Growth funds: Stick to your guns

As equities globally play the old-as-time tune of optimism and panic, it's time we put our 'Growth' bucket under the scanner. Since they are the cornerstone of your equity portfolio and equity appears volatile at this point, the timing seems apt. Our readers may already know that Flexi-cap, Large & Mid-cap and Value-oriented funds comprise our Growth bucket. But what's new is the addition of the popular Multi-cap funds. So, without further ado, let's look at the key trends cooking within our 'Growth' category before offering a strategy to tackle the current climate. Value style triumphs. Again. The value investing style maintained its hegemony over funds geared towards growth. While growth style showed a flicker of resurgence, it remained short lived. As such, the value investing style kept its winning streak for the third straight year. When examining the performance of the Nifty 500 Value 50 index against the Nifty 500, the data shows that the value factor gained notable strength in the latter part of last year. It continues to win the arm-wrestle this year, too. (For the uninitiated, Nifty 500 Value 50 index identifies the 50 most value-tilt stocks from the Nifty 500 universe). Active funds wobble At the time of our last category update in September 2023, we saw a resounding number of active funds - above 90 per cent - beating the BSE 500 index across the three 'Growth' categories. (We didn't include multi-cap funds here, as they are a new addition). The landscape has changed since then. The broad rally in the home stretch of 2023 allowed the BSE 500 index to claw back the deficit. Now, less than half the active funds in flexi-cap and large- & mid-cap categories are beating the BSE 500, consequently hurting their category returns as seen in the graph below. Only the active value-oriented funds remain well ahead. Flexi-ing its muscle Investor interest in flexi-cap funds, which appeared to wane in the first two quarters of this financial year, has staged a comeback, perhaps implying a slowdown in the small- and mid-cap fund universe. Meanwhile, the inflows in the remaining three fund categories have remained more or less stable. Tug of war between bulls and bears The gloves are off in the Indian equity market. The bulls and bears are out in full force to stake out their territory. While the be-positive brigade points to strong macroeconomic data and robust fundamentals, Nervous Ne