For those of you who are new to our platform, FundsIndia’s ‘Select Funds’ is a list of investment worthy funds. Spread across various categories, this list helps you narrow down your investment choices from the hundreds of funds that you would otherwise have to sift through before investing.
This list is reviewed on a quarterly basis. There are additions to ensure that good choices are not left out. There are also deletions if we find certain funds’ strategies to be inappropriate for the prevailing market conditions.
Before we move on to the changes we have made this quarter, here’s an important message – none of the funds we removed warrant a sell. We do not prefer that you sub-optimally churn your portfolio. Our endeavour, through the Select Funds list, is to choose funds that are good and appear to have an edge in the present environment.
This quarter, our Select Funds list, more or less, remains the same.
Addition to high risk
In the equity – high risk category, we brought in Franklin India High Growth companies, that we recently covered in our weekly call. This fund is an ideal candidate for the current growth-oriented market scenario. It has also built a good track record for itself. However, it is not suitable for a core portfolio and fits the bill of only those with a reasonably higher risk appetite.
Balanced Fund
In the ‘Equity – Hybrid (balanced fund)’ category alone, we decided to remove HDFC Prudence. While this is not an exit call, we thought it would suffice to have HDFC Balanced, another balanced fund from the same fund house. HDFC Prudence is a little more aggressive and volatile when compared to its sister fund.
While it has a well-established track record, for the sake of keeping our list simple and to have a consistent performer, we decided to simply retain HDFC Balanced. Those of you who are holding HDFC Prudence may continue to do so. For those investing afresh, you may choose HDFC Balanced if you are looking for a balanced fund for your core portfolio.
Change in Risk Profile
While our ‘Tax-saving Funds’ list continues to be the same, we have changed the classification of some of the funds. IDFC Tax Advantage (ELSS), for instance, has been reclassified as a moderate risk fund as its standard deviation has become lower, suggesting that it swings far lesser and is more steady. ICICI Pru Tax Plan and Axis Long Term Equity, on the other hand, have moved to the high risk category for marginally higher deviation from their mean returns. Our views on these funds, however, remain unchanged.
Fund Performance
Among our ‘Equity Funds – Moderate Risk’ category, we have funds such as Axis Equity, HDFC Top 200 and ICICI Pru Dynamic, whose returns are seemingly lower than the rest of the funds listed there. Some of you might wonder if they are mediocre.
You may have to note the following:
– Some funds may choose to take contrarian sector calls. Axis Equity, for instance, has slightly underweight exposure to finance when compared with its benchmark. At the same time, it has higher exposure to the IT space when compared with some of its peers. These contrarian calls may most likely have pulled down the performance of the fund a little; however, the fund still comfortably beat both its benchmark and category average. One needs a wait approach to see if contrarian calls pay off.
– Similarly, HDFC Top 200 has reduced its exposure to cyclical sectors, compared with early 2014, when it loaded itself with engineering and capital good sectors. Higher valuations in these sectors, together with the fact that it has lower mid-cap exposure than regular diversified funds (at this point of time), has meant that it cannot keep pace with peers. However, this fund too is above its category average and beat its benchmark comfortably.
– ICICI Pru Dynamic, on the other hand, takes dynamic asset allocation calls based on the fundamental valuations of markets. At this point of time, it only has about 75 per cent allocated to equities. The fund works well for those who are particular about equity valuations, and when to invest in equities. While it has also comfortably beat its benchmark, it may be unfair to compare this fund with pure equity peers who hold over 90 per cent in equities.
We have taken just 3 funds (above) to provide a sample on why some funds may be lagging over others in the short term. You should be careful not to shuffle your portfolio too often, based on such short-term blips in performance.
As for our debt funds, we have kept the list untouched. Our income fund calls are beginning to pay off well and we would urge you to stay invested to reap the benefits from a debt rally over the next 18-24 months.
