We have explored the best large cap mutual funds to invest in India in 2012 and we also discussed the best large cap and mid cap mutual funds to invest in 2012 in India in our previous two articles. Let’s now take a peek at the best mid cap, small cap and multi cap mutual funds in India where you can park your money in 2012.
The definition of these groupings as per www.valueresearchonline.com is here – multi cap funds are those that have an exposure of 40-60 per cent of their equity portfolio to large cap stocks while mid cap and small cap funds are those that have an exposure of less than 40 per cent of their equity portfolio to large cap stocks.
So without much ado, let’s zip down on some best mid cap, small cap and multi cap mutual funds –
1. IDFC Premier Equity
IDFC Premier Equity is an open ended mid cap and small cap equity fund bench-marked against BSE 500 and in existence for 6 years now. It has returned a decent 18% since launch and has curtailed its 2011 fall in a handsome way as compared to its benchmark.
Net assets have now grown to Rs 2,405/- crores but the fund has still outperformed it’s peers all through the years consistently. Among the mid cap and small cap category, it would be a shame not to have this !
| Returns in % | ||||
| IDFC Premier Equity | Since Launch | 5 yr | 3 yrs | 1 yr |
| Fund | 18.85 | 17.37 | 32.7 | -8.2 |
| Category | – | 4.24 | 25.17 | -16.26 |
2. BSL Dividend Yield Plus
BSL Dividend Yield Plus fund was launched in 2003. Benchmarked against S&P CNX 500, the returns have been high, around 26% since launch. With high returns and low risk taking capability, this fund can be a pick for your portfolio in 2012.
It has the ability to limit the downside and give decent returns over a long period of time by taking a strong exposure to mid cap stocks.
| Returns in % | ||||
| BSL Dividend Yield Plus | Since Launch | 5 yr | 3 yrs | 1 yr |
| Fund | 25.59 | 12.26 | 27.74 | -11.21 |
| Category | – | 4.24 | 25.17 | -16.27 |
1. HDFC Equity & HDFC Growth
While HDFC Equity is in existence for 17 years, HDFC Growth is 11 years old. Both have returned around 20% since launch which is a handsome figure by all means. HDFC Equity is benchmarked against S&P CNX 500 while HDFC Growth compares with Sensex.
The corpus that HDFC Equity manages is approximately 7-8 times that of HDFC Growth. Take your pick after you run through both of them and decide which one is suitable for you.
| Returns in % | ||||
| HDFC Equity | Since Launch | 5 yr | 3 yrs | 1 yr |
| Fund | 20.22 | 9.56 | 28.57 | -18.17 |
| Category | – | 5.48 | 22.02 | -16.58 |
| Returns in % | ||||
| HDFC Growth | Since Launch | 5 yr | 3 yrs | 1 yr |
| Fund | 19.74 | 9.58 | 24.01 | -12.53 |
| Category | – | 5.48 | 22.02 | -16.58 |
2. Tata Equity PE
Launched in 2004, Tata Equity is benchmarked against the Sensex and is a relatively smaller fund as compared to the HDFCs mentioned above. It has a corpus of Rs 640/- crores with a history of delivering high returns with average risks.
50% of its portfolio is concentrated in the top 3 sectors and the fund takes high exposure to sectors like energy and financial services. Maybe the small corpus is a blessing in disguise as it is managed quite well.
| Returns in % | ||||
| Tata Equity | Since Launch | 5 yr | 3 yrs | 1 yr |
| Fund | 20.54 | 10 | 24.67 | -15.65 |
| Category | – | 5.48 | 22.02 | -16.58 |
3. Quantum Long Term Equity
This is a really tiny fund – at a corpus of Rs 90 crores, Quantum Long Term Equity has been in existence for 6 years now. It’s ability to return more for investors with very less risk is what makes it stand out.
The fund aims to achieve long-term capital appreciation by investing in shares of companies that are typically included in BSE 200 Index and attractively priced in the market.
| Returns in % | ||||
| Quantum Long Term Equity | Since Launch | 5 yr | 3 yrs | 1 yr |
| Fund | 12.33 | 10.16 | 28.96 | -13.02 |
| Category | – | 5.48 | 22.02 | -16.58 |
Phew !
