Here is a list of recommend funds compiled by Fundsupermart for 2014.
The month of January is eagerly awaited by our associates and investors as it is that time of the year when the iFAST Investment Advisory Division comes out with the list of recommended funds. This is the medium through which we inform our investors about the best funds in the industry that should be a part of their portfolio, and share information about any concerns that we see in any of the funds which were taken up for analysis. Although it is only in January that we release the recommended funds list, the team starts working on the model from December onwards and we are as anxious as our investors to see the outcome of our model. Before getting into the details of the recommended funds for 2014, I would like to give a gist of how the funds actually make it to the final selection.
Recommended funds for 2014
Last year when I was introducing my recommended funds for 2013, Dalal Street was in a party mood and we see a similar euphoria this year as well. The street could not hold onto last year’s party mood for long as both the domestic and global environment spoilt the jubilation.
When UPA formed the government in 2004, we were growing at more than 9%, but the same set of economist-led team at North Block made sure that we grow at 4% after more than 9 years at the center. Other macroeconomic indicators like IIP, CAD, inflation, and the currency created havoc in the economy. The biggest killer was the US FED Chairman’s announcement in May regarding the tapering of the bond buying programme which had a serious impact on both the equity and debt markets. However, the bad phase gave way to some positive sentiments with the government waking up from a long slumber and passing bills and legislations in a hurry. The State Elections in December clearly indicated that the country needs a bold government which can take decisive actions to propel the economy back to the 9% growth rates. Hence, even though the street has been chanting the “NaMo” mantra, we would advise our investors not to get carried away by these noises but stay put, and continue taking an exposure into Indian equities as we maintain our neutral stance on them.
As far as fixed income is concerned, we had been advocating duration funds in the beginning of the year on the basis of our views on interest rates, but things went for a toss after the FOMC announcement on tapering. The knee jerk reaction from Mint Street to control the currency volatility saw the safest instruments in the debt category like liquid and ultra-short term funds entering into a negative zone. These measures did not help the currency, but in turn made a lot of investors lose their faith in debt funds. We only have one thing to say to our investors: all categories of mutual funds including both equity
New Entrants Replacements
and debt are subject to volatility and they should be aware about the same before taking an exposure into any of the funds. Gradually, things began to improve and by the time the erudite Rajan took over the reins at Mint Street, the debt market recovered from the mayhem witnessed in the month of July and the fixed income market moved into a positive zone. At this juncture, we will continue to maintain a conservative stance in fixed income and suggest only short term funds and dynamic bond funds to our investors. This is because we would also like to wait and watch what Rajan and team will be doing in the coming months.
Changes in the recommended funds
Our recommended funds for 2014 stand at 53 with 35 of them belonging to the equity category, 14 in the debt category and the remaining 4 in the hybrid category. As for the equity category, out of the 35 funds, 10 are replacements while 3 of them are new entrants. Specifically, we have decided to move out of 2 funds belonging to the DSP BlackRock Mutual Fund family namely DSP BlackRock Top 100 Equity Fund and DSP BlackRock Small and Mid Cap Fund. Although these funds had been going through short term volatility for some time now, we continued to recommend the same to our investors. This was due to the belief that every equity fund goes through a volatile phase and it is only a matter of time before they regain their lost glory. Hence, we had been telling our investors to be in the patient mode for some time. However, this time our model has severely punished these funds, as a result of which we are not advising any more fresh exposures into any of these funds. A piece of advice to our investors who have got into the funds recently: Hold onto it for some more time before pressing the exit button.
There have been two big changes that have come up in the recommended funds this year. The first one is that Reliance Banking Fund which has been a part of our list since June 2009 when we first launched the iFAST recommended funds, has been replaced with ICICI Prudential Banking & Financial Services Fund. Secondly, we had started including a pharma fund in our list of recommended funds since June 2010 and Reliance Pharma Fund has always been our top pick. This year the fund had to be replaced with SBI Pharma Fund. We are aware about the fact that our investors had reposed a lot of faith in these 2 funds; and our advice to all of them would be to stay invested in these funds and not stop any of the ongoing SIPs into the same. We don’t have any serious concerns on these 2 funds as we believe that they are going through short term volatility as of now.
As
far as the new entrants are concerned, the most promising fund in the multi cap
space i.e. IDFC Premier Equity Fund has been the favorite of many of our
investors. It is only last year that we had started classifying this fund as a
multi cap, while in the previous years the fund belonged to the midcap space.
The fund always used to be the top performer in whichever categories it was
placed. However, we could not make it a part of our earlier recommended lists
on account of its mandate that it will not accept lump sum investments. Though
the mandate remains the same, we have decided to give thumbs up to this fund
and hence Kenneth’s biggest bet makes an entry into our recommended funds list
for the first time.
