Over the six-month period ending June 2024, a cross-category weighted average of 77% of funds across all Indian active fund categories underperformed their assigned benchmarks.
As highlighted in the SPIVA Global Mid-Year 2024 Scorecard, the first half of 2024 proved to be a particularly challenging market environment for active managers across global equity markets, as the outperformance of the very largest companies resulted in a high proportion of index constituents underperforming the benchmark return. In India, 77% of actively managed Indian Equity Large-Cap funds trailed the S&P India LargeMidCap’s total return of 17.4%, posting an asset weighted average return of 14.5%, both measured in INR (see Report 1).
Indian ELSS and Indian Equity Mid-/Small-Cap funds had relatively better results: just 58% of Indian ELSS managers underperformed the S&P India BMI, and a slim majority (52%) of the Indian Equity Mid-/Small-Cap funds underperformed the S&P India SmallCap’s total return of 22.3%.
Fixed income active managers found it particularly challenging to add value: 94% of Indian Composite Bond funds and 74% of Indian Government Bond funds lagged the 5.3% return of the iBoxx ALBI India.
Market Context: H1 2024 and Beyond
The S&P India LargeMidCap ended the first half of 2024 up 17.4% and rallied a further 7.7% in Q3 2024 to extend its YTD gain to 26.5% as of Sept. 30, 2024 (see Exhibit 2). In local currency, Indian large-cap equity performance trailed domestic small-cap issues, but significantly outperformed the global flagship S&P World Index and the U.S.-focused S&P 500.
Among S&P India LargeMidCap constituents, slightly more than one-half (52%) outperformed the index in H1 2024. As the SPIVA Global Mid-Year 2024 Scorecard highlights, despite nearly even odds of picking a winning stock in the first half of the year, over three-quarters of Indian Equity Large-Cap funds (77%) underperformed the benchmark.
Given the significant dispersion of individual stock returns, stock picking may have played a significant role in active fund performance in H1 2024: from a contribution perspective, the top 20 stocks (out of 237) combined accounted for over one-half of the S&P India LargeMidCap’s 17.4% total return in the first six months of 2024.
As the months keep rolling past, time will tell how well India’s active equity managers navigate the challenges and opportunities remaining in 2024.
