 closed +1.18% higher, Nifty Next-50 index closed +6.68% higher, the Mid-Cap 100 closed -0.48% lower while the Small Cap 100 index closed with -0.31% losses for February 2024. Clearly, the action appears to be shifting from the small caps and the mid-caps to the large caps and, possibly, the Nifty Next 50 index. In a volatile market, there is a clear shift to safety.

How benchmark bond yields turned out in February 2024

Bond markets, the month of February 2024, were extremely range bound. Through the month of February 2024, the 10-year benchmark bond yields in India stayed between 7.00% and 7.10% through the month with little signs of volatility. The only volatility we saw was in the immediate aftermath of the interim budget announcement, when the yields dropped. That was because the interim budget had pegged the FY25 fiscal deficit at just 5.1% of GDP, hinting at lower stress on the borrowing calendar. The other factor depressing yields was the frenetic FPI flows into debt, ahead of the index inclusion. The enhanced demand raised bond praises and kept the yields under pressure.

However, yields did not fall too sharply and there were two factors responsible. Firstly, the inflation continues to be elevated and the worsening Red Sea crisis is keeping oil on the boil. That means a lot of imported inflation. The other factor that is keeping yields from falling is the RBI unwillingness to cut rates before the full budget is presented. With real yields at over 200 bps, the 10-year bond yields have been squeezed into a tight range.

Equity Large-Cap Funds

Top performing Direct Plans (Growth Option) on 5-year returns (as on 29th Feb-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Baroda BNP Paribas Large (G)	39.316%	19.281%	20.194%
Canara Robeco Blue-Chip (G)	31.979%	16.709%	19.635%
Nippon India Large Cap (G)	43.368%	23.970%	19.606%
Category Average	35.001%	16.780%	16.817%
BSE 100 (TR) Index	32.520%	17.470%	17.387%
Data Source: Morningstar

Equity Multi-Cap Funds

Top performing Direct Plans% (Growth Option) on 5-year returns (as on 29th Feb-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Quant Active Fund (G)	51.624%	31.268%	31.134%
Mahindra Manulife Multi (G)	53.686%	27.726%	26.561%
Baroda BNPP Multi Cap (G)	46.263%	23.768%	22.149%
Category Average	46.131%	24.265%	22.763%
BSE 500 (TR) Index	39.471%	19.466%	19.001%
Data Source: Morningstar

Equity Flexi-Cap Funds

Top performing Direct Plans (Growth Option) on 5-year returns (as on 29th Feb-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Quant Flexi Cap Fund (G)	63.209%	35.809%	32.482%
JM Flexi Cap Fund (G)	60.041%	28.062%	24.923%
PPFAS Flexi Cap Fund (G)	42.617%	24.131%	24.357%
Category Average	39.630%	19.343%	18.700%
BSE 500 (TR) Index	39.471%	19.466%	19.001%
Data Source: Morningstar

Equity Mid-Cap Funds

Top performing Direct Plans (Growth Option) on 5-year returns (as on 29th Feb-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Quant Mid-Cap Fund (G)	63.753%	39.835%	33.524%
Motilal Oswal Mid-Cap(G)	53.737%	34.925%	28.234%
PGIM Mid-Cap Opps Fund (G)	28.626%	22.235%	28.123%
Category Average	48.765%	24.596%	23.555%
BSE Midcap (TR) Index	64.691%	26.815%	23.831%
Data Source: Morningstar

Equity Small-Cap Funds

Top performing Direct Plans (Growth Option) on 5-year returns (as on 29th Feb-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Quant Small Cap Fund (G)	72.833%	45.875%	39.099%
BOI Small Cap Fund (G)	51.234%	30.977%	32.935%
Nippon Small Cap Fund (G)	58.554%	37.001%	32.069%
Category Average	51.076%	30.090%	27.802%
BSE Midcap (TR) Index	66.790%	31.990%	28.177%
Data Source: Morningstar

Equity Linked Savings Schemes (Tax Saving)     

