Mutual Funds (MFs), as an investment opportunity, are a very important part of an investor’s portfolio. It has become one of the most preferred modes of investment for the short term as well as long term.
2020 has been critical for retail investors and there is a lot to be reviewed and pondered upon to understand how the year 2020 has gone by and what we need to keep in mind for 2021.
Here’s a list of the top-performing equity mutual funds (Compiled by Groww — an investment platform):
Large-cap funds saw a growth in average Asset Under Management (AUM) of 4.22 percent. They performed better in 2020 as compared to 2019. The median annual returns of all large-cap mutual funds with AUM of greater than 500 crores was 13.31 percent in 2020 as compared to 12.44 percent in 2019.
These were the top large-cap funds chosen by investors
● Axis Bluechip Fund Direct Plan Growth
● ICICI Prudential Bluechip Fund Direct Growth
● Mirae Asset Large Cap Fund Direct Growth
● Nippon India Large Cap Fund Direct Growth
● SBI Bluechip Direct Plan Growth
Mid Cap Funds
This is the sector that has seen the biggest improvement in 2020 in terms of performance. In 2019, the performance of midcap funds was mediocre at best with median returns at 4.61 percent and mean returns of 4.48 percent.
However, they have witnessed a significant turnaround in 2020, with median returns of 23.85 percent. The top 5 midcap funds have all generated a return of more than 28 percent annual returns for their investors in 2020.
These were the top mid-cap funds chosen by investors:
● Axis Midcap Direct Plan Growth
● DSP Midcap Direct Plan Growth
● Kotak Emerging Equity Fund Direct Growth
● L&T Midcap Fund Direct Growth
● Invesco India Mid Cap Fund Direct Growth
Small Cap Funds
In 2020, the pandemic and subsequent lockdowns led to a lot of stock prices dropping drastically within no time. While almost all stocks suffered, small-caps were one the worst-hit. Eventually, the government announced economic stimulus packages to boost liquidity in the system that is still floating in the market.
With the country edging itself out of the lockdown, investors are turning towards stocks to earn profits and are looking for potential multibaggers. This has led to an increase in the trading volumes of small-cap stocks.
Talking about mutual funds, in September, the Securities and Exchange Board of India (SEBI) released a circular mandating a minimum investment in small-cap stocks for multi-cap funds. With this new mandate, there was a surge in mutual funds buying small-cap stocks to adhere to the new norms. As a result, small-cap stock prices started rising resulting in a rally in small-cap funds.
These were the top small-cap funds chosen by investors:
● SBI Small Cap Fund Direct Growth
● Axis Small Cap Fund Direct Growth
● HDFC Small Cap Fund Direct Growth
● Nippon India Small Cap Fund Direct Growth
● L&T Emerging Businesses Fund Direct Growth
Multicap funds are usually preferred by new investors or those seeking equity diversification. With exposure to stocks from large, mid, and small-cap companies, these funds are the most difficult to manage during volatile market conditions. In 2020, the pandemic and associated lockdowns had caused a lot of volatility in the markets. Hence, fund managers needed to ensure that they assess stocks from all market capitalizations to optimize the returns of the portfolio.
The median annual return among multicap funds was 14.31 percent and the average return was 15.42 percent in 2020. The same return in 2019 was 9.27 percent and 8.88 percent respectively. In terms of growth, average assets under management grew by 2.4 percent as far as multi cap funds were concerned.
These were the top multi-cap funds chosen by investors:
● Parag Parikh Long Term Equity Fund Direct Growth
● Kotak Standard Multicap Fund Direct Growth
● Aditya Birla Sun Life Equity Fund Direct Growth
● Motilal Oswal Multicap 35 Fund Direct Growth
● Axis Multicap Fund Direct Growth
ELSS funds are primarily preferred by salaried professionals as they offer tax benefits while providing an opportunity to earn market-linked returns. ELSS funds averaged a return of 13.33 percent in 2020 as compared to 8.27 percent in 2019.
These were the top ELSS funds chosen by investors:
● Mirae Asset Tax Saver Fund Direct Growth
● Axis Long Term Equity Direct Plan Growth
● Aditya Birla Sun Life Tax Relief 96 Direct Growth
● Tata India Tax Savings Fund Direct Growth
● Motilal Oswal Long Term Equity Fund Direct Growth
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