 "Small-cap, IT funds outshine markets")
Mutual fund investors would have made great returns by investing in categories such as mid-cap, small-cap, pharmaceuticals and information technology (IT) over the past three years.
The average compounded annual growth rate (CAGR) for these four categories has been in excess of 20 per cent since 2013. In comparison, the benchmark Sensex and the Nifty indices have given annualised return of less than eight per cent.
Small-cap equity schemes, in particular, have done quite well with investors making returns of 30 per cent CAGR. In other words, Rs 1,000 invested in a small-cap equity fund in 2013 is now worth Rs 2,250. Some schemes in this category include DSP BlackRock Micro Cap fund, Franklin India Smaller Companies Fund, Reliance Small Cap Fund and Sundaram SMILE Fund.
The second in the list are technology-oriented equity schemes that invest in stocks such as Infosys, Tata Consultancy Services, HCL Technologies, Mindtree and Wipro. They have clocked three-year annualised gain of 25.15 per cent. Schemes in this category include ICICI Prudential Technology Fund, Birla Sun Life New Millennium Fund, Franklin Infotech Fund and SBI IT Fund.
These funds have continued to perform better despite a lot of apprehension among market experts, as several stocks in the category appeared stretched in valuations. "It is not advisable for investors with a long-term horizon to move out of mid-cap and small-cap funds. Over the long term, they have outperformed the large-cap funds," said Kaustubh Belapurkar, director (fund research) at Morningstar India.
Pharma funds would have done much better had it not been for the US Food and Drug Administration-related issues that many companies in the sector have witnessed in the past year.
Large-cap equity funds, on an average, gave a yearly return of 11.4 per cent.
Multi-cap schemes did a bit better, with 16 per cent annualised return in the past three years.
