These large-cap index funds have the lowest tracking error and expense ratio

These large-cap index funds have the lowest tracking error and expense ratio

Henil Shah

In the year 2022, 87 per cent of the actively managed large-cap funds underperformed S&P BSE 100 Total Returns Index. This points towards the benefits of investing in an index fund. This article lists the top large-cap index funds with the lowest tracking error and expense ratio.

“Don’t look for the needle in the haystack. Just buy the haystack” – John C. Bogle. By this, John C. Bogle meant that, rather than buying individual stocks from the index, buy the index itself. John C. Bogle was a firm believer that it is difficult for an active fund manager consistently beat the index.

 

To understand this, we carried out a study wherein we gathered calendar year returns of actively managed Large-Cap funds and the S&P BSE 100 Total Returns Index (TRI) from 2014 to 2022.

 

Calendar Year Returns of Actively Managed Large-Cap Funds and S&P BSE 100 TRI

Fund

2014

2015

2016

2017

2018

2019

2020

2021

2022

S&P BSE 100 TRI

34.21

-1.95

5.02

33.27

2.61

10.92

16.84

26.53

6.03

Aditya Birla SL Frontline Equity Fund

44.72

1.1

7.43

30.58

-2.91

7.64

14.22

27.9

3.54

Axis Bluechip Fund

40.85

-1.24

-3.62

38.03

6.54

18.57

19.72

20.64

-5.66

Bank of India Bluechip Fund

-

-

-

-

-

-

-

-

-2.99

Baroda BNP Paribas Large Cap Fund

47.4

5.58

-5.5

37.05

-3.97

17.18

16.84

22.08

4.21

Canara Rob Bluechip Equity Fund

35.89

-0.47

1.89

31.37

3.39

15.68

23.06

24.54

0.82

DSP Top 100 Equity Fund

37.49

-2.33

4.89

26.48

-2.72

14.85

7.49

19.53

1.44

Edelweiss Large Cap Fund

37.65

0.77

0.4

33.8

1.69

11.52

17.29

23.39

3.38

Franklin India Bluechip Fund

37.22

2.02

6.45

26.31

-3.58

5.26

13.67

32.76

-2.22

HDFC Top 100 Fund

46.52

-6.09

8.52

31.97

0.13

7.7

5.91

28.54

10.61

HSBC Large Cap Fund

34.85

-2.99

8.02

30.53

-3.17

15.11

15.85

22.7

0.51

ICICI Prudential Bluechip Fund

41.10

-0.21

7.74

32.75

-0.81

9.77

13.49

29.17

6.85

IDBI India Top 100 Equity Fund

40.62

3.2

1.55

28.04

-5.92

12.71

16.43

31.25

2.94

IDFC Large Cap Fund

30.39

-5.67

5.28

34.16

-4.23

10.59

17.41

26.75

-2.32

Indiabulls Blue Chip Fund

28.71

3.24

4.43

33.36

-1.37

12.01

8.15

17.45

4.39

Invesco India Largecap Fund

39.52

4.57

2.77

28.34

-0.44

10.5

14.05

32.53

-2.99

ITI Large Cap Fund

-

-

-

-

-

-

-

21.42

-0.24

JM Large Cap Fund

45.48

-1.26

1.82

20.86

0.8

4.9

18.11

23.20

3.40

Kotak Bluechip Fund

42.46

3.77

2.93

29.18

-2.11

14.2

16.37

27.74

1.99

L&T India Large Cap Fund

44.58

-0.23

0.83

29.52

-1.96

13.25

13.06

24.49

3.67

LIC MF Large Cap Fund

39.85

-2.58

2.31

26.77

0.72

14.99

13.81

23.77

-1.58

Mahindra Manulife Large Cap Pragati Yojana

-

-

-

-

-

-

11.89

29.69

1.89

Mirae Asset Large Cap Fund

52.86

4.25

8.09

38.58

-0.64

12.73

13.7

27.74

1.60

Nippon India Large Cap Fund

54.65

1.11

2.23

38.42

-0.2

7.25

4.91

32.37

11.33

PGIM India Large Cap Fund

43.45

2.04

2.70

28.16

-3.61

14.52

13.33

20.97

1.47

Quant Large Cap Fund

-

-

-

-

-

-

-

-

-

SBI BlueChip Fund

47.86

7.99

4.83

30.23

-4.11

11.64

16.34

26.08

4.36

Sundaram Large Cap Fund

-

-

-

-

-

-

-

27.48

4.05

Tata Large Cap Fund

36.05

1.34

2.9

29.54

-3.65

12.11

8.33

32.67

3.31

Taurus Largecap Equity Fund

38.41

3.15

-1.56

25.63

-6.22

8.51

10.15

17.96

6.68

Union Largecap Fund

-

-

-

-

-5.06

12.04

15.07

28.56

-0.48

UTI Mastershare

43.29

-0.49

3.6

29.57

-0.39

10.69

18.67

29.56

-1.79

 

