Did all you keen financial analysts notice that the markets dipped from February 2018 till March 2018 and recovered again in June 2018?

Well, we have performed a small analysis to check how mutual funds from various categories have been affected during this time period.

The Stock Market Crash- 2018

The Indian stock market crash of February 2018 could be anticipated because Sensex was trading at an all-time high of 35,000+ levels and Nifty was trading at a level of 10,800+.

Since February 2017 Sensex and Nifty had only been bull.

In the last 12 months, Sensex has jumped by almost 7,500+ points and Nifty has increased by 2,400+ points.

The markets have continued the downtrend and they are presently trading marginally below the dotted line.

Sectoral indices are trading on a mixed note, with stocks in the pharma sector leading the losses.

The BSE Sensex was trading down by 45 points (down 0.1%) and the NSE Nifty was trading down by 32 points (down 0.3%).

Meanwhile, the BSE Mid Cap index was trading down by 1.4%, while the BSE Small-Cap index was trading down by 1.6%. The rupee is trading at 68.65 to the US$.

How Did the Stock Market Crash of 2018 Affect Investors?

Investors’ lost over Rs.4 lakh crores in market capitalization on  BSE, for the period starting from February 1 to February 12th.

Bulls managed to recoup some losses, but the word of caution still lingers.

The S&P BSE Sensex might have corrected by 4.6% in the month of February, but there were plenty of stocks which got hammered and fell up to 60 percent from their respective 52-weeks highs recorded in the month of February 2018.

Although most large-cap stocks remained relatively stable, quality midcaps failed to stand still and witnessed deep cuts in a matter of days.

Of course, the crash was not like the 2008 stock market crash, but it was enough to scare the seasoned investors.

Analysis

For this study, we have chosen  the best performing mutual funds in each category

In the 1st category of Small-Cap Funds, we have chosen:

HDFC Small Cap Fund, SBI Small-Cap Fund, and Reliance Small-Cap Fund.

In the 2nd category of Large-Cap Fund, we have chosen:
Mirae India Asset Opportunities Fund,  Reliance Top 2000 Fund, and SBI Blue-chip Fund.

In the 3rd category of Mid-Cap Funds, we have chosen:

DSP Blackrock Mid-Cap Fund, L&T Mid-Cap Fund, and Kotak Emerging Equity Scheme.

In the 4th category of Debt Funds, we chosen:

Franklin India Low Duration Fund, HDFC short term Debt Fund, and L&T Low Duration Fund.

We have chosen a time period from February of 2018 to June 2018 and we have a net lumpsum investment of rupees 15,00,000.

The Variation of NAV During this time period is shown below:

From the above graphs and a few simple calculations, we observe that the return on the initial investment of Rupees 15,00,000 varies between the various categories.

In the Case of Small-Cap Funds, the Net Return is Shown Below:

HDFC Small Cap Fund SBI Small-Cap Fund Reliance Small-Cap Fund
Returns (in Rupees) 14,85,396 13,11,494 13,66,825

In Case of  Mid-Cap Fund, the Net Return is Shown Below:

DSP Blackrock Mid-Cap Fund L&T Mid-Cap Fund Kotak Emerging Equity Scheme
Returns (in Rupees) 14,26,237.665 14,03,235 14,14,862

In Case of  Large-Cap Fund, the Net Return is Shown Below:

Mirae India Asset Opportunities Fund Reliance Top 2000 Fund SBI Blue-chip Fund
Returns (in Rupees) 14,63,149.079 14,44,905.881 14,94,909.586

In Case of  Debt Fund, the Net Return is Shown Below:

Franklin India Low Duration Fund HDFC short term Debt Fund L&T Low Duration Fund
Returns (in Rupees) 15,44,736 15,29,633.723 15,32,322

From the analysis, we can say that only Debt Funds do not make a loss during this period.

Conclusion

Small-Cap Funds, Large-Cap Funds, and Mid-Cap Funds have actually suffered during this time period.

If you had invested in any of these categories, you would have seen a drop during these months. But presently, the market seems to be recovering and this is obviously a good sign.

This analysis also tells us that debt funds are less riskier than small, mid or large cap funds and debt funds can survive the market bubble burst better.

Keep these pointers in mind while investing.

Happy investing 🙂

Disclaimer: The views expressed in this post are that of the author and not those of Groww