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Recommended Mutual Funds for 2013
January 18, 2013

The updated recommended funds list for 2013 is summarized here.


Author : Dr. Renu Pothen



Top Fund Picks for 2013

Table 1 : changes in recommended funds

CATEGORIES
RECOMMENDED FUNDS AS ON DEC 2011
RECOMMENDED FUNDS AS ON NOV 2012
EQUITY FUNDS
LARGE CAP ICICI PRUDENTIAL FOCUSED BLUECHIP EQUITY FUND ICICI PRUDENTIAL FOCUSED BLUECHIP EQUITY FUND
FRANKLIN INDIA BLUECHIP FUND FRANKLIN INDIA BLUECHIP FUND
DSP BLACKROCK TOP 100 EQUITY FUND DSP BLACKROCK TOP 100 EQUITY FUND
NA BIRLA SUN LIFE FRONTLINE EQUITY FUND
MID CAP & SMALL CAP HDFC MID-CAP OPPORTUNITIES FUND HDFC MID-CAP OPPORTUNITIES FUND
DSP BLACKROCK SMALL AND MID CAP FUND DSP BLACKROCK SMALL AND MID CAP FUND
IDFC STERLING EQUITY FUND IDFC STERLING EQUITY FUND
NA SBI MAGNUM SECTOR FUNDS UMBRELLA- EMERGING BUSINESSES FUND
MULTI CAP UTI OPPORTUNITIES FUND UTI OPPORTUNITIES FUND
MIRAE ASSET INDIA OPPORTUNITIES FUND MIRAE ASSET INDIA OPPORTUNITIES FUND
FIDELITY EQUITY FUND RELIANCE EQUITY OPPORTUNITIES FUND
VALUE & CONTRA ICICI PRUDENTIAL DISCOVERY FUND ICICI PRUDENTIAL DISCOVERY FUND
RELIGARE CONTRA FUND RELIGARE CONTRA FUND
DIVIDEND YIELD UTI DIVIDEND YIELD FUND BIRLA SUN LIFE DIVIDEND YIELD PLUS
INDEX FRANKLIN INDIA INDEX FUND BSE PLAN FRANKLIN INDIA INDEX FUND BSE PLAN
ICICI PRUDENTIAL INDEX FUND ICICI PRUDENTIAL INDEX FUND
HDFC INDEX FUND - SENSEX PLUS PLAN HDFC INDEX FUND - SENSEX PLUS PLAN
ELSS FRANKLIN INDIA TAXSHIELD FRANKLIN INDIA TAXSHIELD
CANARA ROBECO EQUITY TAX SAVER CANARA ROBECO EQUITY TAX SAVER
HDFC TAXSAVER AXIS LONG TERM EQUITY FUND
FIDELITY TAX ADVANTAGE FUND ICICI PRUDENTIAL TAX PLAN
RELIGARE TAX PLAN RELIANCE TAX SAVER ( ELSS ) FUND
GLOBAL FRANKLIN ASIAN EQUITY FUND FRANKLIN ASIAN EQUITY FUND
DWS GLOBAL AGRIBUSINESS OFFSHORE FUND DWS GLOBAL AGRIBUSINESS OFFSHORE FUND
MIRAE ASSET CHINA ADVANTAGE FUND JPMORGAN JF GREATER CHINA EQUITY OFF-SHORE FUND
BANKING RELIANCE BANKING FUND RELIANCE BANKING FUND
PHARMACEUTICALS RELIANCE PHARMA FUND RELIANCE PHARMA FUND
INFRASTRUCTURE ICICI PRUDENTIAL INFRASTRUCTURE FUND ICICI PRUDENTIAL INFRASTRUCTURE FUND
AIG INFRASTRUCTURE AND ECONOMIC REFORM FUND PINEBRIDGE INFRASTRUCTURE & ECONOMIC REFORM FUND
NA DSP BLACKROCK INDIA T.I.G.E.R. FUND
FMCG SBI MAGNUM SECTOR FUNDS UMBRELLA-FMCG FUND SBI MAGNUM SECTOR FUNDS UMBRELLA-FMCG FUND
TECHNOLOGY FRANKLIN INFOTECH FUND ICICI PRUDENTIAL TECHNOLOGY FUND
SPECIALITY NA L&T INDIA SPECIAL SITUATIONS FUND
DEBT FUNDS
FLOATING RATE CANARA ROBECO FLOATING RATE NA
BIRLA SUN LIFE FLOATING RATE FUND - LONG TERM PLAN NA
ULTRA SHORT TERM TEMPLETON INDIA ULTRA-SHORT BOND FUND TEMPLETON INDIA ULTRA-SHORT BOND FUND
BNP PARIBAS MONEY PLUS FUND AXIS TREASURY ADVANTAGE FUND
DWS ULTRA SHORT TERM FUND
ICICI PRUDENTIAL FLEXIBLE INCOME PLAN
SHORT TERM TEMPLETON INDIA SHORT-TERM INCOME PLAN TEMPLETON INDIA SHORT-TERM INCOME PLAN
DWS SHORT MATURITY FUND
PINEBRIDGE INDIA SHORT TERM FUND
NA HDFC SHORT TERM PLAN
DYNAMIC BOND BIRLA SUN LIFE DYNAMIC BOND FUND BIRLA SUN LIFE DYNAMIC BOND FUND
NA UTI DYNAMIC BOND FUND
NA DSP BLACKROCK STRATEGIC BOND FUND
INCOME ICICI PRUDENTIAL INCOME PLAN TEMPLETON INDIA INCOME BUILDER ACCOUNT
NA CANARA ROBECO INCOME FUND
NA DWS PREMIER BOND FUND
GILT-SHORT TERM ICICI PRUDENTIAL GILT FUND TREASURY PLAN ICICI PRUDENTIAL GILT FUND TREASURY PLAN
GILT-LONG TERM ICICI PRUDENTIAL GILT FUND INVESTMENT PLAN ICICI PRUDENTIAL GILT FUND INVESTMENT PLAN
  NA BIRLA SUN LIFE GOVERNMENT SECURITIES FUND - LONG TERM PLAN
HYBRID FUNDS
BALANCED HDFC PRUDENCE FUND HDFC PRUDENCE FUND
HDFC BALANCED FUND HDFC BALANCED FUND
MIP RELIANCE MONTHLY INCOME PLAN RELIANCE MONTHLY INCOME PLAN
BIRLA SUN LIFE MONTHLY INCOME DSP BLACKROCK MIP FUND
ASSET ALLOCATION NA AXIS TRIPLE ADVANTAGE FUND