FundsIndia’s Research team has, to the best of its ability, taken into account various factors – both quantitative measures and qualitative assessments, in an unbiased manner, while choosing the fund(s) mentioned above. However, they carry unknown risks and uncertainties linked to broad markets, as well as analysts’ expectations about future events. They should not, therefore, be the sole basis of investment decisions. To know how to read our weekly fund reviews, please click here.
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Very good analysis and updates. Your analysis on balanced and ELSS funds are spot on. Few questions:
1. Why are gilt funds not part of your list? I only see corporate bond funds short/long term.
2. Why is a pure-value fund like QLTE or PPFAS LTV not present? Because their AUM is low, or returns are low in this bull run? Or because your selection criteria doesn’t include pure-value funds? At least QLTE has a proven track record in market highs and lows. But I understand why advisers don’t recommend it (pure online).
1 We think gilt funds are not ideal for retail investors as they need active entry and exit strategies. Over longer periods (which is what we seek), returns are sub-optimal.
2. For PPFAS – it is yet to enter our filter criteria of track record. Quantum – We have a a well-defined process for selecting funds that we recommend to our investors. Since we have agreement with almost all AMCs, we take all funds, without bias, to choose the worthy universe. But for all such fund houses, we have a mutually beneficial agreement with the AMC – we distribute their funds, they share their fees with us. However, with Quantum, we don’t have such a commercial agreement. So, we don’t include their funds for evaluation and have a neutral view. Investors welcome to do a due diligence on their funds and use our platform to invest in quantum funds as we make them available in the platform.
Thank you! That was honest and transparent response 🙂 which is why I like fundsindia blog!
You forgot to mention high growth, which I think is a new addition
Rajat, that was sharp 🙂 thanks, will add it. Vidya
hi
when going thro your news letter, i expect the bottom line should be made as simple as possible and easily understandable. i believe the clarity in the funds suggested or removed / not recommended in the letter can be emphasized more simply.
Hello Sir,
Appreciate your feedback. Will seek to make them more readable. The bottom line for this one is – Franklin India High Growth cos was added, HDFC Prudence was removed. Rest were cosmetic changes if I might say that (change in risk profiles). thanks, Vidya
hi, learning a lot thru your articles, thank you.
isn’t it fund size do matter in its performances, specially if it is really toooo big/small than they r bound by certain regulations & need to allocate/proportionate (max %) accordingly willingly or unwillingly.
Does one need to switch if horizon is long (as these days emphasis is on retirement n life occasions)
sometimes too many schemes by same name confuses.
like to learn in detail abt liquid funds their working, taxation etc
regards
gaurav
Hello Gaurav, Fund size matter in terms of having a decent corpus size so that a fund is able to handle redemption pressures without disturbing the investments too much. Otherwise, corpus size and keeping it compact matters more for mid and small cao funds.We have written many articles on our blog on liquid funds. Please go through them. thanks, Vidya
Hi,
I just recently joined funds india. I really appreciate the analysis provided with simple understanding for investors like us on why few funds were taken out and why few funds are not performing compared to peers but it does not require shuffle.
I disagree with a member that bottomline clarity was not simple on inclusions & exclusions. May be he has not read other experts mentioning ratios, P/E’s etc.
Keep it up. And wish this sort of analysis periodically.
Hello Ms Bala,
regarding HDFC prudence, it is a mid-cap style fund whereas HDFC balanced is a large cap fund. Yes the debt holdings may be same but that is only 30-40% of AUM. So actually they are quite different, isn’t it? Hence to remove it from the list may not be correct solely because it is just another balanced fund. If there are other reason’s, that’s fine. Your thoughts please?
regards.
