$1.4 billion in assets, are down 5.3 percent and 7.9 percent, respectively, according to Lipper data.
Fund managers have also made mistakes selecting blue chips. For example ITC was among the top picks at six of India's top ten equity funds, but its shares fell by almost a fifth from its all time high earlier this year after the cigarette and consumer products maker posted unexpectedly slow sales.
At an investment conference in June, SEBI chairman U.K Sinha stunned his audience with a speech rebuking "non-serious" players and admonishing them to find a new business model. His remarks were seen to have been targeted at the smallest of India's 47 fund houses, most of which are unprofitable.
"I think SEBI has become very cognizant and proactive in terms of looking at fund houses and also individual schemes' performance, especially on how funds are doing compared to the benchmark," said Mahesh Patil, co-chief investment officer at Birla Sun Life Asset Management Co Ltd.
The government wants to encourage retail investors to put money into the stock markets. As part of that drive, SEBI this year proposed a slew of rules meant to protect retail investors.
Just this month, SEBI tightened disclosure rules by listed companies.
Although SEBI has not specified what actions it might take against under-performing funds, asset managers fear regulators could increase scrutiny of new funds.
Poor performance has contributed to net redemptions of 106 billion rupees by retail investors from equity funds this year, according to industry data. That marks the fourth year in five the industry has seen money flowing out, leaving managers to rely on lower-margin debt funds and advisory business.
Not every fund has struggled. The two biggest funds managed by S. Naren, chief investment officer of ICICI Prudential Asset Management Co, are up 9.2 percent and 10.7 percent respectively, thanks to a bias towards big caps early in 2013.
Globally asset managers have had a better run. Equity funds in the United States and Japan, two countries that have seen a rally in shares, have on average outperformed their respective broad market indexes, according to Lipper data.
However in Indonesia, another country dogged by a weakening currency, funds have lagged, posting an average rise of 3.2 percent compared to the 4.5 percent rise in the IDX Composite Index.
"It's very disappointing that the flagship equity funds in India have fared so poorly," said Dhirendra Kumar, CEO of mutual fund tracker Value