# Replacements; New Entrants

It is that time of the year when the India Research Desk of iFAST Financial releases its coveted list of recommended funds. Last year, when we informed our  investors about the change in recommended funds, the Indian market was the worst performer in 2011. In addition, global markets were bleeding with all asset classes going through a volatile phase. The questions asked by our investors were on the lines of “Should I stop my existing SIPs?” or “Is it the right time to enter the market?” At that time our view on the domestic market was: “The long-term outlook is promising for equity as an asset class. In the short term, we are cautious on Indian equity and believe that the first half of 2012 will be challenging for equity investors”. In addition, the view from our global research desk was to this tune of “equity valuations are at multi-year lows and investor confidence is clearly lacking. As companies sustain their profitability and the global economy steers clear of recession, stock markets have the potential to rally strongly from their current depressed valuations on any semblance of a catalyst”.

All investors who acted on our advice are seeing their investments in green after a long time.

A year later it seems like the gloom has given way to exuberance, with Dalal Street virtually in a party mood. Fundamental and technical analysts are competing with each other by raising the expectation bar of where the indices are going to hit so that they can let investors make that fast buck in a short period of time. However, we still advice investors to be on a cautious path and not get carried away by this herd behavior. We are of the view that the macroeconomic indicators will show an improvement this year but definitely at a slow pace. The Government and the Reserve Bank of India (RBI), the torchbearers of the economy, are showing the willingness to take the economy back into the growth trajectory, which is a big positive in the coming year. We continue to believe in the growth story of India and maintain our positive stance on Indian equities from a long-term perspective. This is substantiated  by our global research desk who are of the view that: “Our outlook for 2013 remains fairly aligned with that of 2012, as we maintain a fairly constructive view on the global economy on expectations of a recovery in the Eurozone alongside an export rebound in Asia”.

Now we come to our fixed income investors. If 2011 was when we were bullish on Fixed Maturity Plans (FMPs), then 2012 was definitely the year when our focus shifted to short-term funds. However, for 2013, we believe that long duration funds should be a part of our investors’ portfolios. . (See Where Fixed Income Investors should invest now).

Our views on the changes made in Recommended Funds

In the current year, our total number of recommended funds stands at 53, as against 44 in 2012.The equity segment has seen an increase in funds from 29 to 33, debt funds’ count has been raised to 15 from 11 and an extra fund has been added in the hybrid category which takes the total number of funds in the same to 5. The reason behind increasing the number of funds is to give our investors more choice while creating their portfolios. There are times when a fund would have been among the top 5 in a particular category as per our model; however it might not make it to the final list of recommended funds. This is because we normally restrict ourselves to publishing just 1 or 2 funds from each category. Hence we get a lot of queries from the investor community on why the said fund has not been a part of our recommended funds for the year. To avoid this confusion, we decided to increase the number of funds in categories like Large caps, Mid caps, Infrastructure, Short term, Dynamic bond, Income and Gilt-Long-Term.

