These NPS schemes weathered the 18-month market pain

In the volatile and often falling market phase that has lasted 18 months from September 2024 has taken a toll on most investors dealing in stocks directly or taking exposure to mid- and small-cap funds.

However, the equity schemes of the national pension system (NPS) have done quite well relatively having contained downsides better than standard benchmarks and comparable mutual fund category.

The performance of other asset classes of NPS was also fairly robust. Corporate bond and government schemes delivered steady positive returns.

Here is an account of the performance of NPS equity, corporate bond and G-Sec schemes from September 2024 till March 2026 and the key takeaways for investors.

We have considered all the 10 NPS players offering tier-1 schemes. These include pension funds from Aditya Birla, Axis, HDFC, Kotak, ICICI, LIC, UTI, DSP, Tata and SBI.

Manoeuvring smartly

In the 18-month period mentioned earlier, the NPS equity schemes have fallen 9.3 per cent. This is better than the Nifty 100 TRI, which fell 11 per cent, or the Nifty 50 TRI that corrected 9.7 per cent.

NPS equity schemes have also done better than large-cap mutual fund category as the latter fell 9.7 per cent in the past 1.5 years.

In general, NPS equity schemes stick to the top 100 stocks by market capitalisation even though they are allowed to go up to the top 200 stocks. This investment pattern helps restrict downsides during broader market falls.

Corporate bond schemes of NPS have done reasonably well, delivering 10.2 per cent in this period on an average as a category.

The CRISIL Composite Index gave 8.1 per cent in the same timeframe.

Mutual funds investing in corporate bonds also gave 10.2 per cent. Medium-duration funds, though, have done better, delivering 11.3 per cent.

All the NPS corporate bond schemes invest almost entirely in AA-rated corporate bonds spanning private and public sector companies. Typically, the average maturity of these portfolios would range from four-six years. The modified duration is typically four-five years.

Given that much of the rally in the longer end of the yield curve had already taken place in 2023-24 and early 2025, in anticipation of interest rate cuts, there was underperformance subsequently over the past year or so.

Therefore, NPS government bonds schemes that invest in securities maturing 10-50 years into the future gave moderate returns at 4.2 per cent, which was still better than long-duration mutual funds that delivered only 2.7 per cent in the past 18 months.

Why allocation matters

Though the relative performance of NPS equity schemes has been reasonable, the quantum of fall and the larger pointers to portfolio stability still need to be addressed.

For a few categories of NPS investors, the negative returns in equities over a prolonged period emphasise the need for reasonable allocation to bonds schemes as well.

Constant rebalancing is important to safeguard portfolio returns.

For those NPS investors who are looking solely at NPS proceeds for their retirement income, going low on risks with modest allocation to equities and sizeable exposure to corporate and government schemes may be absolutely necessary. A 10-15 per cent cut as seen in the recent past in an equity-heavy NPS portfolio can seriously dent your overall corpus size and upset withdrawal calculations.

For those with higher equity allocations (60 per cent or higher), paring NPS equity exposure every year in their 50s and bringing it down substantially closer to retirement at the age 60 may help.

In case you are not able to decide a suitable allocation pattern, there are some options given by NPS fund managers themselves. The lifecycle 75 (starts at 75 per cent equity at age 35 and reduces gradually to 15 per cent after age 55), lifecycle 50 (starts at 50 per cent and reduces to 10 per cent), or lifecycle 25 (starts at 25 per cent and reduces to 5 per cent) can be taken, depending on your risk appetite and criticality of NPS to your steady retirement income.

Even for those primarily investing in mutual funds, with exposure being taken to NPS only as an additional avenue, it would make sense to take moderate risks (debt-heavy asset mix), so that a corrective phase closer to retirement still ensures a steady NPS corpus at least till such time as equity mutual funds recover.

Published on March 28, 2026