Markets are falling. Are India’s biggest equity mutual funds protecting investors better than their…

The latest market report highlights that The selloff in Indian equities is showing little sign of letting up.

The Nifty 50 was trading around 22,423 on Thursday, down nearly 198 points or 0.87 percent intraday. During the past month, the index has lost nearly 7 percent, extending a slide that had already pushed the market to a six-month low in the previous session.

The decline follows seven straight weeks of losses, with rising oil price marks, geopolitical tensions, weak global cues and continued foreign fund outflows weighing on sentiment.

For mutual fund market participants watching portfolios turn red, the question is simple: are actively managed funds cushioning some of the decline, or declining just as much as their benchmarks?

Moneycontrol compared the biggest fund by AUM in the large-cap, mid-cap, small-cap, flexi-cap and multi-cap categories with their respective benchmarks. HDFC Balanced Advantage Fund was further noted separately to see how a fund that can shift between equity and debt has behaved during the correction.

Who has held up better in the current decline?

The clearest standout is Nippon India Small Cap Fund. It advanced 1.24 percent over the last two months even as the Nifty Smallcap 250 TRI eased 0.10 percent. YTD too, the fund stays ahead, returning 8.81 percent against 7.19 percent for the benchmark.

Parag Parikh Flexi Cap Fund has additionally cushioned the latest decline. It declined 2.85 percent over two months, compared with a 5.34 percent decline in the Nifty 500 TRI. But that advantage disappears YTD, when the fund is down 7.09 percent against the benchmark's 6.81 percent slide.

The biggest large-cap, mid-cap and multi-cap funds, in the meantime, have all fallen slightly more than their benchmarks over the latest two months. The gaps are small, but the numbers show that being the biggest fund in a category does not automatically mean better downside protection.

Beyond the market decline: How do they look over 1 and 2 years?

The longer-term comparison changes the picture.

Nippon India Small Cap Fund stays ahead of its benchmark over both one and two years. HDFC Mid Cap and ICICI Prudential Large Cap trail their benchmarks over one year but move ahead over two years.

Parag Parikh Flexi Cap additionally trails the Nifty 500 TRI over one year, but over two years its slide is just 0.52 percent against a 3.67 percent decline in the benchmark.

Nippon India Multi Cap is the only one among the five equity funds that trails its benchmark over both one and two years.

Did the balanced advantage fund cushion the decline?

HDFC Balanced Advantage Fund is down 3.74 percent over the latest two months and 5.53 percent YTD. For reference, its additional benchmark, the Nifty 50 TRI, is down 6.83 percent and 12.61 percent, respectively.

Over one and two years too, the fund's declines are smaller than those of the Nifty 50 TRI.

That stated, this is not a like-for-like comparison with the five pure-equity funds. A balanced advantage fund can shift between equity and debt, and HDFC Balanced Advantage Fund's primary benchmark is itself a hybrid equity-debt index. The Nifty 50 TRI comparison should as a result be read only as additional context.

Overall, the data reveals that the biggest funds have not responded uniformly to the market decline. Nippon India Small Cap has stayed ahead of its benchmark across all four periods, while Parag Parikh Flexi Cap has provided stronger protection in the latest two-month decline but not over every period.

The latest correction can show how a fund behaves under market stress, but the one- and two-year numbers additionally underline why that short-term performance should not be looked at in isolation.