The year 2022 was nit by volatility from new Covid-19 variants, the Russia-Ukraine war and supply disruptions. These factors worsened inflationary pressures and threatened economic recovery across the world. But it was not all bad news for India. Even though the benchmark Nifty 50 gained only about 5% this year, it was the best-performing index in the global market, which speaks volumes about the resilience of the Indian economy in the post-Covid era.

In a volatile market, many retail investors showed interest in mutual funds, and equity-oriented mutual funds formed a major part of their portfolios. Let's look at how equity mutual funds performed in 2022 and which of them delivered above-average returns. 

The question of one year versus longer-term performance

While a fund’s one year's performance is not solely enough to base a decision on, it gives an insight into the fund's potential. Another matter of debate within the investor community is active vs passive investments. This year’s data proves that some funds do generate alpha, but with the number of schemes and AMCs growing, the ratio of alpha generators is shrinking.

Flexi-Cap Funds

Flexi-cap equity mutual funds have gained traction in the past few years with many AMCs launching new schemes. They allow flexibility in the selection of stocks across the market capitalisation spectrum and even include investments in international markets. 

Outperformers of this category include  HDFC Flexi Cap Dir Gr managed by Priya Ranjan and Roshi Jain,  Quant Active Dir Gr by Sanjeev Sharma and Vasav Sahgal, and  ICICI Pru Flexicap Reg Gr by Rajat Chandak and Sharmila D’mello. 

Schemes that underperformed are Rajeev Thakkar and Raunak Onkar’s Parag Parikh Flexi Cap Reg Gr, Shreyash Devalkar and Hitesh Das’ Axis Flexi Cap Reg Gr, and Ajay Tyagi’s UTI Flexi Cap Reg Gr.

Large-Cap Funds

This popular category has the majority of investments in the Nifty 50 universe and delivers stable returns without too many risks. It has only a handful of schemes that beat the benchmark.

Sailesh Raj Bhan and Kinjal Desai’s Nippon India Large Cap Gr, Priya Ranjan and Rahul Baijal’s HDFC Top 100 Gr, and Anish Tawakley and Vaibhav Dusad’s ICICI Pru Bluechip Gr has the best returns in this category.

The lowest returns are from Sumit Agrawal and Sachin Relekar for IDFC Large Cap Gr, Amit Nigam and Dhimant Kothari for Invesco India largecap Gr, and Shreyash Devalkar and Hitesh Das for Axis Bluechip Fund Gr.

Mid-Cap Funds

These funds have been the investors' choice due to a set of mid-cap stocks generating higher returns than benchmark indices. Nearly 30% of the schemes in this category generated higher returns than the benchmark.

The top performing schemes are Sanjeev Sharma and Vasav Sahgal’s Quant Mid Cap Gr, Chirag Setalvad and Priya Ranjan’s HDFC Mid-Cap Opportunities Gr, and Niket Shah and Ankush Sood’s Motilal Oswal Midcap 30 Reg Gr.

Underperformers in this category include Axis Midcap Gr managed by Shreyash Devalkar and Hitesh Das, DSP Midcap Reg Gr by Vinit Sambre and Resham Jain, and Aditya BSL Mid Cap Gr by Anil Shah. 

Small-Cap Funds

This high-risk category invests in small-cap companies which are nimble and able to grow quickly.  Investors bet on fund managers identifying winners at an early stage and ride out the journey. Only six funds in this category could beat the benchmark last year.

Outperforming fund managers include Sanjeev Sharma and Vasav Sahgal for Quant Small Cap Gr, R Srinivasan and Mohit Jain for SBI Small Cap Fund Reg Gr, and Chandraprakash Padiyar and Satish Mishra for Tata Small Cap Fund Reg Gr.

Fund managers Aniruddha Naha and Ravi Adukia for PGIM India Small Cap Reg Gr, Anoop Bhaskar for IDFC Emerging Businesses Reg Gr and Vishal Gajwani for Aditya BSL Small Cap Gr underperformed. 

Multi-Cap Funds

Multi-cap funds invest in a mix of stocks from companies of different sizes. These funds tend to give higher returns in trending markets. In 2022, only five funds could beat the benchmark index.

Sailesh Raj Bhan and Kinjal Desai for Nippon India Multi Cap Gr, Sanjeev Sharma and Vasav Sahgal for Quant Active Gr, and Harsha Upadhyaya and Abhishek Bisen for Kotak Multicap Reg Gr outperformed the benchmark, while Sanjay Chawla and Sandeep Jain for Baroda BNP P Multi Cap Reg Gr, Anupam Tiwari and Sachin Jain for Axis Multicap Reg Gr, and Pranav Gokhale and Amit Nigam for Invesco India Multicap Gr underperformed.

Large- and Mid-Cap Funds

Another popular category among equity mutual funds, these schemes invest in large- and mid-cap companies only. From these, only seven funds beat the benchmark last year.

While Sanjeev Sharma and Vasav Sahgal for Quant Large and Mid Cap Gr, Ihab Dalwai and Sharmila D’mello for ICICI Pru Large & Mid Cap Gr, and Chandraprakash Padiyar and Meeta Shetty for Tata Large & Mid Cap Reg Gr outperformed, Satyabrata Mohanty for Aditya BSL Equity Advantage Gr, Jinesh Gopani and Hitesh Das for Axis Growth Opportunities Reg Gr, and Neelotpal Sahai for HSBC Large & Mid Cap Reg Gr were the weakest performers. 

ELSS (Equity Linked Savings Scheme)

Tax-saving benefits make ELSS a crowd favourite, and the three-year lock-in period gives fund managers flexibility. But only two schemes stood out last year, while nearly 60% of ELSS schemes underperformed.

Outperformers include Vasav Sahgal and Ankit Pande’s Quant Tax Plan Gr, Roshi Jain and Priya Ranjan’s HDFC TaxSaver Gr, and George Thomas and Christy Mathai’s Quantum Tax Saving Reg Gr.

Vishal Chopda for UTI Long Term Equity Reg Gr, Dhimant Kothari and Amit Nigam for Invesco India Tax Plan Gr, and Jinesh Gopani for Axis Long Term Equity Gr fail to do well..

Quant AMC stands out with at least one outperforming scheme in almost every category of equity mutual funds. Another highlight is that the AMCs which have been around for almost two decades, HDFC AMC, Nippon India and ICICI Prudential, have alpha-generators in some categories. Many of the newer AMCs do not seem to be delivering alpha to investors just yet.