Top 7 Equity Mutual Funds That Delivered Over 20% CAGR in Modi 2.0
June 10, 2024 Mutual Fund
The Indian equity market has experienced significant growth in recent years, offering investors the potential for substantial returns. Equity mutual funds have been a popular choice amongst investors for capitalising on this growth. While past performance does not guarantee future results, identifying funds consistently delivering high returns can be a valuable starting point for your investment journey.
Given the noise around general elections in 2024, the Indian equity market witnessed a major slump on Tuesday equity benchmark indices saw a severe decline. The drop was seen during the 2024 Lok Sabha election vote-counting process when it was discovered that the Bhartiya Janata Party (BJP), led by Shri Narendra Modi, had not secured a clear majority. It secured 240 Lok Sabha seats, falling 32 seats shy of the midway mark of 272 seats.
[Read: Should Mutual Fund Investors Worry About BJP Falling Short of Majority? Know Here]
Although early trends witnessed the ruling BJP-led National Democratic Alliance (NDA) in the lead, the opposition Indian National Developmental Inclusive Alliance (INDIA), led by the Congress party, could be ahead of what exit polls had predicted.
The S&P BSE Sensex and Nifty 50 were down by 5% each on June 04, 2024, after surging more than 3% each on Monday, June 03, 2024. The Nifty dropped 1,200 points to a low of 22,000, while the S&P BSE Sensex lost more than 4,000 points to a low of 72,337.
Data as of June 05, 2024
(Source: ACE MF, data collated by PersonalFN Research)
Following the Lok Sabha election results in 2024, the benchmark S&P BSE Sensex and Nifty 50 indexes gained back almost half of their losses on speculation that the NDA, led by Mr. Narendra Modi, would form the government.
On June 05, 2024, the S&P BSE Sensex ended at 74,382, rising 2303 points, while the Nifty 50 gained 736 points to reach a high of 22,620. In addition, Mr. Narendra Modi was officially chosen by the NDA to lead the alliance. With this, the market returned to normal following the unusual volatility of the previous few days.
However, the unexpected general election results indicate that the BJP may need to rely on alliance partners, mainly the TDP (under the leadership of Shri N. Chandrababu Naidu) and JDU (led by Shri Nitish Kumar), who secured 16 and 12 seats, respectively, to continue in power.
The Modi administration has carried out a number of measures targeted at social welfare programmes, economic reforms, and infrastructure development since coming to power in 2014. Numerous sectors of the Indian economy have been greatly impacted by this progressive agenda. Certain stock and mutual fund segments stand to gain significantly if this momentum persists.
The establishment of a Modi 3.0 government will benefit a wide range of companies, primarily those in domestic cyclical industries including infrastructure, manufacturing, capital goods, defence, and power.
[Read: 5 Best Mutual Fund Types to Benefit During Modi’s Third Term]
Over the course of the last five years under the Modi-led NDA administration, equity mutual fund categories such as mid and small cap funds and sectoral/thematic funds (infrastructure, healthcare, pharma, etc.) have been driving impressive returns in the Indian market.
A robust Indian economy over the past few years has created a favourable environment for businesses, leading to overall market growth. Investors may benefit from the mutual funds focused on the sectors or the companies under these sectors/themes that are under consideration for development by the Modi 3.0 government.
In the ever-churning world of finance, identifying mutual funds that consistently outperform the market is a constant quest for investors. This article explores seven equity mutual funds in India that have achieved a Compound Annual Growth Rate (CAGR) exceeding 20% over the past five years.
A Look at the Top Performers
1. Bank of India Small Cap Fund
Bank of India Small Cap Fund, launched in December 2018, currently holds an AUM of Rs 1052.37 crore. It boasts a consistent track record, generating a 32.96% CAGR over the past five years. This open-ended fund invests in a diversified portfolio of small-cap companies across various sectors.
The fund’s investment strategy emphasises fundamental analysis and identifying companies with strong financials and growth prospects. The scheme has a significant portion of its assets invested in sectors like healthcare, automobile, and financial services, and it also allocates to financial institutions like BSE Ltd.
Data as of May 31, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)
Looking at the small-cap peers, the Bank of India Small Cap Fund is the top performer with the highest 5-year returns, and given the noticeable outperformance and prudent management, it becomes a good option for investors.
Edelweiss Small Cap Fund was launched in February 2019 and had an AUM of Rs 3,361.40 crore as of May 30, 2024. This actively managed fund has emerged as a frontrunner, delivering a stellar 30.26% CAGR in the last five years based on daily rolling returns.
