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Review of our Recommended Funds
July 31, 2013

We have updated our list of the best mutual funds in the industry.


Author : Dr.Renu Pothen



Time for Long Term Debt Funds

Table 1 : changes in recommended funds

Categories
Recommended Funds as at NOVEMBER 2012
Recommended Funds as at JUNE 2013
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
BSL FRONTLINE EQUITY FUND BSL FRONTLINE EQUITY FUND
MIDCAP & 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
SBI EMERGING BUSINESS FUND SBI EMERGING BUSINESS FUND
MULTI CAP UTI OPPORTUNITIES FUND UTI OPPORTUNITIES FUND
MIRAE ASSET INDIA OPPORTUNITIES FUND MIRAE ASSET INDIA OPPORTUNITIES FUND
RELIANCE EQUITY OPPORTUNITIES FUND RELIANCE EQUITY OPPORTUNITIES FUND
CONTRA & VALUE ICICI PRUDENTIAL DISCOVERY FUND ICICI PRUDENTIAL DISCOVERY FUND
RELIGARE CONTRA FUND RELIGARE CONTRA FUND
DIVIDEND YIELD BSL DIVIDEND YIELD PLUS BSL DIVIDEND YIELD PLUS
INDEX FRANKLIN INDIA INDEX FUND BSE SENSEX PLAN FRANKLIN INDIA INDEX FUND BSE SENSEX 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
AXIS LONG TERM EQUITY FUND AXIS LONG TERM EQUITY FUND
ICICI PRUDENTIAL TAX PLAN ICICI PRUDENTIAL TAX PLAN
RELIANCE TAX SAVER ( ELSS ) FUND RELIANCE TAX SAVER ( ELSS ) FUND
GLOBAL FRANKLIN ASIAN EQUITY FRANKLIN ASIAN EQUITY
DWS GLOBAL AGRIBUSINESS OFFSHORE FUND DWS GLOBAL AGRIBUSINESS OFFSHORE FUND
JPMORGAN JF GREATER CHINA EQUITY OFF SHORE 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
PINEBRIDGE INFRASTRUCTURE AND ECONOMIC REFORM FUND STANDARD PLAN PINEBRIDGE INFRASTRUCTURE AND ECONOMIC REFORM FUND STANDARD PLAN
DSP BLACKROCK INDIA T.I.G.E.R. FUND DSP BLACKROCK INDIA T.I.G.E.R. FUND
FMCG SBI FMCG FUND SBI FMCG FUND
TECHNOLOGY ICICI PRUDENTIAL TECHNOLOGY FUND ICICI PRUDENTIAL TECHNOLOGY FUND
SPECIALITY L&T INDIA SPECIAL SITUATIONS FUND L&T INDIA SPECIAL SITUATIONS FUND
DEBT FUNDS
FLOATING RATE/FLOATER
NA
NA
NA
NA
ULTRA SHORT TERM TEMPLETON INDIA ULTRA SHORT BOND FUND TEMPLETON INDIA ULTRA SHORT BOND FUND
AXIS TREASURY ADVANTAGE FUND AXIS TREASURY ADVANTAGE FUND
ICICI PRUDENTIAL FLEXIBLE INCOME PLAN ICICI PRUDENTIAL FLEXIBLE INCOME PLAN
SHORT TERM TEMPLETON INDIA SHORT TERM INCOME PLAN TEMPLETON INDIA SHORT TERM INCOME PLAN
PINEBRIDGE INDIA SHORT TERM FUND STANDARD PLAN PINEBRIDGE INDIA SHORT TERM FUND STANDARD PLAN
HDFC SHORT TERM PLAN DWS SHORT MATURITY FUND
NA
RELIANCE REGULAR SAVINGS FUND DEBT 0PTION
DYNAMIC BOND FUND BSL DYNAMIC BOND FUND BSL DYNAMIC BOND FUND
UTI DYNAMIC BOND FUND UTI DYNAMIC BOND FUND
DSP BLACKROCK STRATEGIC BOND FUND DSP BLACKROCK STRATEGIC BOND FUND
NA
IDFC DYNAMIC BOND FUND
NA
SBI DYNAMIC BOND FUND
INCOME TEMPLETON INDIA INCOME BUILDER ACCOUNT PLAN A TEMPLETON INDIA INCOME BUILDER ACCOUNT PLAN A
CANARA ROBECO INCOME CANARA ROBECO INCOME
DWS PREMIER BOND FUND UTI 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
BSL GOVERNMENT SECURITIES FUND LONG TERM PLAN BSL 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
DSP BLACKROCK MIP FUND DSP BLACKROCK MIP FUND
ASSET ALLOCATION AXIS TRIPLE ADVANTAGE FUND AXIS TRIPLE ADVANTAGE FUND
#Replacements; New Entrants

