Wise Wealth Advisors

D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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Ignore Sensex

Posted by Muthu on November 23, 2015

As on 30th September 2015, the one year return of Sensex was -1.79%. During the same period the CRISIL AMFI equity performance index, which is an index to measure the performance of actively managed funds in India, has provided a one year return of 9.44%. An alpha of 11.23%.

I’ve written an article earlier as to how this CRISIL AMFI index has delivered a return of 22.74% for the period 1’st April 1997 (the date this index was constituted) to 31’st March 2015. During the same period Sensex has provided an annualised return of 12.36%. So CRISIL AMFI index has generated an alpha of 10.38% over 18 years.

Alpha denotes the margin by which mutual funds have outperformed the indices.

For the last 18.5 years (as on 30the September 2015), actively managed funds have delivered annualised return of 21.86%.

Though Sensex itself has provided decent returns over long run, actively managed equity funds (where you invest your money) has done phenomenally well in India.

The CRISL AMFI Equity fund index has never given a negative return for any 5 year period on a daily rolling basis since inception.

Though for convenience we use Sensex in many illustrations, please note that actively managed funds have done much better than Sensex.

Ignore Sensex.

Focus on funds.

8 Responses to “Ignore Sensex”

  1. Rohit said

    muthu sir.

    your post is excellant .. but which 5 best CRISIL AMFI fund / scheme for next 10-20 years you suggest ?? pl guide for lumpsum and sip both…
    Also your view on birla MNC and Reliance pharma fund ..??

    • Muthu said

      I would suggest that you meet a financial advisor. During the meeting he can understand your life and financial situation & suggest appropriate investments.

  2. Girish Sidana said

    Dear Muthu, why have you taken annualised return of actively managed funds for 18.5 years? Whats the logic of this period? As you, yourself have mentioned that even Sensex has given very good returns over a long time, the “alpha” seems to be much lower over longer period of time. You have not mentioned alpha for 18.5 years. I guestimate it to be in the range of only 4 to 5 %.

    Also, India has gone through economic liberlisation during last 20 years or so. It was period of hectic growth. Chances are future (next 20 years) will not be the same. Does it bring us to the point that alpha will reduce significantly. Look at the stock markets of developed world. Most actively managed funds are not able to beat their underlying index. Does it not create a case for passively managed funds in future? (I mean ETF). Developed markets are an example of this. ETFs are more popular than actively managed funds.

  3. Girish Sidana said

    Dear Muthu, Why have you taken annualised returns of actively managed funds for last 18.5 years? As you have yourself said that even Sensex has given decent return over a long period, what is the “alpha” of actively managed funds over this long period? My calculation says it is only 4 to 5%. We also should not forget the fact that these figures pertain to the period of hectic economic growth in India (after opening of our economy). Chances are very low that it will be the same for next 20 years. Does it make a case for passively managed funds? (I mean ETF).

    Look at the developed markets – Actively managed funds have rarely beaten the underlying index.

  4. MPSingh said

    Little worried about the welfare following unprecedent rains. Hope you are fine. May Almighty bless everyone in the turmoil.

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