Top performing Direct Plans (Growth Option) on 5-year returns (as on 29th Feb-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Quant Tax Plan (G)	59.668%	34.458%	34.524%
BOI ELSS Tax Saver (G)	53.904%	25.487%	27.283%
SBI Long Term Equity Fund (G)	59.189%	27.438%	22.985%
Category Average	38.920%	19.467%	18.842%
BSE 200 (TR) Index	37.287%	18.570%	18.426%
Data Source: Morningstar

Index Funds (Equity)

Top performing Direct Plans (Growth Option) on 5-year returns (as on 29th Feb-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
DSP Nifty-50 Equal Weight (G)	43.007%	21.819%	18.989%
Sundaram Nifty 100 EW (G)	49.894%	20.301%	18.102%
UTI Next 50 Index Fund (G)	58.739%	20.405%	17.989%
Category Average	45.159%	18.005%	16.429%
Benchmark Index	N.A.	N.A.	N.A.
Data Source: Morningstar

Balanced Funds (Aggressive Allocation)

Top performing Direct Plans (Growth Option) on 5-year returns (as on 29th Feb-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Quant Absolute Fund (G)	39.843%	27.122%	26.878%
BOI S&M Equity and Debt (G)	47.413%	26.991%	23.211%
ICICI Pru Equity & Debt (G)	38.988%	25.022%	21.883%
Category Average	30.401%	16.538%	16.055%
CRISIL MIF Blended Index PR	12.554%	7.672%	9.411%
Data Source: Morningstar

Balanced Funds (Conservative Allocation)

Top performing Direct Plans (Growth Option) on 5-year returns (as on 29th Feb-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Kotak Debt Hybrid (G)	19.235%	12.358%	13.239%
SBI Conservative Hybrid (G)	15.652%	10.991%	11.461%
HDFC Hybrid Debt Fund (G)	18.271%	11.793%	11.310%
Category Average	13.960%	9.236%	8.882%
CRISIL MIF Blended Index PR	12.554%	7.672%	9.411%
Data Source: Morningstar

Dynamic Asset Allocation Funds (BAF)

Top performing Direct Plans (Growth Option) on 5-year returns (as on 29th Feb-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
HDFC BAF (G)	41.341%	24.053%	20.313%
Baroda BNP Paribas BAF (G)	27.740%	14.967%	17.218%
Edelweiss BAF (G)	26.371%	14.324%	16.454%
Category Average	25.049%	12.780%	12.857%
Benchmark Index	N.A.	N.A.	N.A.
Data Source: Morningstar

Multi-Asset Allocation Funds (MAAF)

Top performing Direct Plans (Growth Option) on 5-year returns (as on 29th Feb-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Quant Multi-Asset Fund (G)	45.702%	34.261%	28.382%
ICICI Pru Multi-Asset Fund (G)	31.301%	23.409%	20.392%
HDFC Multi-Asset Fund (G)	24.650%	15.552%	16.031%
Category Average	27.922%	16.923%	16.007%
Benchmark Index	N.A.	N.A.	N.A.
Data Source: Morningstar

Arbitrage Funds (Cash-Futures)

Top performing Direct Plans (Growth Option) on 5-year returns (as on 29th Feb-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Tata Equity Arbitrage (G)	8.277%	6.118%	6.137%
Edelweiss Arbitrage Fund (G)	8.331%	6.206%	6.062%
Invesco India Arbitrage (G)	8.332%	6.355%	6.050%
Category Average	7.639%	5.465%	5.314%
Benchmark Index	N.A.	N.A.	N.A.
Data Source: Morningstar

Government Securities Funds (Gilt Funds)

Top performing Direct Plans (Growth Option) on 5-year returns (as on 29th Feb-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Bandhan G-Sec Fund (G)	10.721%	6.215%	8.762%
SBI Magnum Gilt Fund (G)	10.095%	6.523%	8.744%
DSP Gilt Fund (G)	10.462%	6.443%	8.739%
Category Average	9.001%	5.569%	7.400%
I-SEC MIBEX Index TR	8.494%	5.677%	7.229%
Data Source: Morningstar