We have done a half yearly review of our Recommended Funds, a practice which was in place for 2 years (2009 and 2010) after which we decided to do a review only once in a year. In addition, we also started updating our investors on what the fund managers have been doing with their portfolios during the first half of the year.

This year, we decided to break with tradition and reviewed our recommended funds in the month of June. This was done on the back of the huge volatility being witnessed in both the equity and debt markets. iFAST Research Desk has always been of the view that investments into equity funds should be held for a long term while fixed income investments are to be actively managed depending on the interest rate cycle.

As per the current review, our recommended funds stand at 56 as against 53 on January 2013.The number of funds in the equity and hybrid categories remain the same, while we have increased the funds in the debt category from 15 to 18 in this review.

We have made additions in the dynamic bond space as we have always been of the belief that since there is a lot of uncertainty on the monetary policy front, investors who do not wish to time the market and have a time horizon of more than a year can take an exposure into this category of funds. Our new bets in this space are IDFC Dynamic Bond Fund and SBI Dynamic Bond Fund. In addition, we have also added a fund in the short-term category that is Reliance Regular Savings Fund Debt Option, the punch line given by the fund house sums up the reason for inclusion into our list this time: “It is ideal for investors who have a low appetite for interest rate volatility and seeking accrual returns with moderate duration, typically for traditional investors of fixed deposits”. On the other hand, we have decided to remove two of our recommended funds that is HDFC Short Term Plan and DWS Premier Bond Fund and these have been replaced with DWS Short Maturity Fund and UTI Bond Fund.

At this juncture, I would like to divert investor attention to some of the funds in the recommended list which recently have been going through short-term volatility which has led to panic among our investors. In this context, we met up with the fund management teams of these funds to know the reasons for the short-term blip and the strategies that they are planning to follow to get back on track. Along with this, we have also got insights on the two new funds that have been included in the dynamic bond category.

We recommend funds on the basis of past performance along with the future upside that we see in a fund. Hence we hope that the words of wisdom from the people who manage your money should give you the confidence to hold onto these funds till your investment goals are realized.

DSP BLACKROCK TOP 100 EQUITY FUND

DSP BlackRock Top 100 Equity Fund entered our recommended funds’ list for the first time in June 2009. With the exception of 2011, this fund has always been a part of our list of recommended funds. The fund has been going through a rough patch for some time now and this has been a cause of concern for our investors as we have taken an exposure into this fund in our recommended portfolios - Moderately Aggressive and Aggressive.

Apoorva Shah-Executive, Vice President & Fund Manager: “During the first half of the year portfolio performance suffered as the fund had a growth oriented outlook and performance got affected because we did not correctly anticipate the tightening measures undertaken by the government. However, we have changed our positioning in line with the current market scenario. We are now bullish on private banks, IT, automobiles and media.We are generally bullish on rural growth as a theme and we have a strong conviction that the next few years will unlock the hidden potential of rural wealth which has been lying unproductive for a long time”.

Our Take: In accordance with this stand, we continue to place our bet on DSP BlackRock Top 100 Fund which was once the favourite picks in the large-cap category.

SBI EMERGING BUSINESS FUND

In the current revamp of recommended funds, SBI Emerging Business Fund turned out to be the best performing mid-cap fund on the platform this time as well. We have taken a huge exposure into this fund in our recommended portfolios - Moderately Aggressive and Aggressive. The recent volatility seen in the mid-cap space has caused jitters in the minds of investors.

