The Fading Alpha in Large-Cap Equities
Over the last decade, institutional market efficiency has intensified in Indian equities. Standard & Poor's Indices Versus Active (SPIVA) scorecards reveal that over 75% of Indian active large-cap mutual funds fail to beat the Nifty 50 or BSE 100 benchmark over 3, 5, and 10-year horizons.
1. Why Active Large-Cap Managers Struggle
- SEBI Categorization Mandate: Large-cap funds must invest at least 80% in the top 100 stocks, leaving little room for off-benchmark alpha bets.
- The Expense Drag: Charging 0.80% - 1.80% TER against low-cost index funds charging 0.10% - 0.20% creates a high statistical hurdle.
2. Key Passive Metrics: Tracking Difference & Tracking Error
When selecting passive funds, inspect Tracking Difference (net return vs benchmark) and Tracking Error (volatility of daily excess returns).
3. Analyze Passive Alternatives on MyPlexus
Compare low-cost Nifty 50 and Nifty Next 50 index funds with active contenders using MyPlexus rolling alpha heatmaps.
