In 2018, there has been a widely talked, ongoing debate on whether to start investing in passive mutual funds and whether Indian markets have matured enough for it to become increasingly tough for fund managers to generate alpha over their benchmark justifying their higher expense ratio.
“In the last 1 year, the index is holding on due to a few stocks whereas the broader universe has seen a sharper correction. For e.g. Nifty 50 has delivered 3% returns since Dec 2017, and although this is very moderate, it is largely driven by a group of 15 Nifty stocks (which contribute 65% of the market cap) which were up 16% while the other 35 stocks were down by 16%.
Similarly, in the Midcap 100 index, the top 30 stocks (48% of Midcap 100 market cap) have given flat returns over the period and the other 70 constituents are down by a massive 30% or more.
This trend in both the indexes shows the broader markets are much more attractive than what the Index levels indicate. This is where it benefits to invest in an actively managed portfolio where the Fund managers are always looking for buying opportunities to invest in growth stocks on its merit irrespective of index levels.” says Akash Singhania, Fund Manager, Motilal Oswal Midcap 30 Fund.