6 days ago
Nifty Returns Trail Fixed Deposits, Reviving Mutual Fund Debate
Indian stocks have had a difficult period, and some common investments have earned less than expected.
The Nifty 50's five-year return has been around 5.2% before considering dividends.
Some bank fixed deposits returned about 6% to 6.5% during the same broad period.
Regular monthly investments in the Nifty produced lower results in the cited calculations because each payment was made at a different time.
Gold performed much better during this period, according to the article.
However, experts say these investments are being compared using different methods.
Dividends and the type of mutual fund can change the result significantly.
The slogan 'Mutual Fund Sahi Hai' means mutual funds can be useful, not that every mutual fund will always make money or beat a bank deposit.
The Nifty 50 is down about 13.5% year to date, while the Sensex has fallen nearly 15%.
The Nifty 50's five-year price-index CAGR is about 5.2%, below typical bank fixed-deposit returns of 6% to 6.5%.
Recent data cited in the article puts the Nifty 50's five-year SIP return between 4.5% and 4.89%, depending on the measure used.
Experts caution that price returns, total returns including dividends, mutual-fund NAV returns, SIP XIRR and FD returns are not directly interchangeable.
Analysts say the slogan 'Mutual Fund Sahi Hai' is not a promise that every fund will beat fixed deposits, inflation or market indexes in every period.
- Who
- Indian equity investors, mutual-fund investors, market analysts and the experts quoted from SMC Global Securities, Avinash Mentor Research and a SEBI-registered market expert.
- What
- A debate over whether recent equity and mutual-fund returns justify reevaluating the 'Mutual Fund Sahi Hai' slogan.
- Where
- India's equity and mutual-fund markets.
- When
- The article discusses year-to-date performance and five-year returns, citing September 30, 2021, September 30, 2026, and August 2026 data.
- Why
- Indian equities have been pressured by elevated US 10-year bond yields and crude-oil prices, while recent returns have lagged fixed deposits and inflation in some comparisons.
Return Skeptics
Methodology-Focused Analysts
Are mutual funds outperforming safer alternatives?
Return Skeptics
The Nifty 50's roughly 5.2% five-year price CAGR and cited SIP returns of about 4.5% to 4.89% are below typical bank FD returns and the article's stated 6% average inflation rate.
Methodology-Focused Analysts
The comparison should include the Nifty 50 Total Return Index, taxes, inflation, fund expenses, asset allocation and the specific fund. Some active funds generated alpha during the period.
How should returns be measured?
Return Skeptics
Investors may see disappointing results when judging the headline Nifty index or their SIP experience, particularly during a volatile market period.
Methodology-Focused Analysts
A lump-sum investment should generally be assessed with CAGR or the total-return index, while a series of SIP investments should be assessed with XIRR. These measures describe different cash-flow patterns.
Meaning of 'Mutual Fund Sahi Hai'
Return Skeptics
The recent performance raises questions about whether the slogan creates overly broad expectations that mutual funds will beat fixed deposits or inflation.
Methodology-Focused Analysts
The slogan is not a guarantee. Mutual funds are investment vehicles whose results depend on the underlying assets; equity, debt, hybrid and sectoral funds carry different risks and return patterns.
Key facts
- Nifty 50 year-to-date performance
- Down about 13.5%, according to the article.
- BSE Sensex year-to-date performance
- Down close to 15%.
- Bank Nifty year-to-date performance
- Down around 8.5%.
- Nifty 50 five-year price CAGR
- Approximately 5.2%, with the article also describing it as below 5.5% and above 5%.
- Bank fixed-deposit returns
- Approximately 6% to 6.5% over the cited five-year period.
- Gold performance
- An absolute return of about 200% and a CAGR of around 25%, according to the article.
- Nifty 50 TRI comparison
- The Nippon India Index Fund Nifty 50 Plan Direct Growth had a cited five-year annualized return of 8.09%, versus 8.32% for the Nifty 50 TRI benchmark.
Quotes
Seema Srivastava
Senior Research Analyst at SMC Global Securities
“The investors need to distinguish between Nifty 50 price returns, Nifty 50 Total Return Index returns, mutual-fund NAV returns, SIP returns and fixed-deposit returns before making a meaningful comparison.”
livemint.com
“The slogan was never a guarantee that every mutual fund would outperform an FD over every three-, five- or seven-year period.”
livemint.com
Sources
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