Investing in equity mutual funds comes with risks, and recent market trends have led to significant corrections in several funds. Over the last six months, certain equity mutual funds have dropped between 20% and 22%, leaving investors wondering if they should buy, hold, or avoid them. This article analyzes the Top 10 Mutual Funds that have fallen 20% to 22% in the last 6 months, categorizes them based on investment strategy, and provides insights into whether they present a good investment opportunity or not.
What happened to Indian Stock Markets in the last 6 months?
You might be wondering why this article talks about last 6 months mutual fund performance. Indian markets have corrected in the lats 4-5 months. We observed that there are over 10 equity funds (Excl ETFs) that fallen over 20% during this period. Some investors might think it is good opportunity to invest during such market correct. But investors should always analyse thorouglly so that they don’t end up in investing in Worst Performing Mutual Funds In the last 3 years which we discussed in our earlier article.
List of 10 Mutual Funds That Dropped 20-22% in 6 Months
The table below lists the mutual funds that saw the steepest decline in the past six months.
| Fund Name | 6-Month Return (%) |
|---|---|
| Bandhan Nifty Alpha 50 Index Fund | -22.88 |
| Tata Infrastructure Fund | -22.66 |
| Motilal Oswal Nifty India Defence Index Fund | -22.64 |
| Samco Special Opportunities Fund | -22.46 |
| Quant PSU Fund | -22.03 |
| Kotak BSE PSU Index Fund | -21.35 |
| SBI Energy Opportunities Fund | -21.19 |
| Bandhan Infrastructure Fund | -20.59 |
| Samco Flexi Cap Fund | -20.45 |
| Invesco India PSU Equity Fund | -20.26 |
| HDFC Defence Fund | -20.18 |
Category-Wise Breakdown of These Declining Mutual Funds
Let’s analyze each category, understand why they have fallen, and determine if they are worth investing in right now.
#1 – Index Fund – High-Risk, High-Reward?
Bandhan Nifty Alpha 50 Index Fund (-22.88%)
This fund tracks the Nifty Alpha 50 Index, which consists of stocks with high alpha (excess return compared to the market). While it can generate high returns during a bull run, it also experiences sharp declines when markets correct.
- Should You Invest?
- Suitable only for high-risk investors though its Nifty50 index. For moderate risk one can consider Largecap Mutual Funds that generated over 13% annualised returns in the last 10 years.
- Not ideal for conservative investors.
- Long-term investors can consider it, provided they can tolerate volatility.
#2 – Infrastructure Mutual Funds – Impacted by Market Cycles
Tata Infrastructure Fund (-22.66%) & Bandhan Infrastructure Fund (-20.59%)
Infrastructure funds focus on companies engaged in construction, power, roads, and utilities. These sectors are heavily influenced by government policies, economic conditions, and funding availability.
- Reasons for the decline:
- High interest rates affecting infrastructure projects.
- Reduced government spending due to fiscal constraints.
- Should You Invest?
- Only for long-term investors who believe in India’s infrastructure growth.
- Short-term volatility is high.
#3 – Defence Mutual Funds – The Hype is Cooling Down?
Motilal Oswal Nifty India Defence Index Fund (-22.64%) & HDFC Defence Fund (-20.18%)
Defence sector funds were among the most hyped categories in 2023, driven by rising defence budgets and increasing self-reliance in defence manufacturing.
- Reasons for the decline:
- Overvaluation concerns after a sharp rally.
- Sector-specific correction due to profit booking.
- Should You Invest?
- High risk, as the sector is volatile.
- Those who missed the initial rally can consider SIPs instead of lump-sum investments.
- Conservative investors should avoid.
#4 – Special Opportunities Fund – Not for Everyone
Samco Special Opportunities Fund (-22.46%)
This fund aims to invest in unique and undervalued opportunities, which can be high-risk and unpredictable.
- Should You Invest?
- Not ideal for risk-averse investors.
- Only for those who understand market cycles and can handle sharp fluctuations.
#5 – PSU Mutual Funds – Government-Backed But Volatile
Quant PSU Fund (-22.03%), Kotak BSE PSU Index Fund (-21.35%), & Invesco India PSU Equity Fund (-20.26%)
Public Sector Undertaking (PSU) funds focus on government-owned companies in sectors like banking, energy, and defence.
- Reasons for the decline:
- PSU stocks are highly volatile and dependent on government policies.
- Profit booking after a strong rally in 2023.
- Should You Invest?
- Only if you believe in the long-term potential of PSUs.
- Be prepared for sudden downturns due to government intervention.
#6 – Energy Mutual Funds – A Tough Sector to Predict
SBI Energy Opportunities Fund (-21.19%)
This fund focuses on companies in the energy sector, including oil, gas, and renewable energy firms.
- Reasons for the decline:
- Fluctuating global crude oil prices.
- Uncertainty in renewable energy policies.
- Should You Invest?
- Suitable for investors with a long-term horizon.
- Highly cyclical, making it risky for short-term investors.
#7 – Flexi Cap Fund – Unstable in Current Market Conditions
Samco Flexi Cap Fund (-20.45%)
Flexi Cap funds have the flexibility to invest across large-cap, mid-cap, and small-cap stocks.
- Reasons for the decline:
- Poor performance of mid-cap and small-cap stocks in recent months.
- Fund manager’s stock-picking strategy might not be working well in the current market conditions.
- If we analyze the performance of Flexi Cap mutual funds over the last six months, most have delivered returns in the range of +5% to -20%, with this fund being the worst performer. Investors can check Top 7 Flexicap Mutual Funds that turned 1 Lakh to ₹ 2.5 to 3.8 Lakhs in last 5 years.
- Should You Invest?
- Investors should monitor the fund’s future performance before making any decision.
- Consider diversified large-cap funds if you prefer stability.
Should You Invest in These Beaten-Down Mutual Funds?
- Investors should be cautious before jumping into these funds just because they have fallen sharply.
- Infrastructure, PSU, and energy funds might recover over the long term but remain volatile.
- Defence funds were hyped earlier and have now cooled down – their future recovery is uncertain.
- Flexi Cap and Special Opportunities funds need to prove their resilience before becoming a strong investment choice.
- For long-term investors with high risk appetite, SIPs may be a better way to enter these funds rather than lump-sum investments.
Before making any investment decision, always analyze your risk appetite, tenure of investment along with financial goals.
What’s Your Take? Have you invested in any of these mutual funds? Are you planning to invest in them now? Let us know your thoughts in the comments below!
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