How equity markets fared in June 2023
The month of June 2023 saw the Nifty cross several psychological barriers like 18,800 and 19,000 levels to close decisively at all-time highs. The rally in the last week of June itself was about 2.8% on the Nifty with IT stocks also showing a sharp bounce, apart from the traditional favourites like autos and FMCG. Several factors worked for equities in June. Firstly, RBI and the Fed paused on rates giving the first hint that rates may be close to topping out. Also, the current account deficit (CAD) for the March 2023 quarter coming in at an attractive 0.2% of GDP while full year CAD was just 2% of GDP. The US GDP for Q12023 being upgraded to 2% also helped sentiments and dispelled fears of recession in the US. The June 2023 rally in equities was broad-based with the Nifty gaining 3.53%, Nifty Mid-cap 5.90% and Nifty Small-cap 6.60%.
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How bond markets fared in June 2023
You really cannot look at equities in isolation and in terms of asset allocation, they must be seen in conjunction with bond markets. In June 2023, the bond markets saw a bounce in yields, after yields had fallen in late May to below the 7% mark. The 10-year bond yields closed June 2023 at 7.11%; a sharp bounce from sub-7% levels. This bounce in yields can be attributed to the hawkish tone of the RBI representatives in the MPC. Additionally, the Bank of England had raised rates by 50 bps while the undertone of the Fed language remained hawkish. Meanwhile, RBI neutralizing excess liquidity also contributed to higher bond yields in the month. This had negative implications for short term 1-year returns on most bond funds, which tapered in the month of June due to higher yields.
How equity mutual funds fared in June 2023
One way to understand the impact of the interplay of equity markets is to look at the best performing equity funds in the Indian market for the month of June 2023. We look at a wide array of 7 categories of equity funds, which include active and passive fund categories. Here are how the best ranked funds in each of the equity categories for the month of June 2023 look like.
- Equity Large-Cap Funds
Top performing Direct Plans (Growth Option) on 5-year returns (as on 30th Jun-23):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
| Canara Robeco Blue-Chip (G) | 24.246% | 23.459% | 16.004% |
| Nippon India Large Cap (G) | 32.941% | 31.423% | 15.362% |
| IDBI India Top 100 Equity (G) | 24.590% | 25.377% | 14.729% |
| Category Average | 23.384% | 22.960% | 12.574% |
| BSE 100 (TR) Index | 23.976% | 25.160% | 13.748% |
| Data Source: Morningstar | |||
- Equity Multi-Cap Funds
Top performing Direct Plans (Growth Option) on 5-year returns (as on 30th Jun-23):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
| Quant Active Fund (G) | 26.516% | 38.912% | 22.928% |
| Mahindra Manulife Multi (G) | 29.349% | 32.060% | 19.155% |
| Nippon India Multi Cap (G) | 38.604% | 38.757% | 17.624% |
| Category Average | 28.449% | 30.128% | 16.252% |
| BSE 500 (TR) Index | 23.977% | 26.403% | 13.872% |
| Data Source: Morningstar | |||
- Equity Flexi-Cap Funds
Top performing Direct Plans (Growth Option) on 5-year returns (as on 30th Jun-23):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
| Quant Flexi Cap Fund (G) | 29.046% | 40.373% | 22.327% |
| PPFAS Flexi Cap Fund (G) | 27.344% | 28.998% | 19.481% |
| PGIM India Flexi Cap Fund (G) | 23.162% | 29.494% | 18.227% |
| Category Average | 24.427% | 24.879% | 13.675% |
| BSE 500 (TR) Index | 23.977% | 26.403% | 13.872% |
| Data Source: Morningstar | |||
- Equity Mid-Cap Funds
Top performing Direct Plans (Growth Option) on 5-year returns (as on 30th Jun-23):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
| Quant Mid-Cap Fund (G) | 30.749% | 40.652% | 22.667% |
| PGIM India Mid-Cap Fund (G) | 23.142% | 39.037% | 21.385% |
| MOSL Mid-Cap 30 (G) | 39.463% | 40.471% | 19.639% |
| Category Average | 29.148% | 31.844% | 16.149% |
| BSE Midcap (TR) Index | 34.160% | 31.632% | 14.571% |
| Data Source: Morningstar | |||
- Equity Small-Cap Funds
Top performing Direct Plans (Growth Option) on 5-year returns (as on 30th Jun-23):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
| Quant Small Cap Fund (G) | 42.170% | 60.088% | 27.210% |
| Axis Small Cap Fund (G) | 30.403% | 39.284% | 24.112% |
| Nippon Small Cap Fund (G) | 40.932% | 48.089% | 22.543% |
| Category Average | 32.180% | 41.245% | 18.583% |
| BSE Midcap (TR) Index | 32.628% | 39.203% | 16.338% |
| Data Source: Morningstar | |||
- Equity Linked Savings Schemes (Tax Saving)
Top performing Direct Plans (Growth Option) on 5-year returns (as on 30th Jun-23):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
| Quant Tax Plan (G) | 25.726% | 43.143% | 25.252% |
| Mirae Asset Tax Saver (G) | 22.772% | 28.204% | 17.732% |
| Canara Robeco Tax Saver (G) | 24.660% | 27.614% | 17.453% |
| Category Average | 24.976% | 25.367% | 13.262% |
| BSE 200 (TR) Index | 23.183% | 25.549% | 13.903% |
| Data Source: Morningstar | |||
- Index Funds (Equity)
Top performing Direct Plans (Growth Option) on 5-year returns (as on 30th Jun-23):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
| Nippon India Sensex Fund (G) | 23.326% | 24.030% | 13.821% |
| HDFC India Sensex Fund (G) | 23.316% | 24.083% | 13.788% |
| ICICI Pru Sensex Fund (G) | 23.238% | 23.920% | 13.783% |
| Category Average | 24.313% | 10.408% | 12.536% |
| Benchmark Index | N.A. | N.A. | N.A. |
| Data Source: Morningstar | |||
What are the major takeaways from the ranking of equity funds? Three things emerge from the seven categories of funds evaluated above.
- Firstly, the top performers have been largely consistent over the last many months with very minor variations. This is a signal that past returns can be used as a good guide for future performance.
- Most of the funds ranked on tops across equity categories have done better than the industry TRI benchmark. That is indication that the top performing equity funds are also creating genuine alpha for the investors.
- There has been a sharp improvement in one year returns in June 2023. That is partially due to the rally in the last two months and largely due to the low base effect as June 2022 was when the market had dipped low on FPI selling.
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