In addition, this year, we have added 3 new categories: “Specialty” (equity), “Dynamic Bond Funds” (fixed income) and “Asset Allocation” (hybrid). The funds that normally find a place in the Specialty segment are those whose themes are either unique or too broad, hence will not fit into any of our other generic classifications. We normally classified dynamic bond funds as a part of Income Funds. However, this year we have decided to create a new category for the same and move all funds which fall within the definition of dynamically managed into this category. Finally, Asset Allocation funds can include funds which play in the 3 assets, i.e. equity, debt and gold or could refer to funds which cater to specific investment goals like children’s education, marriage, pension plans, etc. We thought it appropriate to start recommending funds from this category as there are investors who are keen to park their surplus in these funds. They are of the opinion that the fund manager will ensure that their asset allocation is taken care and don’t have the bother of rebalancing on a periodic basis.

We have deleted one category this year, i.e. Floating Rate Funds from the debt space. As the funds are finding it difficult to find floating rate instruments, most of the funds in this category are being restructured as Ultra Short Term Funds. Hence, we thought it appropriate to do away with this category.

The year 2012 saw major changes in some of the fund houses that we had been recommending to our investors. We would like to make our stand clear on the reasons why funds from these fund houses still find a place in our recommended funds list. Firstly, PineBridge Investments acquired AIG Global AMC (India) and AIG Trustee Company (India). The only major change was the appointment of Siddhartha Singh who was earlier Product Specialist-India Equities and Head-Product Development as the CEO. There was no change in the fund management team and this, along with the fact that Singh being put at the helm of a fund house which has been facing uncertainty for some time now, gives us all the more confidence in continuing with the funds from the PineBridge stable. Another major development that took place during the year was the take over of Fidelity Mutual Fund by L&T Mutual Fund. Fidelity funds, although few in number, were the favourite picks of many investors and this event definitely created some apprehension amongst them. As we put out this note, the acquisition has been completed and Ashu Suyash, the Country Head, India Fidelity International has taken charge as the new CEO of L&T Mutual Fund. In addition to this, the fund was able to rope one of the most experienced hands in the industry in the form of Soumendra Nath Lahiri as the head of equities. We believe that both these stalwarts with their new teams should be able to bring L&T Mutual Fund as a preferred choice for investors, as this has not been the case till recently. In this scenario, our investors might be wondering why some of our favourite Fidelity picks like Fidelity Equity Fund, Fidelity Tax Advantage Fund have not made it to the list this year. The reason for this exclusion is that they were not able to clear some of the filters in the model. Having said that, we have no concerns on these funds and advice all those investors who have investments in these funds to continue to hold onto them.

As far as the fund houses are concerned, we have some new entrants in this year’s list. L&T Mutual Fund finds a place in our list for the first time with the inclusion of L&T India Special Situations Fund. We are of the view that Lahiri would be able to keep up the impressive performance that Nitin Bajaj and Anirudh Gopalakrishnan have been able to put up. In addition, there is Axis Mutual Fund. Though a relatively new player, it is quickly finding acceptance among investors because of the numbers that their funds have been able to put up. We have included 3 funds from this fund house: Axis Long Term Equity Fund (ELSS category), Axis Treasury Advantage Fund (ultra short term) and Axis Triple Advantage Fund (asset allocation). Finally, JP Morgan Mutual Fund has found a place in the list with the addition of their global fund, JPMorgan JF Greater China Equity Off-Shore Fund.

CONCLUSION
This is the sixth time that our recommended funds are undergoing a review. Although we come out with the list just once a year, we keep reviewing them on a regular basis. We would advice our investors to take an exposure to funds depending on their risk profile and investments goals. For those funds that were a part of our recommended list in 2012 but do not find a place this year, our suggestion to those investors who started an SIP in the same or made a lumpsum investment to continue with the existing investments. The reason for their exclusion is that these funds could not clear some of the filters in our model. However, it does not indicate that you have to terminate your investments in such funds.

Watch this space to see which of our recommended funds make it to our model portfolios this year.

Note:

For the benefit of our investors, we are also releasing a report that, in a nutshell, will give a brief outline on the investment strategies and the performance of all our recommended funds for 2013. (See Preview to the Recommended Funds of 2013). Please feel free to get back to us on feedback@fundsupermart.com if you have any queries on any of our funds.

Happy Investing and a great year ahead!

iFAST and/or its content and research team’s licensed representatives may own or have positions in the mutual funds of any of the Asset Management Company mentioned or referred to in the article, and may from time to time add or dispose of, or be materially interested in any such. This article is not to be construed as an offer or solicitation for the subscription, purchase or sale of any mutual fund. No investment decision should be taken without first viewing a mutual fund's offer document/scheme additional information/scheme information document. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Investors should seek for professional investment, tax, and legal advice before making an investment or any other decision. Past performance and any forecast is not necessarily indicative of the future or likely performance of the mutual fund. The value of mutual funds and the income from them may fall as well as rise. Opinions expressed herein are subject to change without notice. Please read our disclaimer in the website.


 


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