(If you are new to this report, please read section "2. How to use this report" first.)
The report for this week:
Report Summary:
This Week:
Last week:
Summary Statements:
The equity funds and hybrid funds corrected thru this week. But the commodity funds did something extraordinary, which is to appreciate for the second consequetive week, while the behavior so far used to be flip flop in general. The bullishness of commodity funds will remain in general for the next 3-6 months. Those who will fail to exploit this will be made to feel ashamed. The commodity funds are likely to give similar annaul return ahead.
Concern:
Global equity has moved from outpatient department to inpatient section now, and will be admitted to ICU soon. The December ralley, if any, will be the last chance to get out of underperforming equity funds. This is primarily due to global cues, that too due to the US debt situation. Even the US allies are slowly dumping the US bonds, which will amplify the escape of funds to more secured avenues like commodity.
Also, the US is likely to take a nuclear option soon, which is to nullify its debt as much possible by couple of measures which will increase the inflation globally, and the run way condition of gold and silver prices to keep going up.
There may be specific opportunities in equities out there, but that will be more of an exception than a general rule, the retail investors will fail to swim upstream in this context.
Opportunity:
The opportunity provided by the commodity funds is unprecedented. The commodity funds will appreciate, at the minimum, at the same annual rate like last one year. It could be much higher too. The prices will be volatile, but the overall gains will be spectacular. The last two weeks of December could be the last chance to get into this bandwagon, before chaos breakout globally, and then one needs to pay higher premium due to the supply concerns and huge price gaps between physical metal and demat version.
Caution: Do not invest in precious metals outside the regulated norms. "Digital Gold" schemes are not safe. As the commodity prices soar, we will also see numerous cases of fraud.
If investing in physical gold and silver, buy in the form to get 100% resale value (authentic bars and coins). Need to store them in bank lockers than at home unless one's home is fortied by security forces. Even bank lockers may not be safe, the insurance from the bank on theft may not be more than 5 lakhs, so diversify storage locations.
1. Combined Funds Top 50
1.1. Combined Funds Top 50 and Bottom 50 Summary:
Top 50 summary:
The top 50 lists are completely dominated by commodity funds, that to Silver funds. This is because Silver is outperforming Gold for now.
The weekly top 50 weekly averages are lesser than the last week as the commodity funds appreciation this week is lesser than that of last week. But, compounding effect of commodity funds performance has enhanced to take the monthly average of monthly top 50 and annual average of annual top 50 much higher.
IT related etfs have made into the weekly top 50 and monthly top 50 lists this time, that is impressive. This is primarily due to rupee depreciation recently. I will still not invest in them, rather stick to commodity funds.
Gold funds remain in the Annual Top 50, therefore the investment in them remains bullish. One can consider investments across Silver and Gold funds at the ratio of 2:1 for short term, till Gold flips to be superior performer ahead, when I am not sure.
Bottom 50 summary:
When we check the Bottom 50 lists across the week, month and year, the message of continued sub par performance of equity is clear. Especially the funds underperforming are smallcap, midcap, tourism, realty, defence, infrastructure.
1.2. Combined Top 50
Green and Amber color marked mutual funds in the list: Since the focus is not only looking for the performance leaders, but also consistent above average performance across all the timelines, the funds are marked in Green or Amber to easily recognize consistency of performance among the leaders.
Green:
If the returns for all the available timelines from 1W thru 1Y is above the average within the list. The fund can not be marked green even with this rule if the returns are not available beyond a month, in which case the fund is marked as amber only.
Amber:
If the returns for all the available timelines from 1W thru 1Y is above the average within the list except for one timeline. For this exception, if any of the weekly and monthly returns are above average, then both timelines are considered to have above average
1.2.1. Combined Weekly Top 50
1.2.2. Combined Monthly Top 50
1.2.3. Combined Annual Top 50
Bearish reversal signs:
Both the weekly and monthly bottom 50 lists are leveraged to identify potential bearish reversal indications of the funds. This is done by marking above average annual return in bold and below average returns for the week and month. The funds with both weekly and monthly below average, but annual above average are marked in darker red, while the funds with only one of the weekly and monthly below averages but with above average annual return are marked in light red.
