1. The average 1M return of top 50 funds is 13.58%, which was 11.65% last week, which means that top 50 funds doing better than last one week.
The average 1M return of the same top fifty funds 28 days back were 6.08%, which means these funds accumulated accelerating gains thru last 28 days.
The average 1M return of top 50 funds as on Jan 27, which is 28 days back was 7.7%, again, confirming that riding on top 50 funds does give glimpse of better performers based on last one month return for the current market conditions. If the top 50 funds average based on 1M returns is an index like Nifty 50, the mutual funds at this index level are still doing great, the bull run is still on, though there is a churn out in the top 50 list.
2. When it comes to new investment decisions, it is recommended that one looks for consistent top performance across different time lines from 1M through 1Y, the top performers are highlighted in bold, based on the following benchmark which is 1Y Return >= 60%, 6M Return >=35%, 3M Return >=20%, and 1M Return in Top 50.
3. This list should be used mainly for buying new investments, not for hold and sell decisions.
4. The rows in red are the funds which were in top 50 28 days back, but have fallen off the top 50 list as on this week. Here too, one may see consistent performers except for the 1M return. One needs to weight whether the 1M return for these will improve, or further erode through coming weeks, so definitely these funds deserve Hold, if not fresh Buy. Even Fresh Buy can be considered if there is faith that they will make it to top 50 again ahead based on anticipated market dynamics ahead.
5. Theory here is that, by focusing on top 50 funds with consistent top returns for all time lines upto 1Y, one gets to ride on the most recent bull trend of the funds, which will help to enhance the investment returns for the fresh investments as the trend tends to continue till it stops. So, if the benchmark here for top 1Y return is 60%, and one is happy with 30% annual return for MF investments in general for the current market dynamics, this approach for fresh investments may enhance the portfolio level return from 30% to 45% very likely.
6. Whem it comes to Sell decisions on low performing funds, the performance benchmarks used here are useful for evaluation. Further one needs to take judgement call as to whether hold a fund beyond 1 Year to save capital gain and Exit load overheads. (One will pay short term gain of 15% for holding for less than one year, and pay long term gain of 10% only for holding more than one year. This 5% difference and the exit load burden of upto 2% is a consideration for selling under performing funds before one year completion.)
7. One can see some trends in the top fifty as follows:
- PSU Bank Funds have come back in to vougue. PSU Funds are still attractive.
- One large cap fund has made it back to top 50, and it is from the Quant family. Bravo! But, it is still an under performer against 6M and 1Y performance benchmarks.
- Certain pharma, healthcare, power and infra funds have fallen from top 50.
- Quant family has improved its hegemony in top 50 funds list thru this week, there are 12 among top 50. Of course, there is a churn out as to which are these 12 funds.
- The second top fund house here is ICICI Prudential, 6 funds in top 50.
8. CPSE ETF regains top spot for 1Y return, which 110% and triggering tears, tears of joy for those riding on it, and tears of lost opportunity for those missing on it. Interestingly, this is a quirk of Value Research, as this is more of an ETF than a mutual fund, if you want to invest in it. So, you will need a demat account to pursue this ETF.
110% annual return is the bearer of the flag for India continuing to shine in the markets, even through the MF path.
Mera Bhaarath Mahaan!
9. Again I challenge positional traders to beat the 1Y return benchmark of 60%, and the short term traders to beat the annual return benchmark of 100%, if there is underperformance in your portfolio against these benchmarks, please consider yielding to mutual funds path to save you agony and time!
10. Standard disclaimers apply. Past pefromance is no guarantee for the performance ahead. But, in mutual funds arena, consistent performance across various timelines is a good bet to have.
Best regards,
Nataraja Upadhya
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