Active Funds Beat Benchmarks: Motilal Oswal Study
By Market Desk
Motilal Oswal Private Wealth study shows active mutual funds outperformed benchmarks last year, with high success rates across large, mid, and small-cap segments due to strategic stock picking.
Actively managed mutual funds significantly outperformed their benchmark indices over the last year, according to a recent analysis by Motilal Oswal Private Wealth. The study highlights strong alpha generation across various market capitalization segments.
Specifically, 94% of large-cap funds, 70% of mid-cap funds, 83% of small-cap funds, 75% of flexi-cap funds, and 84% of multi-cap funds successfully surpassed their respective benchmarks during this period.
Driving Alpha Generation
This outperformance is largely attributed to fund managers’ adeptness at navigating volatile macroeconomic conditions. Their strategies included bottom-up, style-agnostic investment approaches.
Trideep Bhattacharya, President & CIO-Equities at Edelweiss Asset Management, confirmed that such volatile environments are ideal for managers to generate alpha. This is achieved by selectively investing in robust businesses at appealing valuations while avoiding weaker companies amidst market dispersion.
Strategic stock picking proved crucial over the past year. Market choppiness, influenced by news related to tariffs and the West Asian crisis, underscored the importance of careful selection.
Performance Across Market Caps
Performance varied across different market capitalizations. Large-cap funds posted a 1.4% loss, significantly outperforming the Nifty 50 TRI’s 5.4% loss.
Midcap funds gained 5.4%, surpassing the Nifty Midcap 150 TRI’s 4% gain. Small-cap funds saw a 6.4% gain, well above the Nifty Smallcap 250 TRI’s 0.1% gain.
The flexi-cap universe rose by 1.1% against the Nifty 500 TRI’s 1.7% fall. Multi-cap funds gained 3.2%, outperforming the Nifty 500 Multicap 50:25:25 TRI’s 0.6% loss.
Sectoral Dynamics
Certain sectors showed strong performance, including defense, capital markets, and data center stocks. These segments provided tailwinds for fund managers.
Conversely, private sector banks and large-cap IT stocks lagged. This underperformance was driven by factors such as foreign institutional investor (FII) selling, a weak rupee, and concerns over AI’s potential impact on IT revenues and profitability.
Given the extensive number of active schemes and fund houses available, the Motilal Oswal study emphasizes the critical importance of careful selection for investors seeking optimal returns.