Commentary:
1. The traditional annual leaders went through significant correction through last week. Hencne, there is a churn out of patterns in the top 50. This is bit unsettling, therefore it is advised to apply caution as to making new investments till the new pattern stabilizes for leadership.
2. Looking at the Top 50 based on 1M Return, one can see that average monthly return has shrunk to mere 3.5% out of 2.07% came through the last week, which confirms the churnout in the Top 50 list.
3. Because of this churn out, very few funds displayed investment worthiness, by having above average return for all the timelines from 1M through 1Y. They are marked in green and they are:
- ICICI Prudential Nifty Auto ETF
- Nippon India Nifty Auto ETF
- ICICI Prudential Nifty Auto Index Fund
4. Since the above funds have decent annual return too, one can invest in these funds right away, but caution is that such an investment needs to be treated as short term. Thematic funds can underperform when the slip from the favorite position, so in my case, I will make this as short term investment, meaning to hold till their domination lasts to be in the leaders list and annual return remains above 40% minimum.
Because the monsoon projection is good, rural India demand will perk up for auto, hence this is a safe short term bet if not longer term.
5. Looking at the Top 50 based on 1Y average, there has been a significant weekly correction to the level of 3%, reducing the monthly return average to less than 0.5% and taking approx 5% gain from the average annual gain.
6. In spite of the significant weekly correction, only one fund made it to be investment worthy by having above average return from 1M through 1Y.
- CPSE ETF
I would wait for one or more weeks to ensure the correction is over for these funds.
7. The correction level on the Bottom 50 funds based on 1M Return is less than that of Top 50 based on 1Y Return. This reconfirms churn out in the leaders list in coming weeks.
In addition to certain hybrid, debt and commodity funds, this list includes some foreign equity and still some IT / Tech/ Digital funds.
8. Look at the Bottom 50 funds based on 1Y Return, and be happy that none of these funds are in your portfolio. Also, get a sense as to how some funds can be a dog in one's portfolio.
9. Overall, hybrid funds did worse than equity funds through this week, again due to the fact that the equity portion of their fund corrected more severely that the equity funds. This makes me to undestand that the hybrid funds are not well professionally managed like the equity funds.
A handful hybrid funds are worthy to complement the equity funds towards giving a balanced approach to equity investments. Otherwise, I am convinced that the hybrid funds are meant for those who are simply looking for up to double the FD returns in their funds for managing the risks against equity.
Unfortunately, my current analysis does not help much on choosing the best performers for the conservative hybrid funds. That is a disclaimer right there. So, I would suggest one to look for the conservative hybrid funds in the Top 50 given, and choose the best among them. In this weeek, the following fit to such a criteria:
- HSBC Conservative Hybrid Fund
- SBI Magnum Children Benefit Plan - Savings Plan
These kind of funds usually do not appear in top 50, as the aggressive hybrid funds usually rule. Due to correction, these two have appeared, and one can make note for conservative investments, if that is the focus. I do not for now, but in future, I might move some of my FD amounts to such funds.
10. The following funds made investment grade by ensuring above average return across 1M through 1Y. Be wary of potential corrections in the weeks ahead though.
- SBI Magnum Children's Benefit Fund -Investment Plan
- JM Aggressive Hybrid Fund
- 360 One Balanced Hybrid Fund
- DSP Dynamic Asset Allocation Fund
11. Looking at the Top 50 Hybrid Funds based on 1Y return, we see weekly and monthly correction impacts taking away annual gains. Usually, this list is dominated by aggressive hybrid funds. This time we see some balanced funds too, which are bit less aggressive on equity.
The following made investment grade by having above average return on all timelines from 1M through 1Y:
- JM Aggressive Hybrid Fund
- Bank of India Mid and Small Cap Equity & Debt Fund - Direct Plan
- ICICI Prudential Retirement Fund - Hybrid Aggressive Plan
- SBI Magnum Children Benefit Fund - Investment Plan
- ICICI Prudential Child Care Fund - Gift Plan
- UTI Multi Asset Allocation Fund
- Mahindra Manulife Aggressive Hybrid Fund
- Invesco India Aggressive Hybrid Fund
12. There has been significant reovery of coomodity funds through last week resulting in some churn out of leaders.
13. Based on above average returns for timelines 1M thru 1Y, the following have made the investment grade:
- Tata Silver ETF
- Edelweiss Silver ETF
14. Since there is churn out of leadership in commodity funds, I got curious as to which funds make it investment worthiness in this list based on above average return from 1M through 1Y. Only one fund made the cut:
- Motilal Oswal Gold and Silver ETFs FoF
15. Though I do not yet invest in debt funds, I wanted to check investment worthy funds within that category based on above average return from 1M through 1Y. Surprisingly, niether on 1M Top 50 and 1Y Top 50, both in these two lists, no debt fund makes the cut. Wonder, why debt funds need to have so much churn out and volitility in the leaders list.
