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Investment Advisory
In recent years, the global investing conversation has tilted in favor of passive investment strategies—low-cost index funds that track broader markets without attempting to outperform them. However, in the Indian context, active portfolio management still holds compelling merit, particularly in the current market environment.
At Entrust, our Investment Advisory team continues to closely monitor and evaluate this dynamic, and our conclusion is clear: active investing remains a strong strategy today.
India is still a market where information arbitrage exists—there are meaningful gaps in how quickly and widely financial information is disseminated. This gives skilled fund managers the opportunity to spot value early, avoid potential pitfalls, and selectively invest in companies with strong fundamentals and growth potential. Passive funds, by design, cannot do this. In such an environment, active investment strategies are better positioned to capture alpha and manage risks proactively, offering investors a competitive edge.
Moreover, during weak or volatile markets, actively managed funds tend to limit downside better than passive strategies. Index-based investments follow the market wherever it goes—up or down. In contrast, active fund managers have the ability to move to cash, avoid overvalued sectors, or double down on undervalued opportunities, all of which can protect investor capital.
Let’s take a look at recent data that illustrates the performance gap between actively managed funds and their respective benchmarks:
| Category | 3 Years | Alpha (3Y) | 5 Years | Alpha (5Y) | Benchmark |
|---|---|---|---|---|---|
| Nippon India Large Cap | 18.88% | 7.71% | 19.35% | 3.91% | Nifty 100 TRI |
| ICICI Pru Bluechip | 15.66% | 4.49% | 18.53% | 3.09% | Nifty 100 TRI |
| HDFC Flexicap | 22.01% | 8.77% | 22.76% | 5.01% | Nifty 500 TRI |
| Parag Parikh Flexicap | 17.43% | 4.19% | 24.78% | 7.03% | Nifty 500 TRI |
| HDFC Midcap Opportunities | 24.84% | 4.57% | 26.93% | 1.55% | Nifty Midcap 150 TRI |
| Kotak Multicap | 24.07% | 10.83% | NA | NA | Nifty 500 TRI |
| Nippon India Small Cap | 23.06% | 4.99% | 32.38% | 5.88% | Nifty Smallcap 250 TRI |
| Average | — | 6.51% | — | 4.41% | — |
| Nifty 50 TRI | 9.52% | — | 13.83% | — | Index |
| Nifty 100 TRI | 11.17% | — | 15.44% | — | Index |
| Nifty 500 TRI | 13.24% | — | 17.75% | — | Index |
| Nifty Midcap 150 TRI | 20.27% | — | 25.38% | — | Index |
| Nifty Next 50 TRI | 15.10% | — | 18.00% | — | Index |
| Nifty Smallcap 250 TRI | 18.07% | — | 26.50% | — | Index |
| Nifty200 Momentum TRI | 14.35% | — | 21.29% | — | Factor |
| Nifty 100 Low Volatility 30 TRI | 14.75% | — | 18.10% | — | Factor |
| Nifty 200 Quality 30 TRI | 13.02% | — | 16.97% | — | Factor |
Across the board, average alpha from these schemes is over 6.5% for 3 years and over 4.4% for 5 years, a significant outperformance compared to their benchmarks. This reinforces our belief that in India, well-managed active portfolios still offer a clear advantage.
This isn’t to say passive investing doesn’t have a role. For broad market exposure at low cost, especially in efficient global markets, passive funds are a smart choice. They work well as part of a core-satellite portfolio strategy, where passive funds form the core and active funds are used tactically to seek alpha.
But for investors looking to beat the market or protect capital in turbulent times, passive funds may fall short. As our analysis shows, passive investment strategies at best trail the market. For better downside protection and superior returns, active management remains the only real bet—especially in an emerging market like India.
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