Small Cap, Gilt Funds In Different Categories Gave Maximum Returns Over 10 Years: Icra

Revealing significant trends in the equity and debt segments, small-cap funds in the equity category and Gilt Funds in the debt category with a 10-year constant duration have delivered the highest returns over ten years, Icra report on mutual funds stated.

The domestic equity markets experienced initial volatility due to unexpected general election results but rebounded sharply with expectations of political stability and policy continuity. The rebound was further supported by a better-than-expected GDP growth rate of 7.8 per cent in the fourth quarter of FY24. 

Additionally, the Reserve Bank of India (RBI) upgraded the GDP growth forecast for FY25 to 7.2 per cent from the earlier estimate of 7.0 per cent, maintaining the key policy repo rate unchanged.

Bond yields, which initially rose due to election results, later fell as United States Treasury yields declined following a softer-than-expected inflation report in the US. This fueled expectations of rate cuts despite the US Federal Reserve indicating only one cut this year. The inclusion of domestic government bonds under the fully accessible route (Far) in the JPMorgan Emerging Market Debt Index on June 28, 2024, also played a role in the trend reversal.

The report’s findings showed that across all equity mutual fund categories, investors enjoyed positive returns over various periods. Notably, small capital funds outperformed other categories, delivering the highest returns over one, three-month, five and ten-year periods. Mid-capital funds also performed well, leading in returns over three, six months and one-year horizons. 

In contrast, large capital funds consistently recorded the minimum returns across all evaluated periods, including one, three, six months, one, three, five and ten-year spans.

In the debt mutual fund category, long-duration funds emerged as top performers, achieving maximum returns over one, three, six months and one-year periods. Credit risk funds stood out with the highest returns over three years. Additionally, corporate bond funds and gilt funds with a ten-year constant duration led in the five and ten-year investment horizons, respectively.