Edelweiss Small Cap Fund has emerged as a strong performer in the small-cap category. The fund’s success can be attributed to its focus on undervalued stocks and its ability to capitalise on emerging market trends. This strategy has capitalised on the recent surge in the small-cap segment, where several companies have witnessed significant growth.
However, do note that small-cap stocks are inherently riskier due to their lower market capitalisation and higher volatility.
Data as of May 31, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)
3. Canara Robeco Small Cap Fund
Canara Robeco Small Cap Fund was launched in February 2019 and had an AUM of Rs 10,085.98 crore as of May 30, 2024. This actively managed fund has delivered a CAGR of 29.15% over the past five years based on daily rolling returns. It invests in a diversified basket of small-cap stocks with a focus on growth potential and valuation. Like the previous two funds, it comes with a higher risk profile.
Canara Robeco Small Cap Fund is a well-established player. The fund follows a growth-oriented investment approach and focuses on small-cap companies with the potential for high returns. The fund’s experienced management team actively manages the portfolio, seeking undervalued stocks with strong fundamentals.
Data as of May 31, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)
Tata Small Cap Fund, which was launched in November 2018, currently holds an AUM of Rs 6,951.59 crores. The fund may not be the absolute top performer among small-cap funds in 2024, but it has delivered a substantial performance. This actively managed fund has delivered a CAGR of 28.64% over the past five years based on daily rolling returns.
The fund focuses on identifying promising small-cap companies with long-term growth potential. It avoids chasing short-term fads and maintains a relatively low portfolio churn, indicating a focus on long-term value creation.
Although several small-cap funds have outperformed Tata Small Cap Fund in 2024, particularly those with a more aggressive investment approach, Tata Small Cap Fund’s strategy prioritises stability and long-term growth over chasing short-term gains. Tata Small Cap Fund offers a good option for investors seeking long-term capital appreciation in the small-cap space.
Data as of May 31, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)
5. Invesco India Small Cap Fund
Invesco India Small Cap Fund has delivered mixed results compared to its small-cap peers in 2024. While it hasn’t cracked the top spot, it showcases decent performance. Invesco India Small Cap Fund, launched in October 2018, currently holds an AUM of Rs 3,964.76 crores. This actively managed fund has delivered a CAGR of 27.68% over the past five years based on daily rolling returns.
Unlike some peers that might chase the hottest sectors, Invesco India Small Cap Fund focuses on identifying fundamentally strong small-cap companies with long-term growth potential across various sectors. While potentially leading to steadier returns, this approach might not always keep pace with the market’s most aggressive surges in specific sectors.
Data as of May 31, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)
The DSP Healthcare Fund has performed competitively within the healthcare/pharmaceutical sector in 2024. DSP Healthcare Fund, which was launched in November 2018, currently holds an AUM of Rs 2,343.94 crores. This actively managed fund has delivered a CAGR of 27.36% over the past five years based on daily rolling returns.
The scheme invests in diversified stocks across the Indian healthcare and pharmaceutical sectors. It focuses on identifying companies with strong growth potential, considering factors like product pipelines, innovation, and market leadership. This approach aims to capture the overall growth of the healthcare sector while managing risk through diversification.
Data as of May 31, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)
Tata Digital India Fund has carved a niche for itself within the technology sector as a mutual fund in India. Launched in December 2015, the scheme currently holds an AUM of Rs 9,460.81 crores. The fund boasts impressive returns, consistently exceeding the category average over various timeframes. This actively managed fund has delivered a CAGR of 26.56% over the past five years based on daily rolling returns.
Data as of May 31, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)
Unlike some technology funds that invest across a broader spectrum, the Tata Digital India Fund takes a concentrated approach. It primarily invests in Indian companies operating in the information technology sector. This targeted focus allows the fund to leverage the expertise of its managers in selecting high-growth potential stocks within the digital landscape.
[Read: Best Mutual Funds for the Next 10 Years]
To conclude…
While the past five years have witnessed impressive performance from these equity mutual funds, remember, chasing past returns isn’t a prudent path to future success. These funds are inherently riskier due to their exposure to smaller companies. Carefully evaluate your risk tolerance and investment horizon before investing.
Conduct thorough research, understand your investment horizon and risk tolerance, and consult a financial advisor before making any investment decisions. By carefully evaluating these factors, you can leverage the potential of these high-growth funds while aligning them with your overall financial goals.
Disclaimer: PersonalFN does not receive any monetary compensation from the fund house or scheme names stated in the article.
This article first appeared on PersonalFN here
