On 1st December, Kalpen Parekh, CEO of DSP Mutual Fund tweeted the allocation of his fresh investments since 2017 (of his personal money). In it, he mentioned that as much as 23% of his fresh investments were in funds investing outside India (fund of funds or FoFs). India’s July-September GDP growth has come in at a 6 year low of just 4.5%. Its nominal GDP growth was even more dire. At 6.1% India’s nominal GDP is the lowest in the past 20 years. Corporate profits are tied to this latter figure and hence your equity mutual fund returns will also be several impacted by the slowdown. The effect is strongest in mid and small caps which have more tied to the domestic economy and have fewer earnings from outside India. The average return of small cap funds in India over the past year is -0.86% and the average return of mid cap funds is 4.32%. This compares poorly to the 10.16% given by the more global facing large cap companies.
ETFs trade like small-cap stocks as SEBI bans MFs’ overseas investment
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