Corporate Bond Funds

Top performing Direct Plans (Growth Option) on 5-year returns (as on 29th Feb-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
HSBC Corporate Bond (G)	8.144%	5.864%	8.131%
ICICI Pru Corporate Bond (G)	8.164%	6.178%	7.595%
HDFC Pru Corporate Bond (G)	8.300%	5.940%	7.580%
Category Average	7.466%	5.379%	6.751%
CRISIL ST Bond Fund Index PR	7.722%	5.685%	7.020%
Data Source: Morningstar

Credit Risk Funds

Top performing Direct Plans (Growth Option) on 5-year returns (as on 29th Feb-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
ICICI Pru Credit Risk Fund (G)	9.262%	7.420%	8.434%
DSP Credit Risk Fund (G)	17.181%	10.249%	8.177%
HDFC Credit Risk Fund (G)	8.167%	6.809%	8.129%
Category Average	8.927%	9.926%	5.406%
CRISIL ST Bond Fund Index PR	7.722%	5.685%	7.020%
Data Source: Morningstar

Liquid Funds

Top performing Direct Plans (Growth Option) on 5-year returns (as on 29th Feb-24):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Quant Liquid Plan (G)	7.157%	5.589%	5.782%
Mahindra Manulife Liquid (G)	7.349%	5.430%	5.359%
Edelweiss Liquid Fund (G)	7.314%	5.399%	5.345%
Category Average	6.342%	4.641%	4.725%
CRISIL Liquid Fund Index PR	7.308%	5.488%	5.458%
Data Source: Morningstar

Here are some key takeaways from the February 2024 mutual fund rankings.

1. Large cap equity funds did a lot better than the mid-cap and small cap fund on one-year returns, due to the strength shown by market caps in February 2024. In a volatile market, there was a rush to safety and so the large caps did benefit from this trend. This sentiment broadly rubbed off on the performance of equity funds overall as we saw the other large cap dependent funds like multi-caps, flexi-caps and even index funds doing quite well in the month of February 2024. Interestingly, the mid-caps and small caps also improved on their short term returns, but that was more due to a low base in the comparable month last year.
2. The leaders, or the top 3 performers, across most of the categories of funds, be it equity or debt, have done better than the benchmark. This is a clear signal that the top performers are also generating alpha in terms of excess returns over the index. The outperformance looks to be quite stark in the case of hybrid funds, but that the index for such hybrid funds itself tends to be quite conservative in their combination. Hence, the returns tend to get overstated at times. However, on the debt side, there were select funds that underperformed over the shorter term, although that was not a major problem since our ranking is based on longer term returns.
3. Debt funds have been generally divergent in their performance and some broad trends are visible. For instance, the preference of investors is more towards the short end of the yield curve rather than the long end of the curve. That means, investors are not too confidence of going to the long end of duration without clarity on rates trajectory. The second issue is the shift that is happening from liquid funds into arbitrage funds. The answer is evident if you look at the short term returns as the volatility in the equity markets has led to sharply higher returns on the arbitrage funds. This has deepened the shift from liquid funds towards arbitrage funds.
4. An interesting point emerges from the analysis of the above mutual fund rankings across the equity and debt categories for the month of February 2024. These findings are broadly consistent over a 5-year period. The top-3 across the various categories have been consistent and any changes have been marginal. There could be occasional internal ranking shifts, but the moves are not too material. That also subtly testifies to the fact that; past returns in most mutual funds are a reliable indicator of future performance; at least in the case of the leaders. For investors, the good news is that they can rely on past performance for future outlook. This has larger implications for financial advisors too; who often debate whether past returns are a good index of future performance of mutual funds? The answer appears to be in the affirmative.

The story of February 2024 on equity funds front is that; short term returns have been positively impacted, but impact on longer term returns is limited. In the equity space, it is the mid-cap and small-cap funds that underperformed. The large caps have done well as the higher volatility in the market has triggered a quick shift to safety. In the case of debt funds, shorter duration funds have done better while the longer duration funds have seen minimal disruption due to relatively range bound bond yields. However, most of the data points like GDP, core sector and fiscal deficit are through. The next big news for fund performance will be the market response to the monsoons and the Kharif output.