Nov 10, 2017 21

Top Performing Mutual Funds Schemes Investment Plans

When we talk about Top Mutual Funds, we have to depend upon ranking provided by apex rating bodies of India who conduct the ratings as per the SEBI guidelines. One such apex ranking agency is CRISIL and rankings of other prominent rating agencies like Value Research, and ICRA are not much different from those of CRISIL.

Categorization of Mutual Fund Schemes

Apex rating agency approved by SEBI categorizes the top mutual funds under several categories, the major categories include:

 Equity funds (large cap, diversified, small and mid-cap)

 Other funds (sector based-infrastructure, index, balanced, long-term gilts, income and short-term income, credit opportunities, very short-term debt, liquid)

 Schemes and Plans (Equity based savings plan, per Assessment month income scheme)

Parameters for Mutual Fund Performance

CRISIL takes into accounts the following parameters while conducting ratings of top Mutual Funds:

 Regular and direct average returns-weight assigned is 50%

 Regular and direct volatility-weight assigned is 25%

 Industry and company concentration-weight assigned is 10% and 5 % respectively

 Liquidity-weight assigned is 5% to 20%

 Superior return score-weight assigned is 75%

 Exposure to sensitive sector-weight assigned is 10%

 Debt-asset quality-weight assigned is 5%

 Asset quality-weight assigned is 10%

 Debt liquidity-weight assigned is 5%

 Equity liquidity-weight assigned is 10 %

 Modified duration-5 to 10%

From CRISIL criteria it can be clearly seen that returns and volatility have high weights. Liquidity is also significantly considered. This means that funds which yield high annualized returns and are assessed to have low volatility and offer sufficient liquidity have been given high ranks by CRISIL. As per SEBI instructions annualized returns for a five year period starting from year1, then subsequently 2, 3, 4 and five have to be considered, and ratings need to be inclusive of most recent data.

Top Mutual Funds as per CRISIL

Top mutual funds (ranks within first five) with broad product spectrum: these firms provide a broad range of mutual fund products, the top ranking names include:

 Birla Sun Life Funds

 Kotak Funds

 SBI Mutual Funds

 HDFC Mutual Funds

 ICICI Prudential Funds

 Franklin Templeton Funds

 Sundaram Mutual Funds

 DSP Black Rock Funds

 UTI Funds

 Mirae Asset Funds

 Axis Funds

 Reliance Mutual Funds

Top mutual funds (ranking within first five) offering specific products: include the following names:

 JM Equity Based Funds

 Tata Equity-Based Funds

 HSBC Equity Funds

 Principal Emerging Blue-Chip Fund

 IDFC Equity Funds

 Invesco India Funds

 LIC Mutual Fund

 L&T Equity-Based Funds

 Baroda Funds

 Canara Robeco Funds

 Edelweiss Bond Fund

 Union Dynamic Bond Fund

 DHFL Paramecia Premium Bond Fund

 BOI AXA Corporate Credit Spectrum Fund

 Escorts Income Fund

 Peerless Liquid Fund

How to Select a Mutual Fund

Selection of a mutual fund scheme would depend on the objective of investment (example tax saving objective). Some investors may have specific objectives. The common investor basically seeks good returns and security of investments. Mutual fund choice decisions are based on the following consideration:

Financial spectrum: Common investors generally prefer an investment firm that provides a broad spectrum of product offerings. Most top mutual fund companies are providing a diverse range of investment options suiting differential objectives, risk appetites and preferences. The investor can be guided to choose the best fit scheme based upon basic inputs provided by the investor pertaining to investment goals, investment amount, frequency, tenure.

Investment firms providing specific products find preference among investors if they offer something specific for meeting specific objectives of the investors.

Yields on Investments: Mutual fund Investment schemes are providing annualized returns ranging from 12 to 30 %. Customers having higher risk appetites can prefer the high yielding schemes managed by the top ranking wealth creators. The general expected rate of return from mutual funds is around 15 %.

Performance of different schemes: Performance of schemes against specific parameters and ratios aid investors in the selection of schemes from many different schemes of a particular investing company. For example, the SBI blue chip is at present performing better than other SBI MF schemes.

Flexibility of Investment: Investors mostly seek flexibility in terms of SIP option and investor friendly and non penalizing mutual fund terms and conditions.

Information Disclosure: Preferred investment firms are transparent on performance disclosures. They provide updated information on NAVs and returns on daily, weekly, fortnightly, monthly, quarterly and annual basis.

Consistency of Investment Firms: Investor firms which have ranked well consistently in the past are preferred by common investors as they are expected to keep up the trend in the future also.