NIFTY 50 index has risen 12% (Dec. 2017 to June 2019). Does that mean large-cap stocks are fairly priced or overvalued? Let’s study the below graph –
Disclaimer: Past performance may or may not be sustained in future.
Source: Motilal Oswal & internal analysis
As can be seen in the graph above, out of the top 50 NIFTY stocks, only a handful of 15 stocks have delivered a return of 30% while the next 35 have delivered a negative return of 11%.
And hence, only a handful of stocks have performed while the broader markets have been lagging behind.
Due to this majority of large-cap equity mutual funds have been underperforming the benchmark. (Large-cap equity mutual funds invest more than 80% of their corpus in top 100 equity stocks ranked in the order of their market capitalisation).