Equity funds deliver 4-6% return in 5 years, single digit return in 10 years

Equity funds have delivered an annual return of   around 4-6% in the last 5 years. And over the past decade, the annual return of most equity funds is in single digits, shows data available on Value Research.

In the large cap fund category, most funds have delivered an annual return of just 5.8% over the past 5 years and 8.3% over the past decade. For multi cap funds, the 5 year returns stand around 5.3% and 10 year returns around 9%. Other popular categories such as large & mid cap, mid cap, small cap and ELSS have also offered annual returns of around 4-6% in the past 5 years and 9-10% in the last decade.

Source - Value Research

In comparison, Nifty has delivered a compounded annual return of around 6% over the past 5 years, which means index funds have performed better than actively managed funds.   

Pankaj Tibrewal, Senior Fund Manager, Kotak Mahindra MF attributes the underperformance in most equity funds to the sharp polarisation in the past 2-3 years which means only around 15 stocks drove the market rally. Further, major disruptions such as the GST and IL&FS crisis also weighed on corporate profitability and led to broader market underperformance in the last 3 years. 

Navneet Munot, CIO, SBI MF is also of the view that some of the major disruptions in the economy has dragged down corporate profitability. And it has reflected in the performance of stock prices of most companies.

Neelotpal Sahai, Head of Equities of HSBC MF also feels that corporate profitability taking a hit and a polarised equity market are among the major reasons for the underperformance of equity funds. Nevertheless, he feels that some of the disruptions in the past such as GST will work as reforms in the  coming years. In addition, a global market revival will also help the equity funds deliver handsome returns in the next couple of years.