Special MF Report to assess impact of Lokasabha Election results and to choose fresh investments now!

 

Commentary:

Context:

    The Lokasabha election reconfirmed political stability at the cost of coalition government. Since exit polls caused euphoria a day before, there was a significant correction on June 4th. This could be an opportunity for fresh MF investments, if one knows which one to target.

Personally, I am bullish on mutual fund investments, and I like to bring in 40% new investments now, another 30% after government formation, and another 30% around the budget formation.

This report is for those who are aiming fresh investments, today. Focus here is only equity and hybrid funds.

1. Looking at the averages, we see negative returns for the equity and hybrid funds for the last one week in general, but the Top 50 averages for the week managed to stay positive.

2. But the annual leaders did suffer more correction than the average. Hence we need to anticipate leadership churn out, and therefore fresh insights for new investments.

This report also helps as a baseline in the weeks ahead, to assess the changes ahead due to further correction or recovery or leadership rotation.

This report only helps for fresh investments, it gives some clues as to which can be held and which need to be watched out for exit (bottom 50). But, it is advised that one does not exit any current MF investments till the budget process is completed through July, as one can anticipate recovery on underperformers.  

Methodology for fresh investments selection: We would consider three ways. 

Method 1: Looking at the above average returns if we take the average of performance from 1W thru 1Y. That way we account for this week performance too all the way to annual performance.

3. The rows in green above are investment worthy for having an above average return across all timelines 1W thru 1Y. They have been consistent in performance including the short 1W.

Method 2: Based on Monthly Perofrmance Leaders

4. The above picture is the Monthly Top performers for the last one month across all fund types. Only three funds made it to the investment grade for having above average returns across 1M thru 1Y.

5. In contrast, the above picture shows the bottom 50 across all fund types. We can see some of the usual top performers trapped here due to significant correction through last week. Since there could be further correction on these, better stay away from them short term.

6. When we look at Equity Only Top 50, good number of funds made it to the investment worthiness for having above average returns from 1M thru 1Y.

7. For those who like to consider hybrid funds which will have less aggressive returns, there is a leadership churnout due to recent correction. The ones which are investment worthy are marked green for having above average return from 1M thru 1Y.

Method 3: Based on 1 Year Return leaders

8. The aobe picture is the Top 50 funds with 1Year Return. Though it is across all fund types, all the leaders here are equity funds. So, no need to discuss equity only annual performace leaders separately. The investment worthy ones are marked in green for having above average return from 1M thru 1Y.

9. The above picture is the annual Top 50 for hybrid funds only. The investment worthy ones are marked in green, for having above average return for all timelines from 1M thru 1Y. You can see churn out in leadership here too.