The year 2020 was an exceptional year in recent history. We witnessed many abnormalities such as negative Crude Oil Prices, the steepest decline and the fastest recovery cycle in the equity market, and complete lockdown by the Central Government in the wake of the Coronavirus pandemic. These were just a few challenges amongst many others.
If we talk about the equity market, more than one Crore new Demat accounts got opened in India in 2020, and whoever invested in this year in the equity market has surely got tremendous returns out of it. However, when it comes to equity or stock market investment, it is always advisable to go through the Mutual Funds (MF) route because these funds are skillfully managed by highly qualified and experienced professionals.
The mutual fund industry has recently crossed a total Asset Under Management (AUM) of Rs 32 Trillion, and it is increasing every year. There are 41 Asset Management Companies (AMCs), and more than 1800 Funds fall under the purview of various Equity, Debt and Hybrid categories. Therefore, it is difficult for a user to select the right Mutual Fund among so many options. Although it is very difficult to predict which sector will perform the best in the coming year, we can only analyze past data and current situation and make an investment decision to invest accordingly.
Here is a snapshot of few mutual funds which has given more than 100 percent return in the last one year.
|Fund Name||Category|| 1 Year Return (%)|
(As on May 10, 2021)
|Net Assets (Cr)|
|Quant Small Cap Fund||EQ-SC||209||170|
|ICICI Prudential Commodities Fund||EQ-THEMATIC||191||214|
|Quant Infrastructure Fund||EQ-INFRA||153||10|
|ICICI Prudential Technology Fund||EQ-IT||126||1818|
|Quant Tax Plan||EQ-ELSS||129||106|
|Kotak Small Cap Fund||EQ-SC||124||3423|
|Tata Digital India Fund||EQ-IT||104||1161|
|Aditya Birla Sun Life Digital India Fund||EQ-IT||107||1148|
|Quant Active Fund||EQ-MLC||118||260|
|DSP Natural Resources and New Energy Fund||EQ-Energy||119||514|
|Quant Consumption Fund||EQ-Consumption||113||7|
Data Source: www.valueresearchonline.com
Although the past performance of a mutual fund never guarantees similar future results, we can take reference of the data for analysis purpose. Almost every category in Equity Mutual Funds has performed well this year; however, IT and Metal in the sectorial funds and Small Cap in the capital segment have outperformed.
Here are some reasons to check the performance of these domains-
Information Technology (IT) - BSE IT index has given a 101 percent return in the last one year. Owing to the COVID-19 pandemic, IT stocks were in flavour, as these companies are getting mammoth deals. Owing to reasons such as an increase in the Work From Home (WFH), change in business tactics, use of Artificial Intelligence (AI), cloud, online advertising and social media, increase in internet consumption and many more, the IT sector remained an outperformer. Looking at these factors, IT stocks will remain agile during the pandemic.
Metals - BSE Metal Index has given an outstanding return of 182 percent in one year. Due to the low-interest rates, Metal demand has increased significantly across the world. As per recent data, the home sales in the USA remained the highest since 2007. Moreover, rising housing and infrastructure demand in China will further augment the metal demand. These factors are helping the metal sector to outdo this excellent performance for one more year.
Small Cap - BSE Small-Cap has displayed a fairly good performance of 99.51 percent in one year. Due to the COVID-19 challenge, a limitation in boundaries is helping the small caps companies. Owing to a new taxation system, small companies are finding it easier to fight with large companies. On account of fewer imports from China due to the cold war situation and border tussles, small cap companies are immensely benefitting.
Therefore, if you had invested in the above Mutual Funds last year at the end of April 2020, your fund would have been doubled by the end of this month. These kinds of opportunities come once in ten years. After the great recession of 2008, few mutual funds have displayed a similar kind of performance in 2009. Otherwise, in general, one should not expect more than 15-20 percent yearly return from the stock market.
Authored by Ravi Singhal, Vice Chairman, GCL Securities Limited
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