FundsIndia’s ‘Select Funds’, a list of investment-worthy funds across various categories, helps you narrow your investment choice from the 100s of funds that you have to otherwise sift through before investing.
This list is reviewed on a quarterly basis. There are additions to ensure that good choices are not left out. There are also deletions if funds under-perform for prolonged periods and pose the risk of an opportunity loss for your portfolio.
We have made changes to this list recently and would like to highlight them here. We are also introducing a new category of ‘theme funds’ meant for risk takers. This category is aimed at investors looking for opportune sectors to invest in and also those looking to diversify into other markets. Do note that you will have to track these more closely if you wish to invest and find opportunities to remove profits.
Equity Funds
Among the equity funds – 2 schemes, Axis Equity and Franklin India Prima have made the cut to our list and one fund – Birla Sun Life Dividend Yield Plus has been moved to the ‘watch’ mode. Read on to know why.
This fund, with a large-cap tilt, has been making it to our filtered list for quite a few quarters now. While it’s consistency in a volatile market provided comfort, we had to see had the fund’s performance in an uptick as well.
The recent rally post September has boosted our confidence in the fund’s ability to ramp up quickly. This fund can be a good addition to a relatively conservative investor’s portfolio. We will soon have a full-fledged call/review on this fund in our weekly review.
Franklin India Prima, one among the handful of funds to have been launched in the 90s, completed two decades of investing in the Indian stock markets.
While the fund ruled the mutual fund charts for many years (until the mid 2000s), it did see a fall from grace since then and was languishing well after the 2008 market fall. But this mid-cap fund appears to be on a comeback trail, this time, seemingly less flashy and more resilient.
Investors can use this mid-cap focused fund as a diversifier in their portfolio. The fund’s current portfolio of stocks, given the exposure to many beaten sectors such as engineering, may provide index-beating returns when markets witness a more steady rally, backed by a revival in the economy.
As such, our positive view on this fund stems more from the fund’s current portfolio. This is a good fund to play the ‘revival’ theme.
Birla Sun Life Dividend Yield Plus
We gave this fund a long rope for 3 quarters now but had to move it to our ‘hold’ bucket for now, giving its continuing underperformance. Why the dip? The fund stubbornly remains overweight (compared with its benchmark CNX 500) on the banking and finance space, as a result of which it had to take a deeper cut, as the sector remains in a downturn.
That said, the quality of banks it holds has undergone a change suggesting that the fund, although bullish on the sector, is now discreet in its picks within the space.
Besides, we still find the rest of the portfolio promising, given the valuations of stocks and the possibility for good upside when an economic revival is in sight. The fund is therefore removed from the Select Funds list, but is being keenly watched by us for improvement.
Debt Funds
It is in tough times that Templeton funds appear to attract attention. Yes, we have 2 additions from that house; one in the short-term debt category and the other in the income fund category. We are placing a hold on the Morgan Stanley Short Term Bond fund simply to wait for its integration with HDFC Mutual.
Templeton India Short Term Income (short-term debt for 1-2 year holding)
We have been quite conservative in our choice of short-term funds, preferring a portfolio laden with mostly certificates of deposits and Commercial papers. We decided we will add one fund with a tilt towards bonds.
But why add now? Because we believe that interest rates could be peaking, and credit risk is perhaps at its worst. In other words, it may only get better. In such a scenario, if we had a portfolio with good corporate bonds but with short tenure, we may do some balancing act for slightly higher returns. But do note that of the short-term funds in our list, we would classify this as being relatively riskier.
Templeton India Income Builder (Debt funds – long term)
Our long-term debt portfolio too, thus far has been a tame one. Quite cautious on credit risk and not taking on too much duration risk (you will not find funds with long average maturity). But again, Templeton India Income Builder’s expertise in picking instruments that may not always be AAA-rated but have comfortably managed a good record meant that the risk-adjusted return in this fund is higher than the other funds in this category we have chosen.
