Insights

Changes to FundsIndia’s Select Funds list

January 10, 2018 . Mutual Fund Research Desk

FundsIndia’s Select Funds is a researched list of funds across categories that you can invest in today. This list helps narrow down investment choices from the hundreds of funds there are. The list is built on the foundations of quantitative metrics such as consistency, risk-return payoff, and volatility as well as qualitative metrics including market outlook, fund strategy, fund positioning and portfolios.

We review this list on a quarterly basis. Note that funds that we removed from our list in our review are not to be redeemed or exited unless we clearly state that. Funds we take off our list are not poor. Their performance based on our quantitative or qualitative metrics have slipped compared to the category leaders but are in no way the worst. We may also remove a fund if we find another that has steadily been improving its performance and merits an inclusion, in order to keep the Select list compact. A fund that we remove can still be a good performer and continue to build long-term wealth.

For equity funds, though 2017 was a year of soaring market returns, choices for fund managers got tighter. Headwinds from 2016’s currency withdrawal and the implementation of the GST delayed a recovery in economic growth as well as corporate earnings. The September 2017 quarter did not show an overall revival; revenue and earnings growth came through in pockets only. Even so, stock markets clocked all-time highs through to December 2017.

For fund managers, the combination of delay in economic and corporate growth and soaring stock prices was tricky to handle. Divergence in fund performance is starker now than before. Lower comparative returns can be because funds took contrarian calls or booked profits in their holdings or moved to stocks with larger market caps. Where returns look poor, it doesn’t automatically mean that the fund is going to do badly. To navigate this tricky market, we’ve drawn up the Select Funds to have a mix of funds that follow a more traditional long-term growth or value-based strategy with those that are more nimble in shifting their portfolio to capture more near-term market trends.

For debt funds, the second half of 2017 has been tough. The 10-year government bond yields spiked sharply by 65 basis points to 7.32% over the course of the December 2017 quarter. Consumer inflation inching up, a monetary policy committee inclined away from rate cuts, rising crude oil prices and its impact on inflation, the exchange rate, and the fiscal deficit, concerns over government borrowing and an oversupply of bonds all served to push yields up. With uncertainty persisting, funds following a duration strategy are set for a rough ride. Long-term investors wishing to avoid this volatility and uncertainty can invest in short-term or income accrual funds from our Select list.

As a FundsIndia investor, you would have received an email listing the changes this quarter and the reasoning behind these changes. You can view the updated list by logging into your FundsIndia account, or by accessing www.fundsindia.com/select-funds (it requires you to still log in).

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