In May 2022, the Nifty fell by -3.03%, which is on top of -2.07% fall in April 2022. However, the pressure was visible in the smaller indices. In May 2022, the mid-cap index fell by -4.72% while the small cap index fell by -10.22%, as smaller stocks being more vulnerable, took the brunt of the fall in markets.
FPI selling continued relentlessly in May 2022 with FPIs selling almost $5.86 billion in equities during the month. The selling got amplified after the RBI went aggressive on rate hikes. However, it must be noted that in the last week of the month of May 2022, the markets did stage a smart recovery as the inflation fight appeared to yield results, giving hopes that the focus on growth may return sooner rather than later.
If April 2022 was the month when the bond yields edged above the 7% mark, the spike in bond yields was almost decisive in the month of May 2022. 10-year bond yields spiked during the month from 7.14% to 7.44% in response to the extreme hawkishness showed by the RBI and the US Federal Reserve. That did impact the bond market returns.
1. Equity Large-Cap Funds
Top performing Regular Plans (Growth Option) on 5-year returns (as on 31st May-22):
| Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
| Canara Robeco Blue-Chip (G) | 4.587% | 14.933% | 13.246% |
| Axis Blue-Chip Fund (G) | 0.855% | 11.514% | 13.163% |
| ICICI Pru Blue Chip (G) | 10.442% | 13.382% | 11.932% |
| Data Source: Morningstar |
2. Equity Multi-Cap Funds
Top performing Regular Plans (Growth Option) on 5-year returns (as on 31st May-22):
| Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
| Quant Active Fund (G) | 11.084% | 28.299% | 21.046% |
| Mahindra Manulife Multi (G) | 11.989% | 20.392% | 13.890% |
| Sundaram Multi Cap (G) | 13.645% | 14.868% | 11.635% |
| Data Source: Morningstar |
3. Equity Mid-Cap Funds
Top performing Regular Plans (Growth Option) on 5-year returns (as on 31st May-22):
| Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
| Quant Mid-Cap Fund (G) | 18.195% | 28.692% | 19.059% |
| Axis Mid Cap Fund (G) | 8.391% | 19.527% | 17.258% |
| PGIM India Mid-Cap Fund (G) | 14.918% | 29.381% | 16.388% |
| Data Source: Morningstar |
4. Equity Small-Cap Funds
Top performing Regular Plans (Growth Option) on 5-year returns (as on 31st May-22):
| Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
| Quant Small Cap Fund (G) | 14.224% | 37.278% | 19.640% |
| SBI Small Cap Fund (G) | 13.201% | 24.003% | 18.755% |
| Axis Small Cap Fund (G) | 17.260% | 25.279% | 18.688% |
| Data Source: Morningstar |
5. Equity Linked Savings Schemes (Tax Saving)
Top performing Regular Plans (Growth Option) on 5-year returns (as on 31st May-22):
| Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
| Quant Tax Plan (G) | 14.442% | 31.149% | 21.270% |
| BOI AXA Tax Advantage (G) | 5.522% | 20.639% | 15.737% |
| Mirae Asset Tax Saver (G) | 6.827% | 17.460% | 15.145% |
| Data Source: Morningstar |
6. Balanced Funds (Aggressive Allocation)
Top performing Regular Plans (Growth Option) on 5-year returns (as on 31st May-22):
| Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
| Quant Absolute Fund (G) | 14.302% | 24.892% | 18.213% |
| ICICI Pru Equity & Debt (G) | 20.406% | 17.529% | 13.482% |
| BOI AXA Mid and Small (G) | 11.316% | 17.704% | 12.360% |
| Data Source: Morningstar |
7. Balanced Funds (Conservative Allocation)
Top performing Regular Plans (Growth Option) on 5-year returns (as on 31st May-22):
| Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
| ICICI Pru Regular Savings (G) | 6.276% | 8.652% | 8.175% |
| Kotak Debt Hybrid (G) | 5.087% | 10.350% | 8.049% |
| Canara Robeco Hybrid (G) | 3.452% | 8.876% | 7.583% |
| Data Source: Morningstar |
8. Arbitrage Funds (Cash-Futures)
Top performing Regular Plans (Growth Option) on 5-year returns (as on 31st May-22):
| Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
| Kotak Equity Arbitrage (G) | 3.959% | 4.384% | 5.199% |
| Nippon India Arbitrage (G) | 3.764% | 4.259% | 5.197% |
| Edelweiss Arbitrage Fund (G) | 3.873% | 4.386% | 5.154% |
| Data Source: Morningstar |
9. Government Securities Funds (Gilt Funds)
Top performing Regular Plans (Growth Option) on 5-year returns (as on 31st May-22):
| Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
| Edelweiss G-Sec Fund (G) | 1.511% | 7.263% | 7.318% |
| DSP G-Sec Fund (G) | 1.707% | 7.308% | 6.974% |
| ICICI Prudential Gilt Fund (G) | 2.195% | 7.336% | 6.906% |
| Data Source: Morningstar |
10. Corporate Bond Funds
Top performing Regular Plans (Growth Option) on 5-year returns (as on 31st May-22):
| Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
| ABSL Corporate Bond (G) | 2.808% | 7.105% | 7.260% |
| HDFC Corporate Bond (G) | 2.295% | 6.881% | 7.117% |
| L&T Triple Ace Bond (G) | 1.143% | 6.996% | 7.039% |
| Data Source: Morningstar |
11. Credit Risk Funds
Top performing Regular Plans (Growth Option) on 5-year returns (as on 31st May-22):
| Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
| ICICI Pru Credit Risk Fund (G) | 4.692% | 7.736% | 7.413% |
| HDFC Credit Risk Fund (G) | 3.798% | 7.670% | 7.043% |
| Baroda Credit Risk Fund (G) | 12.344% | 7.175% | 6.759% |
| Data Source: Morningstar |
12. Liquid Funds
Top performing Regular Plans (Growth Option) on 5-year returns (as on 31st May-22):
| Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
| Quant Liquid Plan (G) | 3.756% | 4.807% | 5.703% |
| IDBI Liquid Fund (G) | 3.526% | 4.328% | 5.463% |
| Mahindra Manulife Liquid (G) | 3.482% | 4.230% | 5.403% |
| Data Source: Morningstar |
In May 2022, equity fund returns over a 1-year period were negatively impacted across large caps, mid-caps and small caps. In fact, the impact was a lot more intense in the mid cap and the small cap funds wherein short term returns fell sharply. There were several reasons for the same, but it was more about the vulnerability of small and mid-cap stocks.
FPI selling, geopolitical risk, rising inflation and central bank hawkishness were the key risk factors. However, despite these short term headwinds, the longer term returns over a 3 year period and 5 year period were not impacted meaningfully. What we can see in the data is that the equity fund rankings have maintained consistency of top performers across categories. This makes the rankings a reliable barometer and decision point for investors.
On the debt funds side, the bond funds, the ones with longer duration holdings, were negatively impacted in Apr-22. That was due to the 10 year benchmark bond yields rallying in May 2022 from 7.14% to 7.44%, due to higher inflation and central bank hawkishness. Short term debt fund returns have stayed under pressure due to rising bond yields. However, arbitrage funds and liquid funds were largely immune to this trend.
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