Which are the high-risk and underperforming mutual funds that can be avoided by investors?

This article categorizes mutual funds based on relative performance, highlighting those offering lower returns at higher risk which can be potentially avoided by investors.

Which are the high-risk and underperforming mutual funds that can be avoided by investors?


Posted on 22 Jan 2025 • Updated on: 26 Mar 2025
Author: Sayan Sircar
9 mins read
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This article categorizes mutual funds based on relative performance, highlighting those offering lower returns at higher risk which can be potentially avoided by investors.

Which are the high-risk and underperforming mutual funds that can be avoided by investors?

Disclaimer: The Fund names in this article are not recommendations to buy/hold/sell. Mutual funds are subject to market risks. Do not invest real money without adequate research.

If you are unhappy with the performance of your mutual funds, you can get a free Mutual Fund Portfolio review.

This article is a part of our detailed article series on the worst performing mutual funds in India. Ensure you have read the other parts here:

📚 Table of Contents

The most basic and simplest equity mutual fund investment that an investor can make is a Nifty 50 Index fund.

Since a diversified index like the Nifty 50 is a decent representative of the stock market, since Nifty 500 and Nifty Total Market funds are quite new, and index funds tracking the Nifty 50 are quite common and popular, it makes a lot of sense to choose active funds that at least attempt to give better returns than the humble Nifty 50 index fund.

By better returns here, we mean, vs. the Nifty 50 index fund,

  • higher returns
  • lower risk (measured via volatility)
  • or both

Funds that don’t give either better returns or have higher volatility than index funds should be carefully reviewed to understand the reason for underperformance.

What is the concept of relative risk vs. return performance of mutual funds against the market benchmark?

Excess Risk and Return of Funds vs the Nifty 50 TRI

If we split the list of all equity mutual funds then we will end up with four categories:

  • funds that give better returns than the Nifty 50 index fund but with lower risk which are ideal for any investor
  • funds that give better returns than the Nifty 50 index fund but with higher risk which are great for investors with high risk tolerance
  • funds that give lower returns than the Nifty 50 index fund but with lower risk which are good for debt funds
  • funds that give lower returns than the Nifty 50 index fund but with higher risk which is a terrible place to be for an equity fund

Related:
Top Mutual Funds with High Returns & Low Risk for Bottom Fishing

Users of the free Arthgyaan mutual fund portfolio review service will get the above chart created for all funds in their portfolio.

In this article, we will look at the latest list of equity mutual funds, including index funds tracking indices other than the Nifty 50, to check if they are in the worst category of lower returns and higher risk.

In the analysis below, we have chosen equity and hybrid mutual funds with worse returns at higher risk using the last three years of market data from AMFI for the period ending 25-Mar-2025. The funds that have fallen the most from their 52-week high levels are presented first.

Which mutual funds have lower returns at higher risk vs the broad market?

Note: This chart represents point-to-point data. The funds in the list will change over time as the future performance of any particular fund is random and cannot be predicted in advance.

Equity: Dividend Yield

Fund Change (%) NAV (52w high) Latest NAV
Templeton India Equity Income 11.25 164.5244 146.0139

Equity: Large Cap

Fund Change (%) NAV (52w high) Latest NAV
BARODA BNP PARIBAS LARGE CAP 12.30 271.7361 238.3240
PGIM India Large Cap 10.76 421.4400 376.1000
Franklin India Bluechip 10.57 1180.3815 1055.6597
Aditya Birla Sun Life Frontline Equity 10.43 605.4800 542.3000
Sundaram Large Cap 10.28 24.0070 21.5392

Solution: Retirement Fund

Fund Change (%) NAV (52w high) Latest NAV
SBI Retirement Benefit 11.80 22.4838 19.8299
Tata Retirement Savings 10.27 78.1158 70.0956
HDFC Retirement Savings 10.16 59.5610 53.5090

Equity: Focused

Fund Change (%) NAV (52w high) Latest NAV
Aditya Birla Sun Life Focused 10.32 165.8028 148.6987

Equity: Contra

Fund Change (%) NAV (52w high) Latest NAV
SBI CONTRA 10.57 440.4668 393.8954

Hybrid: Aggressive

Fund Change (%) NAV (52w high) Latest NAV
JM Aggressive Hybrid 12.13 147.1653 129.3135

Equity: Sectoral or Thematic

Fund Change (%) NAV (52w high) Latest NAV
ICICI Prudential FMCG 18.08 606.7700 497.0900
UTI MNC 17.10 476.5359 395.0646
ICICI Prudential Bharat Consumption 16.69 29.7100 24.7500
SBI Equity Minimum Variance 15.12 27.2354 23.1182
ICICI Prudential MNC 13.90 33.0200 28.4300

Solution: Child Fund

Fund Change (%) NAV (52w high) Latest NAV
SBI Magnum Childrens Benefit 11.43 46.3549 41.0574

Other: FoF Domestic

Fund Change (%) NAV (52w high) Latest NAV
ICICI Prudential Nifty 100 Low Volatility 30 ETF FOF 13.14 19.8080 17.2055

Other: Index Funds

Fund Change (%) NAV (52w high) Latest NAV
UTI BSE Low Volatility Index 13.70 18.2369 15.7378

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What should investors do with this data?

Related:
Analyze Your Mutual Fund Portfolio for Free with Arthgyaan's Mutual Fund Review Service

There are three key takeaways from this data:

  1. Review existing funds: Investors should check if their current funds are on the list and evaluate their next steps, including consulting their advisor.
  2. Bottom fishing opportunities: Funds in the list might represent bottom-fishing opportunities if you can make a case that the underperformance is a buying opportunity for a lump sum investment.
  3. Exit active funds in the portfolio: This might be a good opportunity to move off to index funds to avoid future underperformance

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This post titled Which are the high-risk and underperforming mutual funds that can be avoided by investors? first appeared on 22 Jan 2025 at https://arthgyaan.com


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