As it is said that Mutual Funds give decent returns in Long Term investing, but why is it that 3rd year is always the most benefitting year??
In the track record of 5 years, usually 1st years is -ve returns, 3rd year is max returns & 5th year is moderate returns. Any specific reason??
@Aparna Nema, In 2011 nifty/sensex lost around 25% and if you compare to the market lows of post lehman crisis, we are in good shape. That is the reason for that pattern.
@Venkat, Thanks for the explanation Venkat. What are your thoughts on 2011 returns ?
@Radhey Sharma, I hope its all because of uncertainty around the global markets of the probable incoming recession, which was likely with many countries and fear is not yet over.
@Radhey Sharma, Hi Radhey, Now a days i have stopped worrying about short term movements. My SIPs are intact and i am monitoring my funds periodically and I am happy with their performance.As per the 25 % correction its more of local issues than global. my opinion:)
@Venkat, Apparently, with FIIs being the biggest detractors / net-sellers (made high chunk of withdrawals in 2011), I think the returns in 2011 were indeed driven down by global events rather than the local ones.
@Venkat, That is a very good indication of your understanding of how personal finance works. Short term movements should not worry someone.
I think the 25% correction is because of both local and global issues.
@Aparna Nema, Not really. This is just an effect of how the lats few years have returned. If you look at 2011, equity gave -25% returns. So all funds returns will be bad.
But if had returned say +10%, then the entire 1,2,3,4,5 year returns would have changed simply because of this figure!
@Radhey Sharma, Exactly. The returns should be bench marked with the corresponding index.
@Aparna Nema, That’s a pure coincident that you have had the 3rd year as your best one. But if this is happening too often, then you can plan out your investments and reap the benefits after 3d year!
@Jaswinder Singh, History repeats itself, those who learnt lesson last time will come out stronger next time.
@Venkat, Hi Venkat, while I agree (with some caveats) with the notion that history repeats itself; I couldn’t understand how this relates to Aparna’s “…investments peaking in 3rd year” syndrome 🙂
Radhey,
Thanks for the list. I have been investing in HDFC Eq. since the last 3 years.
Rakesh
I hope DSP BlackRock’s Small and Mid-cap fund has high risk but can outperform the market during the booming period.
@Manickkam, You have DSP BlackRock’s Small and Mid-cap fund ?
How is the fund and what are your views ?
@Radhey Sharma, Its expense ratio is low. It has average risk and deploys the entire cash in mid and small cap. The returns are higher compared to the index during the bull market and lower during the bear market. It has enough diversification.
@Manickkam, You got your basics right….hmmm…
Over last couple of years I have been impressed by the philosophy which Mr. Ajit Dayal of Quantum follows and I have high regards for him and his ethical processes. I hope his funds do well as well.
@Jaswinder Singh, The chap writes well as well. His ethics are good.
Quantum is a nice fund house actually.
@Radhey Sharma, I got an opportunity to attend one of his sessions and I was very impressed with his philosophy and ethical approach – however I was equally disappointed to learn that the accumulative investments in his funds are next to nothing as compared to their peers from the so called “branded” fund houses.
@Jaswinder Singh,
Mr Ajit Dayal of Quantum Mutual Fund and Mr Dhirender Kumar Of Value Research are my favourite.
Radhey,
Since last few days you have written articles on Best Large,Mid-cap, Small-caps, Multi-cap funds. Why don’t you write one on Best Balanced Funds and ETF Funds. It will benefit all of us who have debt component in their portfolio.
Rakesh
@Rakesh, I will write on this in this month. Please await the articles.
I have already invested in a large cap fund HDFC Top 200 and a mid cap fund IDFC Premier Equity. I now wish 2 invest in a small cap fund from a long term (10 years or more) perspective.
Any recommendations?
@Dinesh, I did articles on this as well so plz check.
Radhey,
I was referring to any dedicated small cap funds that may be good to invest in. There were a couple launched by HSBC and Reliance some time back, but I don;t know how good/bad their performance is.
