While assessing funds to derive the list of Recommended Funds, we have looked at past performance, expense ratios and resilience of the funds. (Click here for more details on the methodology)

The past performance of the mutual funds schemes takes up a large part of our consideration. Although the past performance is not indicative of future performance, we believe that past performance can still give us an indication of the quality of the fund management team. We look specifically at cumulative performance over various time horizons (from one-year to five-year periods) and the returns as per calendar year, to rank these funds.

Changes in Recommended Funds for Equity Funds

In the equity segment, most of the changes in recommended funds were on account of funds being recommended for some new categories / classifications, or on account of new funds being added on to our platform (from the last review period).

The new sector categories that we added in the recommended funds include Pharmaceuticals, Technology and FMCG (Fast Moving Consumer Goods) as these sectors have performed well in the first half of 2010.

In categories like Mid and Small-caps and ELSS (Equity Linked Savings Schemes), the changes in recommended funds were primarily due to addition of new funds on to our platform (from the last review period).

Changes in Recommended Funds for Bond and Hybrid Funds

The changes in recommended funds from the bond and hybrid segment were a mixed bag. Some changes were due to addition of new funds on to the platform (from the last review period). And some were due to a slight downgrade of earlier recommended funds.

In some categories like Ultra Short-Term and Monthly Income Plan, the changes were primarily due to addition of new funds on to our platform. In the Ultra Short-Term category, both the recommended funds viz. LICMF INCOME PLUS FUND- GROWTH and RELIANCE MONEY MANAGER FUND- GROWTH, were added on to our platform after the last review. From the Monthly Income category, HDFC MULTIPLE YIELD FUND PLAN 2005- GROWTH was added on to our platform after the last review.

However, for certain categories, the changes in recommended funds were due to a downgrade of earlier funds in this review. In the Debt-Income category, ICICI PRUDENTIAL LONG TERM PLAN- CUMULATIVE was excluded from our recommended funds list as the overall rank of the fund (within its peer category) fell sharply from the first place (as at December 2009) to the eighteenth spot (as at June 2010). The huge fall in overall ranking of the fund could primarily be attributed to the sharp rise in the expense ratio of the fund.

In the Debt-Short Term category, JM SHORT TERM FUND- GROWTH, was excluded from our recommended funds list, as the overall rank of the fund fell slightly from the second place (as at December 2009) to the fourth spot (as at June 2010).

In the Monthly Income Plan (MIP) category, UTI MONTHLY INCOME SCHEME-GROWTH  was excluded from our recommended funds list, as the overall rank of the fund fell from the first place (as at December 2009) to the sixth spot (as at June 2010). Meanwhile, the overall rank of our new recommended fund in the MIP category viz. RELIANCE MONTHLY INCOME PLAN- GROWTHclimbed up from the seventh rank (as at December 2009) to the second rank (as at June 2010).
 
Previous Recommended Funds Have Not Gone Bad

We usually recommend funds that have the highest overall rank within their respective fund category / classification, unless they don’t have the requisite track record. So it may happen that a previously recommended fund no longer appears amongst the top ranked funds (within that category) for the relevant review period. Our observation has been that most of the previously recommended funds that have been replaced, have not performed poorly, but have dropped by a mere one or two ranks (overall rank), as a result of which they have been replaced.
The high turnover in the recommended funds list is primarily on account of funds being recommended for some new categories / classifications, or on account of new funds being added on to our platform (from the last review period).