As for the debt category, one of the changes that we have made is that from this year onwards, we will not have any recommended Ultra Short Term Funds. This is owing to our belief that since these funds are only used as a vehicle to park the surplus required for a short time period, it does not make sense to run them through a model whose parameters are based on a five-year time horizon.
As far as debt funds are concerned, UTI Short Term Income Fund and Sundaram Select Debt Short Term Asset Plan are the new entrants in the Short Term category. In the income category, Baroda Pioneer Public Sector Undertaking (PSU) Bond Fund, being a relatively small fund, surprisingly replaced UTI Bond Fund which is one of the biggest players in this category. Finally, our all-time top picks in Gilt-short Term and Long Term Categories, ICICI Prudential Short Term Gilt Fund and ICICI Prudential Long Term Gilt Fund, which have been a part of our recommended funds list since 2011 have given way to SBI Magnum Gilt Fund Short Term Plan and IDFC Government Securities Fund Investments Plan B.
This note will not be complete without our views on the fund houses that have entered our recommended funds list this year. 2014 seems to belong to ICICI Prudential Mutual Fund which has got the maximum number of funds in our recommended list. Though the fund management team saw a few high profile exits in the last few years, the superb performance of the funds is a clear indication that the processes at the fund house are robust. The other 2 fund houses that are competing for the top slots are SBI Mutual Fund and Canara Robeco Mutual Fund. SBI Mutual Fund’s reign at the top is a clear indication that Navneet Munot and his team is working hard to regain the lost glory of a fund house which was once a household name amongst mutual fund investors. Canara Robeco Mutual Fund first entered our recommended funds list in 2011 with Canara Robeco Floating Rate followed by Canara Robeco Equity Tax Saver in 2012 after which the income fund – Canara Robeco Income featured in our list in 2013. There has been no looking back for this fund house with a total of 5 funds entering the recommended funds list this year. Another surprise entrant into our recommended funds list this year is Tata Mutual Fund, one of the oldest survivors in the industry. The dividend yield fund from the Tata stable has made sure that the veteran gets into our list for the first time this year. The Chennai Express seems to be on track and here we are referring to Sundaram Mutual Fund, whose equity funds were once a part of every investor’s core portfolio. They are slowly recouping as can be seen from our model. However, the fund house seems to be getting its bets right in the debt space, as a result of which Sundaram Select Debt Short Term Asset Plan has become a part of our recommended short term funds.
Anoop Bhaskar and his UTI Opportunities Fund has been a part of our recommended funds from 2011 and continues to beat all the model parameters this year as well. While for a change, it is UTI Mutual Fund’s debt team led by Amandeep Chopra that is slowly making an inroad into investor portfolios this year with their short term and dynamic category funds clearing all the filters in our model.
There is always a debate in the industry regarding domestic and foreign fund houses. The exits in the last 2 years are creating confusion in the minds of investors if they should go ahead with the foreign fund houses or not. iFAST Investment Advisory Divison has never made a distinction between the 2 while recommending funds, because we believe that “survival of the fittest” is best applied in the mutual fund industry. If Fidelity and Morgan Stanley decided to take an exit route, then we should also remember that others like Schroders and Invesco are placing their faith in the domestic market. In this space, we have been very positive on Mirae Asset Mutual Fund and PineBridge Investments. Since 2012, Mirae’s flagship fund - Mirae Asset India Opportunities Fund has been a part of our recommended funds list while this year their midcap fund, Mirae Asset Emerging Bluechip Fund has competed with the goliaths in the industry to become the best performer. Gopal Agrawal and his team continues to put good performance on the table year after year and it is only a matter of time before investors start making these funds a part of their core portfolio. Finally, in our last year’s note we had written about the transition that happened at PineBridge Investments and the confidence that we had placed in the fund house. Although we introduced PineBridge Infrastructure & Economic Reform Fund in our recommended funds in 2012, it was their short term fund that we placed a big bet on and it turned out to be the best performer during times of huge volatility in the model. We consider this fund to be our find and are happy to see it being accepted across the investor community in the last 1 year.
Conclusion
2014 will be filled with noises right from NaMo in Delhi to Yellen in the US and it is not possible to stay immune to all of it. Our advice to investors is to stay invested in their portfolios and not lose faith. They always need to keep in mind that though the market might react to any sudden news, it also calms down in a few days.
We wish all our investors a Happy and Prosperous 2014!
The views expressed in this article are solely of the author and do not necessarily reflect the views of Cafemutual.
