6.11 The index baseline

SPIVA India (S&P Dow Jones Indices; the S&P site blocks automated fetching, so the figures below come from press coverage of the reports and were not checked against the reports themselves):

• Mid-year 2025 (data to June 2025; CafeMutual, 2 Oct 2025): 73% of large-cap funds underperformed their benchmark over 10 years, and about 90% over 5 years; mid/small-cap 82% over 10 years and 67% over 5; ELSS (tax-saving equity funds) 87% over 10 years and 68% over 5. On a risk-adjusted basis mid/small-cap underperformance was much lower (24% over 5 years, 48% over 10).
• Mid-year 2026 (H1 2026): the S&P India LargeMidCap index fell 4.0% while the average active large-cap fund fell 5.1% equal-weighted (5.6% asset-weighted); most funds underperformed in all equity categories (secondary reports give about 85% of large-cap funds in H1 2026).

Caveats

1. Since 2024 SPIVA has benchmarked Indian large-cap funds against the S&P India LargeMidCap index (roughly the top 200 companies), while SEBI requires large-cap funds to hold mostly the top 100. When mid-caps outperform, this inflates measured underperformance. Critics have made this point (e.g. basunivesh.com).
2. Survivorship: SPIVA counts merged and closed funds as part of the denominator, which is correct but means headline rates are not comparable with naive studies.
3. Fund returns are after expense ratios; index returns have no costs. An index fund lags its index by its own expense ratio and tracking error.

Course stance The default for most of your money is a low-cost Nifty 50 or Nifty 500 index fund. Active stock-picking is a satellite (for example at most 20–30% to start) that must beat the index after costs and taxes, measured honestly: compute the XIRR (money-weighted return) of your picks and of a "shadow" index portfolio with the same cash-flow dates.