When the pandemic led to lockdowns across India, the stock markets were jolted at the end of FY20. So much so that March 2020 saw the largest fall of the benchmark indices in Indian stock markets.

A year later, at the end of March 2021, the picture was a complete contrast.  During this period, the Nifty rose from 8,597 at the end of FY20 March 31, 2020) to 14,690 at the end of FY21 (March 31, 2021.) That is a return of 71% over 12 months.

We decided to look at the mutual funds’ performance in FY21 across various categories, by filtering those with assets under management of above Rs 1,000 crore.

To make this analysis more relevant, we compared the returns of mutual funds across various categories with their respective benchmark’s total return index.

Quick takes:

• Among large cap funds only two schemes managed to outperform the benchmark. Franklin India Bluechip Fund (managed by Anand Radhakrishnan, Roshi Jain and Mayank Bukrediwala) has been the top performer outperforming the benchmark by 5.81%  followed by SBI Bluechip Fund (managed by Sohini Andani) outperforming the benchmark by 2.90%

• In the midcap category, only one scheme outperformed the benchmark. The only scheme is SBI Magnum Midcap Fund (managed by Sohini Andani). This fund outperformed the benchmark by 3.41%

• The three top performers in the equity-linked savings scheme (ELSS) category outperformed the benchmark. IDFC Tax Advantage Fund (managed by Daylynn Pinto) by 24.91%, Mirae Asset Tax Saver Fund (managed by Neelesh Surana) by 11.40% and Franklin India Taxshield Fund (managed by Lakshmikanth Reddy and R Janakiraman) by 3.32%

• In the small cap category, there was only one scheme that outperformed its benchmark. Kotak Small Cap Fund (managed by Pankaj Tibrewal) by 0.32%

• In the value category, all but one scheme managed to outperform their benchmark index. These are IDFC Sterling Value Fund (managed by Anoop Bhaskar and Daylynn Pinto) by 41.32%, L&T India Value Fund (managed by Venugopal Manghat, Alok Ranjan and Vihang Naik) by 9.83% and Aditya Birla Sun Life Pure Value Fund (managed by Milind Bafna) by 8.47%

• In the focused category, three top performing schemes outperformed their benchmark. Nippon India Focused Equity Fund (managed by Vinay Sharma and Kinjal Desai) by 23.62%, Mirae Asset Focused Fund (managed by Gaurav Misra) by 12.25%, and Franklin India Focused Equity Fund (managed by Anand Radhakrishnan, Roshi Jain and Mayank Bukrediwala) by 4.65%

Across all the selected categories, four fund houses have more than one fund amongst the  top performers in FY21

• Franklin India AMC - three funds with two of them managed by the same team (Anand Radhakrishnan, Roshi Jain and Mayank Bukrediwala)

• Mirae Asset AMC - two funds (managed individually by Neelesh Surana and Gaurav Misra)

• SBI AMC - two funds (both managed by Sohini Andani)

• IDFC AMC - two funds (both managed by Daylynn Pinto)

The other standout performance has been by Kotak Small Cap Fund, managed by Pankaj Tibrewal, which has given the highest return across categories.

Now let us take a deeper dive into these various categories and their performance over FY21.

Large cap category: Limited funds close to the benchmark or exceed it

Under the large cap category, the benchmark index is the Nifty 100 Total Return Index (TRI). The Nifty TRI gave a return of 71.18% over FY21. Only two schemes in this category beat the said benchmark, while three other schemes’ performance was very close to the benchmark’s return. There are a total 34 schemes in this category.

The top performer, Franklin India Bluechip Fund, surprisingly has delivered the highest returns despite having a heavy weightage on the financial sector and lesser exposure to the IT and Pharma sectors, which delivered maximum returns in FY21.

Midcap category: One star outperformer but high returns as a category

The benchmark index of this category, the Nifty Midcap 100 TRI, gave a return of a whopping 102.44% in FY21. Only one scheme has been able to outperform the Nifty Midcap 100 TRI during the last 12 months, while 17 schemes have delivered returns of over 80% in the same period.

SBI Magnum Midcap Fund was the top performing scheme in this category. The scheme’s outperformance was helped by Godrej Properties (2X returns), PI Industries (2X returns), JK Cements (3X returns) and Ramco Cements (2X returns).

ELSS category: Lock-in period helps to lock in performance too

By their very nature, ELSS schemes have a lock- in period of three years. This helps schemes in the category avoid redemption pressures. The fund managers of these schemes have more flexibility and can hold some stocks for longer duration. This is reflected in the performance as more funds in this category have outperformed their benchmark compared to other equity funds. The benchmark index for this category is the Nifty 200 TRI, which gave a return of 74.61% in FY21.

Out of a total 41 schemes in this category, 11 outperformed their benchmark in FY21. IDFC Tax Advantage Fund was the best performing scheme in this category. Its outperformance came from some stocks that gave more than 100% return in FY21. Some of these stocks are Tata Motors (4X returns), Deepak Nitrite (4X returns), State Bank of India (2X returns) and NCC  (4X returns).

Small cap category: Raising the benchmark to the next level

The small cap category is one that has been amongst the best performing categories in the past financial year. The benchmark for this category (Nifty Smallcap 100 TRI) has literally raised the “benchmark” for the rest of the pack, with a massive 127.45% return in FY21. While only one scheme has managed to outperform this benchmark, the lowest return is also more than 80% creating ample wealth for investors.

Kotak Small Cap Fund is the only fund that has outperformed the benchmark. The returns of this fund have come from some of the stocks which have multiplied in value over 3 times in the same time frame, namely, Dixon Technologies (5X returns), Persistent Systems (4X returns), Century Plyboards (3X returns), APL Apollo Tubes (5X returns), among many others.

The other surprise performer has been Aditya Birla Sun Life Small Cap Fund which was amongst the most underperforming funds over the previous three years and has emerged amongst the top three funds in this year.

Value category: Creating value across the board

The benchmark for this category is also the Nifty 200 TRI, which gave a return of 74.61% in FY21.This category stands out for the reason that, even amongst the worst performing schemes, except for one, the rest of the category posted returns above the benchmark.

IDFC Sterling Value Fund, the top performing value fund in FY21, delivered category beating returns, despite it not having large allocation to IT and pharma sectors.  Notable contributors to its outperformance Deepak Nitrite and KEC, both of which saw a 3X returns in FY21.

Focused category: The top performers have definitely not lost their focus

Though this category has a limited number of funds, the top 3 funds in this category have outperformed the benchmark. The benchmark index–Nifty 200 TRI–gave a return of 74.61% in FY21.

Only 13 funds have an AUM of more than 1000 Crores and within such a small set, a total of five funds have outperformed the benchmark.

Nippon India Focused Equity Fund, the top performer, draws its returns based on the financial sector and a few other stocks from its portfolio like Ashok Leyland and Honeywell Automation that gave returns exceeding 100% in FY21.

Although some of the returns look very high, it needs to be noted that many of these funds were down by 30% to 50% in March 2020. The beginning of FY21 was almost the lowest point for these schemes. It will be interesting to see where these schemes end up in the return pecking order at the end of FY22.