Performance of Actively Managed Large-Cap Funds against S&P BSE 100 TRI

Fund

2014

2015

2016

2017

2018

2019

2020

2021

2022

Aditya Birla SL Frontline Equity Fund

10.51

3.05

2.41

-2.69

-5.52

-3.28

-2.62

1.37

-2.49

Axis Bluechip Fund

6.64

0.71

-8.64

4.76

3.93

7.65

2.88

-5.89

-11.69

Bank of India Bluechip Fund

-

-

-

-

-

-

-

-

-9.02

Baroda BNP Paribas Large Cap Fund

13.19

7.53

-10.52

3.78

-6.58

6.26

0.00

-4.45

-1.82

Canara Rob Bluechip Equity Fund

1.68

1.48

-3.13

-1.90

0.78

4.76

6.22

-1.99

-5.21

DSP Top 100 Equity Fund

3.28

-0.38

-0.13

-6.79

-5.33

3.93

-9.35

-7.00

-4.59

Edelweiss Large Cap Fund

3.44

2.72

-4.62

0.53

-0.92

0.60

0.45

-3.14

-2.65

Franklin India Bluechip Fund

3.01

3.97

1.43

-6.96

-6.19

-5.66

-3.17

6.23

-8.25

HDFC Top 100 Fund

12.31

-4.14

3.50

-1.30

-2.48

-3.22

-10.93

2.01

4.58

HSBC Large Cap Fund

0.64

-1.04

3.00

-2.74

-5.78

4.19

-0.99

-3.83

-5.52

ICICI Prudential Bluechip Fund

6.89

1.74

2.72

-0.52

-3.42

-1.15

-3.35

2.64

0.82

IDBI India Top 100 Equity Fund

6.41

5.15

-3.47

-5.23

-8.53

1.79

-0.41

4.72

-3.09

IDFC Large Cap Fund

-3.82

-3.72

0.26

0.89

-6.84

-0.33

0.57

0.22

-8.35

Indiabulls Blue Chip Fund

-5.50

5.19

-0.59

0.09

-3.98

1.09

-8.69

-9.08

-1.64

Invesco India Largecap Fund

5.31

6.52

-2.25

-4.93

-3.05

-0.42

-2.79

6.00

-9.02

ITI Large Cap Fund

-

-

-

-

-

-

-

-5.11

-6.27

JM Large Cap Fund

11.27

0.69

-3.20

-12.41

-1.81

-6.02

1.27

-3.33

-2.63

Kotak Bluechip Fund

8.25

5.72

-2.09

-4.09

-4.72

3.28

-0.47

1.21

-4.04

L&T India Large Cap Fund

10.37

1.72

-4.19

-3.75

-4.57

2.33

-3.78

-2.04

-2.36

LIC MF Large Cap Fund

5.64

-0.63

-2.71

-6.50

-1.89

4.07

-3.03

-2.76

-7.61

Mahindra Manulife Large Cap Pragati Yojana

-

-

-

-

-

-

-4.95

3.16

-4.14

Mirae Asset Large Cap Fund

18.65

6.20

3.07

5.31

-3.25

1.81

-3.14

1.21

-4.43

Nippon India Large Cap Fund

20.44

3.06

-2.79

5.15

-2.81

-3.67

-11.93

5.84

5.30

PGIM India Large Cap Fund

9.24

3.99

-2.32

-5.11

-6.22

3.60

-3.51

-5.56

-4.56

Quant Large Cap Fund

-

-

-

-

-

-

-

-

-

SBI BlueChip Fund

13.65

9.94

-0.19

-3.04

-6.72

0.72

-0.50

-0.45

-1.67

Sundaram Large Cap Fund

-

-

-

-

-

-

-

0.95

-1.98

Tata Large Cap Fund

1.84

3.29

-2.12

-3.73

-6.26

1.19

-8.51

6.14

-2.72

Taurus Largecap Equity Fund

4.20

5.10

-6.58

-7.64

-8.83

-2.41

-6.69

-8.57

0.65

Union Largecap Fund

-

-

-

-

-7.67

1.12

-1.77

2.03

-6.51

UTI Mastershare

9.08

1.46

-1.42

-3.70

-3.00

-0.23

1.83

3.03

-7.82

-        Positive Values represent outperformance against index.

-        Negative Values represent underperformance against index.

 

As can be seen in the above table, 87 per cent of the actively managed large-cap funds underperformed S&P BSE 100 TRI. In fact, since 2016, the actively managed large-cap funds started to lose their charm. This clearly explains the importance of investing in index funds over actively managed large-cap funds.

 

Moreover, another reason for investing in index funds over actively managed large-cap funds is the relatively lower expense ratio. The average expense ratio of an actively managed large-cap fund (direct plan) is 1.04 per cent, while that of the index fund is 0.25 per cent, which is almost 75 basis points (100 basis points = 1 per cent) lower than the actively managed large-cap fund.

 

List of Top Large-Cap Index Funds with lowest expense ratio and tracking error

Name

AUM (Rs Crore)

NAV (Rs)

Expense Ratio (%)

Tracking Error (%)

NAVI Nifty 50 Index Fund

580

11.58

0.06

0.12

IDFC Nifty 50 Index

550

39.31

0.08

0.18

SBI Nifty Index Fund

3,100

164.48

0.18

0.03

Motilal Oswal Nifty 50 Index Fund

230

15.30

0.10

0.06

UTI Nifty 50 Index Fund

9,000

123.63

0.20

0.03

Tata Nifty 50 Index Fund

330

119.92

0.16

0.11

IDBI Nifty Index

220

36.28

0.16

0.09

Nippon India Index Nifty 50

650

32.41

0.20

0.04

ICICI Prudential Nifty 50 Index Fund

3,800

186.13

0.17

0.08

Axis Nifty 100 Index Fund

850

15.94

0.15

0.20

 

Final Thoughts

Our analysis shows that actively managed large-cap funds underperform S&P BSE 100 TRI. Moreover, even the expense ratio of index funds is lower than actively managed large-cap funds which in turn adds to the returns. However, having a proper asset allocation that goes with your risk profile is recommended. Moreover, it is wise to track your investments at least once every quarter to make sure your investments are on track.

 

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