Mutual Fund Category Performance: May 2023

The domestic equity markets experienced a month of growth, influenced by various factors such as:

• Favourable domestic macroeconomic data
• Upbeat corporate earnings for quarter ended March 2023
• Better-than-expected U.S. jobs data for April 2023
• Expectations of a normal monsoon this year

The yield on the 10-year benchmark bond witnessed a significant decline of 13 bps, closing at 6.99%. This decrease in bond yields can be attributed to the following factors:

• Expectations that the U.S. Federal Reserve may pause its interest rate hikes, providing a favourable outlook for bond markets
• Anticipation that the Reserve Bank of India's decision to withdraw the highest denomination 2,000-rupee note from circulation would enhance liquidity in the Indian banking system
• Positive sentiment driven by better-than-expected inflation data for April 2023 in India

Here are some key trends observed in the Equity Mutual Fund category during the month:

• Small Cap Fund emerged as the top performer, delivering the highest returns across all investment horizons except for the 1-week period, where Mid Cap Fund performed the best
• Over the past 10 years, Small Cap Funds generated returns of over 20%, followed by Mid Cap Fund and Multi Cap Fund, all surpassing a 12% return
• In the last 1 year, Small Cap Funds yielded returns of more than 19%, followed by Value Fund/Contra Fund and Mid Cap Fund, with all funds generating returns of over 12%
• Only Focused Fund (-0.13%) and Large Cap Fund (-0.50%) reported negative returns over the six-month period
• All fund categories delivered the highest returns in the 3-year period, ranging from 23% to 43%

In the debt segment, all fund categories gave the maximum return in 3-month period that ranged between 6% to 19%. Long Duration Fund gave the maximum return for investment from 1-month period to 1-year, while Gilt Fund with 10-year constant duration gave the maximum return for 5-year and 10-year period. Liquid Fund gave maximum return for an investment of 1-week period.

In hybrid segment, Balanced Hybrid Fund/Aggressive Hybrid Fund gave the maximum return across all time-period except for 6-month, 3-year and 5-year period. Multi Asset Allocation Fund gave maximum return across 3-year and 5-year period.

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