InvestorQ : My mutual fund manager is finding it harder to beat the index. Is that true across all fund managers and why is it happening?
Chandralekha Desai made post

My mutual fund manager is finding it harder to beat the index. Is that true across all fund managers and why is it happening?

Answer
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Dawn Cherian answered.
12 months ago


You are absolutely correct that it is getting much harder to beat the Nifty and Sensex in India and one answer could be index funds, but you can look at that later. For now, it is true that India is becoming a difficult market to beat. That was not the case for a long time since India was the haven for active investing. There were tons of promising mid cap and small cap stocks. Large caps were underpriced and fund managers had options to pick and choose stocks to beat the market. Global investors often wondered how fund managers in India could consistently outperform equity indices in India. For long, global fund managers were struggling to beat the market.

Unfortunately, that is coming to India too. According to Morningstar, it is getting tougher to beat the index in India too. In the five years since 2014, funds have literally struggled to beat the index, even if they have been doing SIPs. For example, over a 1 year time frame up to December 2018, nearly 92% of the funds failed to beat the indices as per a study by SPIVA. If you extend that investment time frame from 1 year to 3 years, 90% of the funds still failed to beat the index. That is a little more worrying. Even if you consider a slightly longer time frame of 5 years and 10 years, almost 60% of the fund managers are finding it hard to beat the index. In short, active investing is not your sure shot ticket to making wealth in the long run; any longer.