Being among the oldest debt funds in the country, its track record also inspires confidence. Hence, we offer this fund in our platter, for those with that extra bit of risk appetite.
Theme Funds
ICICI Pru Technology, SBI Pharma, ICICI Prudential Export & Other Services, L&T Global Real Assets, FT India Feeder Franklin US Opportunities and Franklin Build India are the themes we will go with, at this point in time. The first two, as you many know, will ride the export theme, especially if markets such as the US are on a recovery mode. These 2 are also relatively safe bets in a credit-sapped environment, as companies in these sectors are mostly cash rich.
The third fund, ICICI Pru Export & Other Services, will ride both the IT and pharma sectors besides other service sectors. This fund would be a proxy for you to ride both the IT and pharma spaces in one shot. Hence, it can be held in lieu of the other 2 funds if you do not want a focused sector bet.
In all these sectors a 2-3 year view and an active profit-booking strategy will be required.
L&T Global Real Assets and FT India Feeder Franklin U.S Opportunities are the 2 international funds in this bucket. The former will invest in hard assets – mines, oil wells, factories, infrastructure and real estate across the globe and is viewed as a hedge against inflation. We chose this for consistency in performance although it has not shown any flashy returns.
The US fund will of course invest in the US market through the parent fund. Do note that while these funds delivered double-digit returns in the last couple of years, they are best viewed as diversifiers and not chart toppers.
The last fund in our theme basket is Franklin Build India. We like to call it a dark horse at this point. Our bet on this fund is entirely based on a revival story. We recently covered this fund in our weekly call.
All the funds in this basket will be termed risky and may undergo changes as and when we see better opportunities. Hence, you may have to track them more actively if you hold them (given a 2-3 year time frame required).
Wealth Conversations – April 2024- Temporary suspension of subscriptions in ” Mirae Asset Global Electric & Autonomous Vehicles ETFs Fund of Fund & Mirae Asset Global X Artificial Intelligence & Technology ETF Fund of Fund
- Merger Announcement: Aditya Birla Sun Life CRISIL IBX AAA Mar 2024 Index Fund
Here is everything that you need to know about Arbitrage Funds- Temporary suspension of subscriptions in “DSP US Treasury Fund of Fund”
Hello Vidya,
I am not sure if I have seen Quantum Long Term Equity Fund in the Select funds list in the past. This fund has had a very consistent VRO rating and has also been a part of Mint50 funds. Any reason why this fund is excluded? Is it due to the AUM size?
Regards,
Anand
Hi Anand,
We have a a well-defined process for selecting funds that we recommend to our investors. Since we have agreement with almost all AMCs, we take all funds, without bias, to choose the worthy universe. But for all such fund houses, we have a mutually beneficial agreement with the AMC – we distribute their funds, they share their fees with us. However, with Quantum, we don’t have such a commercial agreement. So, we don’t include their funds for evaluation and have a neutral view. If you like, you are welcome to do a due diligence on their funds and use our platform to invest in these funds using your account. thanks, Vidya
Hi Vidya,
I really appreciate the transparency and maturity in your response. This, in addition to the fact that FundsIndia allows investing in Quantum funds despite the lack of a commercial agreement, speaks volumes of your customer-centric values. Once again goes on to show why FundsIndia is arguably the best financial service provider in India.
Regards,
Anand
Thanks, Anand! Vidya
Hi Vidya
I have started a SIP in “ICICI Pru Export & Other Services”. You have mentioned in the article that these sectors need a “2-3 year view and an active profit-booking strategy”
Can you please elaborate on what you meant by active booking strategy. Is it something like redeeming the fund when ever there is a good spike?
Hi Vishwanath, By active profit booking, I meant selling some units when you have extraordinary profits like 50-60% or more in a year. Also, with theme funds, do not have very long SIPs (may be a year or so) because the theme itself may not last too long. thanks,
How am I supposed to react to your appreciation of the performance of MF? Am I supposed to redeem the funds in which I have invested for long term and then after some time, say six months, they do not appear in your list. What do you recommend whether to redeem them and invite short term capital gains or continue despite your recommendations. What is the objective behind your suggestions?
