The outperformance of the vast majority of diversified equity (DE) funds compared to their benchmark indices has been a puzzle. In the last five years for instance, 86 per cent of active DE funds, and as much as 90 per cent of the total corpus of DE funds, have beaten the Sensex/Nifty.
One possible reason may be the Nifty/Sensex are not constructed in a way that gives a truly representative picture of market movements. Or, this may happen because India is not a strongly-efficient market. Rather than being disseminated at the same time to everybody, information leaks at different speeds, to
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