Indian Stock Market Report: Underperformance of Large-Cap Funds and Exceptional Performance of ELSS Funds in 2023

According to a report by S&P Dow Jones Indices, despite a strong year for the Indian stock market in 2023, more than half of the country’s equity Large-Cap funds failed to outperform the S&P BSE 100 index. The report, titled “S&P Indices Versus Active Funds (SPIVA(r)) India Scorecard,” highlights the underperformance of many actively managed funds in meeting their respective benchmarks across various categories.
Exceptional Performance of ELSS Funds
However, there was an exception to this underperformance. The Equity Linked Savings Scheme (ELSS) funds stood out as a majority of them outperformed their benchmark. In fact, 70% of ELSS funds managed to outperform their benchmark (S&P BSE 200) across all measured time horizons, including 1, 3, 5, and 10 years.
Disappointing Performance of Equity Mid/Small-Cap Funds
On the other hand, the performance of Equity Mid/Small-Cap funds was less impressive. A staggering 74% of these funds fell short of the S&P BSE 400 MidSmallCap Index in the same year. This category also recorded its worst long-term performance over the past decade.
Underperformance of Indian Composite Bond and Government Bond Funds
In the bond market, the situation was also challenging. A staggering 96% of Indian Composite Bond funds and 82% of Indian Government Bond funds failed to surpass their respective benchmarks. Despite the S&P BSE India Government Bond Index seeing an increase of 7.9%, less than one-fifth of active managers in this category managed to beat this benchmark. The underperformance by Indian Composite Bond fund managers was the highest across all categories on the SPIVA India Scorecard, with a rate of 96%.
These findings emphasize the importance of careful analysis and due diligence when selecting investment options, as not all funds were able to outperform their benchmarks in 2023.