NEW DELHI: In September 2024, the landscape of passive mutual funds in India revealed a concerning trend, as approximately 38 funds reported negative returns amid a total of 353 passive mutual funds spanning various asset classes.
The significant statistic emphasises the volatility and challenges inherent in passive investment strategies during this period.
Particularly noteworthy were the losses incurred by those mutual funds concentrated in the defense sector. The Aditya Birla Sun Life Nifty India Defence Index Fund, the Motilal Oswal Nifty India Defence Index Fund, and the Motilal Oswal Nifty India Defence ETF experienced the steepest declines, with losses of 4.49 per cent, 3.97 per cent, and 3.90 per cent, respectively.
These figures highlight not only the susceptibility of sector-focused funds to market fluctuations but also the potential over-reliance on specific industries that may fail to perform under adverse conditions.
In addition to the defense sector, five passive mutual funds centered around the public sector undertakings (PSUs) theme also reported negative returns. The Kotak Nifty PSU Bank ETF and Nippon India ETF Nifty PSU Bank BeES each recorded losses of approximately 3.33 per cent, while the DSP Nifty PSU Bank ETF and ICICI Prudential Nifty PSU Bank ETF lost about 3.32 per cent. Furthermore, the HDFC Nifty PSU Bank ETF saw a decline of 3.31 per cent.
These results raise critical questions regarding the robustness of investments in government-affiliated banking sectors, particularly in times of economic stress.
The technology sector was not immune to this unfavorable trend, either. Fifteen IT-focused mutual funds faced negative returns ranging from 1 per cent to 2.07 per cent.
The Navi Nifty IT Index Fund and ICICI Prudential Nifty IT Index Fund both recorded the highest losses within this sector at 2.07 per cent, whereas the Axis Nifty IT Index Fund’s return dipped by approximately 2.05 per cent.
Such performance signals the need for investors to approach sector-specific investments with caution, as even traditionally robust sectors can face downturns.