Hello Alok, Thanks for your query. Select Funds, as you may know is a list of investment worthy funds at a point in time. This list keeps changing as and when we find better or new opportunities. But that does not make the other options poor. When we make the change, we clearly mention whether the fund that is replaced is a ‘hold’ or needs to be exited. Hence, view this list as an option for fresh investment and not to make switches. If you are looking for reviews that will monitor your portfolio and recommend changes, then our portfolio offerings under ‘Smart Solutions’ will offer such a solution. thanks, Vidya
Thanks for the prompt and satisfying reply. But somewhere it may be mentioned in your recommendations that the investors may not redeem their existing funds to invest i these funds or alternately you may recommend the funds the investors may exit due to under performance. It is just a suggestions, you have the larger picture about objectives of your own organisations as well as the larger picture of benefits of the investor community due to your recommendations.
Regards
Alok
Hi Alok, Thanks for the suggestion. When an exit is warranted, we shall definitely make it known. thanks, Vidya
Hello Vidya,
I am not sure if I have seen Quantum Long Term Equity Fund in the Select funds list in the past. This fund has had a very consistent VRO rating and has also been a part of Mint50 funds. Any reason why this fund is excluded? Is it due to the AUM size?
Regards,
Anand
Hi Anand,
We have a a well-defined process for selecting funds that we recommend to our investors. Since we have agreement with almost all AMCs, we take all funds, without bias, to choose the worthy universe. But for all such fund houses, we have a mutually beneficial agreement with the AMC – we distribute their funds, they share their fees with us. However, with Quantum, we don’t have such a commercial agreement. So, we don’t include their funds for evaluation and have a neutral view. If you like, you are welcome to do a due diligence on their funds and use our platform to invest in these funds using your account. thanks, Vidya
Hi Vidya,
I really appreciate the transparency and maturity in your response. This, in addition to the fact that FundsIndia allows investing in Quantum funds despite the lack of a commercial agreement, speaks volumes of your customer-centric values. Once again goes on to show why FundsIndia is arguably the best financial service provider in India.
Regards,
Anand
Thanks, Anand! Vidya
How am I supposed to react to your appreciation of the performance of MF? Am I supposed to redeem the funds in which I have invested for long term and then after some time, say six months, they do not appear in your list. What do you recommend whether to redeem them and invite short term capital gains or continue despite your recommendations. What is the objective behind your suggestions?
Hello Alok, Thanks for your query. Select Funds, as you may know is a list of investment worthy funds at a point in time. This list keeps changing as and when we find better or new opportunities. But that does not make the other options poor. When we make the change, we clearly mention whether the fund that is replaced is a ‘hold’ or needs to be exited. Hence, view this list as an option for fresh investment and not to make switches. If you are looking for reviews that will monitor your portfolio and recommend changes, then our portfolio offerings under ‘Smart Solutions’ will offer such a solution. thanks, Vidya
Thanks for the prompt and satisfying reply. But somewhere it may be mentioned in your recommendations that the investors may not redeem their existing funds to invest i these funds or alternately you may recommend the funds the investors may exit due to under performance. It is just a suggestions, you have the larger picture about objectives of your own organisations as well as the larger picture of benefits of the investor community due to your recommendations.
Regards
Alok
Hi Alok, Thanks for the suggestion. When an exit is warranted, we shall definitely make it known. thanks, Vidya
Hi Vidya
I have started a SIP in “ICICI Pru Export & Other Services”. You have mentioned in the article that these sectors need a “2-3 year view and an active profit-booking strategy”
Can you please elaborate on what you meant by active booking strategy. Is it something like redeeming the fund when ever there is a good spike?
Hi Vishwanath, By active profit booking, I meant selling some units when you have extraordinary profits like 50-60% or more in a year. Also, with theme funds, do not have very long SIPs (may be a year or so) because the theme itself may not last too long. thanks,