R. Srinivasan-Head of Equity: “Although the fund was initially launched as a high conviction fund which was sector and market capitalization agnostic, the sudden increase in the corpus has led to some changes in the way the fund is managed. Currently the fund takes around 40% exposure into large-cap stocks and it will no longer be managed like a high-risk, high-return fund”

Our Take: Investors taking an exposure into this fund should not go by the superlative performance delivered by this fund in the past but should keep in mind the strategy that will be followed in the future. The fund continues to be our best bet in the mid-cap category.

PINEBRIDGE INDIA SHORT TERM FUND STANDARD PLAN

PineBridge India Short Term Fund, which stands on three basic pillars of Safety, Liquidity and Tradability, has been going through a volatile phase during the last few months. Although this is in line with the market trend, we have been keeping a close track on this fund on account of the huge exposures that we had taken in all our model portfolios.

Vikrant Mehta-Head-Fixed Income: “We were uncomfortable buying credit in the past 2-3 months since the spreads were quite compressed and we felt the risk-reward ratio was not favourable. Post the FOMC meet, the subsequent sell-off credit spreads have expanded and we may move into this segment progressively if the risk reward ratio is favourable. Given the extreme volatility in the debt and forex markets, we would be running a more conservative strategy in the near term. We are not seeing a major withdrawal of liquidity from the short-term market and, hence, we feel there is a possibility of further action by the RBI to contain speculative behavior in forex markets. Hence, we will be deploying cash in short-term maturity papers as and when we feel the risk reward is favourable”.

Our Take: As on July 23, 2013, the total cash exposure of this fund was 81.8% as against 19.47% on July 16, 2013.We believe that the defensive stance taken by Mehta will open up more opportunities in the coming weeks and investors can park their surplus into  this fund without having sleepless nights in these uncertain times.

IDFC DYNAMIC BOND FUND

IDFC Dynamic Bond Fund cleared all the filters in our model and hence made it to our recommended funds list for the first time.

Suyash Choudhary-Head-Fixed Income: “The IDFC Dynamic Bond Fund is an actively managed fund positioned in the income fund category to take exposure across the curve. It is a wide structure and conceptually can go anywhere on the curve. Our biggest discomfort with the market over the last few months was that it was under-pricing the external account risk while focusing almost exclusively on inflation. With the latest RBI measures, the market is being forced to price in the complete macro-economic picture including the external risks. Before and through these volatile times we were holding very large cash levels in the fund and remained in wait and watch mode. However, now we will look for opportunities over the next month or so to increase duration. Once this current phase subsides, the interest rate story will become more powerful than it has ever been over the past few months. This then provides a much more comfortable situation for investors to participate in”.

SBI DYNAMIC BOND FUND

SBI Dynamic Bond Fund, a fund in the dynamic space which has been popular among investors since last year, has found a place in our recommended funds list in the review done in June 2013.

Dinsesh Ahuja-Fund Manager: “The RBI went on a pause mode in the June policy on account of the volatility in global markets creating pressure on the local currency. We had reduced duration in the fund and have been maintaining a cautious stand for the near term. Keeping in mind the overall growth inflation dynamics the recent rise in bond yields could offer interesting opportunities for medium- to long-term investors, while bearing in mind that there could be continued volatility in the near term”.

In conclusion

As always, I am concluding this note by saying that investors need not get into a panic mode seeing the volatility in the equity or debt markets as a result of which the recommended funds are also going through a rough patch which is a cause of concern. For those investors who have taken an exposure to the debt funds which have been replaced in the current review, our advice is to hold onto their positions and take an exit call at the appropriate time. The uncertainty in the markets should be used as an opportunity to make an entry into our recommended funds while our existing investors should continue holding onto their portfolios and be ready to go through short-term volatility. I would sign off this note by saying that patience is a virtue that investors should practice to sail through these uncertain times.

Note:

For the benefit of our investors, we will soon be 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.

Please feel free to get back to us on research.ind@ifastfinancial.com if you have any queries on any of our funds.

 

 


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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