—
Hello Sir,
Your observation of the difference in market-cap in the 2 funds used to be true. But is no longer the case (although some websites show the investment style as balanced having large caps). Both funds have equal exposure to large caps. The difference is prudence has more no. of stocks (more stocks but about the same proportion of holding in this market cap segment), spread out in the mid and small-cap category than Balanced. The distinction is in the nature of stocks, which is where Prudence takes more aggressive calls. As stated, it was not removed just because it is another fund from the house alone…it is also more volatile. The standard deviation is higher and risk adjusted return lower for Prudence when compared with Balanced. While Prudence per se is a good fund, we prefer funds with lower volatility and therefore we chose to retain Balanced over Prudence. thanks, Vidya
Should one stay invested in HDFC Equity and Top 200, if their horizon is 10 years.
Hello Rahul, If you are holding them you may continue to. If you wish to invest afresh or having SIPs, look for funds based on your current risk profile and consistent performers fitting that. There are funds now with superior record in terms of being less volatile and generating superior risk-adjusted returns. thanks, Vidya
What’s your view on UTI Transportation and Logistics fund and Birla Sun Life MNC fund?
Pl see our view on UTI fund here: https://blog.fundsindia.com/blog/mutual-funds/fundsindia-reviews-uti-transportation-and-logistics-fund/5318 It remains unchanged since then.
On the MNC fund, given the theme, the valuations of stocks in that basket tend to be high. hence if you are a value picker it may not suit you. We do not provide calls on theme funds.
Hi vidya great greetings of the day. First of all thanks alot for your prompt reply.
Madam i want to invest in icici pru focused blue chip equity fund through sip…but i am confused i want to know compare to hdfc top 200 which fund is better option for me…for period of ten year..investment amount 2500 monthly.nav of icici focused bluechip fund is only 28 rs and hdfc top 200 is above 300/
Hello Sudhir,Sorry for the delayed response. First, do not compare funds based on their NAV. A fund that has been around for long will have a higher NAV, that’s all. Fund specific recommendations can be made if you write to us through your activated FundsIndia account, using the advisor appointment feature. That way, we can look in detail into your investments and come with a recommendation.
As for the difference between ICICI Pr Focused Bluechip and HDFC Top 200. The former is a large-cap fund while HDFC top 200 has a large-cap tilt but has some midcaps as well. Top 200 is also more volatile compared with ICICI Pru focused Bluechip. For a suggestion, I am afarid I cannot make one through this forum. thanks, Vidya
Very good analysis and updates. Your analysis on balanced and ELSS funds are spot on. Few questions:
1. Why are gilt funds not part of your list? I only see corporate bond funds short/long term.
2. Why is a pure-value fund like QLTE or PPFAS LTV not present? Because their AUM is low, or returns are low in this bull run? Or because your selection criteria doesn’t include pure-value funds? At least QLTE has a proven track record in market highs and lows. But I understand why advisers don’t recommend it (pure online).
1 We think gilt funds are not ideal for retail investors as they need active entry and exit strategies. Over longer periods (which is what we seek), returns are sub-optimal.
2. For PPFAS – it is yet to enter our filter criteria of track record. Quantum – We have a a well-defined process for selecting funds that we recommend to our investors. Since we have agreement with almost all AMCs, we take all funds, without bias, to choose the worthy universe. But for all such fund houses, we have a mutually beneficial agreement with the AMC – we distribute their funds, they share their fees with us. However, with Quantum, we don’t have such a commercial agreement. So, we don’t include their funds for evaluation and have a neutral view. Investors welcome to do a due diligence on their funds and use our platform to invest in quantum funds as we make them available in the platform.
Thank you! That was honest and transparent response 🙂 which is why I like fundsindia blog!
Should one stay invested in HDFC Equity and Top 200, if their horizon is 10 years.
Hello Rahul, If you are holding them you may continue to. If you wish to invest afresh or having SIPs, look for funds based on your current risk profile and consistent performers fitting that. There are funds now with superior record in terms of being less volatile and generating superior risk-adjusted returns. thanks, Vidya
What’s your view on UTI Transportation and Logistics fund and Birla Sun Life MNC fund?
Pl see our view on UTI fund here: https://blog.fundsindia.com/blog/mutual-funds/fundsindia-reviews-uti-transportation-and-logistics-fund/5318 It remains unchanged since then.