Bullish reversal signs:
Annual bottom 50 funds list is used to recognize potential bullish reversal. Any fund with above average return for both the week and the month in the list is marked as grey indicating potential bullish reversal.
2. How to use this report:
1. This report is useful to buy the funds on consistent performance leadership, sell the funds when they give signal of falling from such a leadership. It also gives a watchlist of underperforming funds showing sign of recovery, but not yet qualifying for buy.
The report combines all mutual fund types, and then seeks top 50 and bottom 50 funds. Therefore, best or worst performing funds are chosen across all fund types (equity, debt, hybrid and commodity).
The report summary is also useful on gauging market pulse ahead for regular stock investment and trading too.
2. Strategy: It is possible that one could aim to double the mutual fund returns over an year using this report than settling for average return concept using SIPs. Typically mutual fund returns on portfolio level are aimed at 12-15% per annum, this report attempts to help targeting 25-30% instead, but by not going for SIP, rather churn the portfolio to contain performance leaders as the market zigs and zags. In such an approach, the holding period of a fund may fall to as less as three months usually, even one month in some exceptional market moves. The price to pay in this approach is higher short term gain tax due to short term churn outs and also may be nominal exit load charges. But the superior return indicated above towards doubling annual yield has accounted for such an overhead.
3. This report is also useful for the stock traders and investors. This report gives insight at the level of summary and associated comments. Also, by identifying the bull and bear trends in the funds, one gets better pulse of the market for stock investment and trading. When someone notices a particular fund type in bearish mode or bullish mode here, but if one of the underlying stock shows different behavior, it is an alert to investigate this anomaly either as a spurious behavior or not.
Buy list:
This report highlights the top 50 mutual funds across all the fund types, for the periods 1 week, 1 month and 1year. Also, it marks the funds within these lists with green color if they are having above average return for all the timelines from 1M thru 1Y, highlighting consistency of performance leadership. For the new funds, it will not give green color just for having superior return for 1W and 1M, rather settles for Yellow, waiting for it to show superior performance beyond 1M.
It marks the funds as yellow, if missing above average returns just for one timeline. While giving yellow color, even if one of the 1W and 1M timeline is not above average, then both are considered as above average, which is to give some concession for very short term, giving the benefit of doubt, and not get spooked by the volatility very short term.
So, while considering the funds with yellow color, one should look for funds with average returns at shorter timelines as more favorable than the ones other way, meaning above average returns in later timelines but missing the boat in the shorter timelines.
Sell list:
The report highlights bottom 50 mutual funds for 1 W and 1M timelines. It highlights those funds having above average return in these lists for the year (meaning performance leaders within the recent losers) and having below average return for the 1W and 1M timeline. If below average for only one timeline across 1W and 1M, they are marked with lighter red, but if both of them below average, then marked darker red. The funds marked in red are the one to be sold before they lose further performance ahead. The money released from such sales can be used to buy the new performance leaders marked in green or yellow.
Why the funds with below average return are not marked in red if the annual average is below average?:
This is because the focus is to alert the bearish reversal sign only than including those who continue to remain in such a state across various weeks. It is understood that all the funds with below average annual return within the list are bearish and have return erosion risk by continuing to hold.
Watchlist:
When it comes to the annual bottom 50 list, it is used for bullish recovery signs. The funds which have above average return for both the 1W and 1M are considered as bullish recovery signs and are marked in grey. One should not buy these funds just for such recovery signs, but keep in mind to anticipate whether they will eventually appear in the buy list or fizzle out thru coming weeks.
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Disclaimer:
- This is not a solicitation for mutual fund investment nor an advice. It is only an insight to help investment decisions based on the free MF performance data downloaded from Value Research. Investment decisions are only yours to make.
- Mutual fund investments are subjected to market risk. Read the prospectus of a mutual fund for all the risk information associated prior to investment.
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- All your investment decisions need to be based on your decision finally, with no blame to anyone else later.
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