On the MNC fund, given the theme, the valuations of stocks in that basket tend to be high. hence if you are a value picker it may not suit you. We do not provide calls on theme funds.
hi, learning a lot thru your articles, thank you.
isn’t it fund size do matter in its performances, specially if it is really toooo big/small than they r bound by certain regulations & need to allocate/proportionate (max %) accordingly willingly or unwillingly.
Does one need to switch if horizon is long (as these days emphasis is on retirement n life occasions)
sometimes too many schemes by same name confuses.
like to learn in detail abt liquid funds their working, taxation etc
regards
gaurav
Hello Gaurav, Fund size matter in terms of having a decent corpus size so that a fund is able to handle redemption pressures without disturbing the investments too much. Otherwise, corpus size and keeping it compact matters more for mid and small cao funds.We have written many articles on our blog on liquid funds. Please go through them. thanks, Vidya
Hello Ms Bala,
regarding HDFC prudence, it is a mid-cap style fund whereas HDFC balanced is a large cap fund. Yes the debt holdings may be same but that is only 30-40% of AUM. So actually they are quite different, isn’t it? Hence to remove it from the list may not be correct solely because it is just another balanced fund. If there are other reason’s, that’s fine. Your thoughts please?
regards.
—
Hello Sir,
Your observation of the difference in market-cap in the 2 funds used to be true. But is no longer the case (although some websites show the investment style as balanced having large caps). Both funds have equal exposure to large caps. The difference is prudence has more no. of stocks (more stocks but about the same proportion of holding in this market cap segment), spread out in the mid and small-cap category than Balanced. The distinction is in the nature of stocks, which is where Prudence takes more aggressive calls. As stated, it was not removed just because it is another fund from the house alone…it is also more volatile. The standard deviation is higher and risk adjusted return lower for Prudence when compared with Balanced. While Prudence per se is a good fund, we prefer funds with lower volatility and therefore we chose to retain Balanced over Prudence. thanks, Vidya
You forgot to mention high growth, which I think is a new addition
Rajat, that was sharp 🙂 thanks, will add it. Vidya
hi
when going thro your news letter, i expect the bottom line should be made as simple as possible and easily understandable. i believe the clarity in the funds suggested or removed / not recommended in the letter can be emphasized more simply.
Hello Sir,
Appreciate your feedback. Will seek to make them more readable. The bottom line for this one is – Franklin India High Growth cos was added, HDFC Prudence was removed. Rest were cosmetic changes if I might say that (change in risk profiles). thanks, Vidya
Hi vidya great greetings of the day. First of all thanks alot for your prompt reply.
Madam i want to invest in icici pru focused blue chip equity fund through sip…but i am confused i want to know compare to hdfc top 200 which fund is better option for me…for period of ten year..investment amount 2500 monthly.nav of icici focused bluechip fund is only 28 rs and hdfc top 200 is above 300/
Hello Sudhir,Sorry for the delayed response. First, do not compare funds based on their NAV. A fund that has been around for long will have a higher NAV, that’s all. Fund specific recommendations can be made if you write to us through your activated FundsIndia account, using the advisor appointment feature. That way, we can look in detail into your investments and come with a recommendation.
As for the difference between ICICI Pr Focused Bluechip and HDFC Top 200. The former is a large-cap fund while HDFC top 200 has a large-cap tilt but has some midcaps as well. Top 200 is also more volatile compared with ICICI Pru focused Bluechip. For a suggestion, I am afarid I cannot make one through this forum. thanks, Vidya
Hi,
I just recently joined funds india. I really appreciate the analysis provided with simple understanding for investors like us on why few funds were taken out and why few funds are not performing compared to peers but it does not require shuffle.
I disagree with a member that bottomline clarity was not simple on inclusions & exclusions. May be he has not read other experts mentioning ratios, P/E’s etc.
Keep it up. And wish this sort of analysis periodically.