Your advice on this would be appreciated.
@Dinesh, I need to know their names before we can comment. However, the above ones are good to go with so why not select these ?
There are about 5 dedicated small cap funds in Indian MF universe : JP Morgan Smaller CO. Fund, Franklin Smaller Co. Fund, DSP BR Mircocap Fund, Reliance Small Cap, and HSBC Small Cap. If I want to allocate a small portion say 10-15% of my MF portfolio to these funds, which ones would u recommend?
Try this –
https://www.thewealthwisher.com/2012/12/14/best-mutual-funds-to-invest-in-2013-in-india/
I invest in IDFC Premier Equity and HDFC Equity .Quantum Long Term Equity fund is also a very good multicap fund.Their fund selection is based on the Value investment philosophy ( Pioneered by Benjamin Graham and Mastered by Warren Buffet) so it should give a good return in the long term.
Investors with Fidelity in their portfolio might want to revisit their strategy. Fidelity is planning to sell off its business in India and it could have a negative impact on the investors.
Article: http://www.hindustantimes.com/business-news/ColumnsBusiness/Fidelity-considers-exit-negative-for-Indian-fund-investors/Article1-807198.aspx
@Vivek,
This news has been going on for quite some time. Fidelity is not happy with SEBI rules & guidelines. But i don’t think it should effect the fund if it has been taken over by a big fund house. We had seen instances of DSP Merill Lynch and Sundaram MF and their funds are doing well.
@Rakesh, I haven’t read anywhere that Fidelity is not happy with SEBI, why do you say that?
In fact some analysts claim that Fidelity is assuming that retail investors in India are not willing to invest in equities wholeheartedly so they don’t want to invest huge amount in India.
Fidelity worldwide has revenues of over $12 billion whereas Fidelity India had carried-forward losses of $60 million as on 31 March 2011. The company also incurred a loss of $12 million in the financial year 2010-2011.
@Vivek,
Here’s the link –
http://www.moneylife.in/article/fidelitys-exit-a-slap-on-sebis-face/23340.html
@Rakesh, Well Moneylife seems to be having some anti-SEBI agenda. In their article they are emphasising one point again and again that banning entry load on MFs is the reason for MF debacle and Fidelity’s exit. If entry load and cutting margins is the reason for everything then all fund houses should exit one after another.
Also, the article mentioned “Distributors and advisors are responsible for pushing and increasing penetration of financial products.” The statement is true no doubt in that but is it right? Are these so called “distributors” and “advisors” selling the right products to investors based on their needs? Hell no! all they care about is their commission and margins.
I don’t know about SEBIs other regulations but cutting entry load is a blessing in disguise for investors if people are willing to see it. This change will ensure that investors don’t fall prey to the so called “advisors” and they make their own educated decisions. This might force some couch potatoes to turn their head towards learning about MF investment.
P.S. When you are replying to a comment, kindly hit “reply to this comment”. It is easy to track a discussion and one can get proper alerts as well. Thanks.
@Vivek,
I don’t think they are anti-SEBI, for me they are kind of whistle-blowers on the Indian financial side. They were the first ones’s to blow out SpeakAsia scam. They also conduct free seminars to educate investors in various cities.
@Rakesh, May be you are right, you have been following them for long time I guess. It’s just the way they wrote this article gave a negative impression.
@Vivek K, Rakesh is right, MoneyLife taken on regulators and other non investor friendly entities head on and exposes them well.
Worth following.
@Radhey,
I have been following Moneylife for quite sometime now and they have been doing an excellent job.
@Rakesh,
I have also read a few issues of Moneylife and found some good articles in them.
@Vivek K, I think that is a big reason for MF sales declines.
With low commissions, distributors are not interested in selling MFs hence the declining folios.
SEBI has done the right thing for investors but this has been the collateral damage.
I personally think someday in the future investors will come back to MFs but that is a looooong way.
You are very right when you say that product sellers care only about their commissions and margins.
@Radhey Sharma, I am sure investors will come back to MFs when they realise they have to take some risk to beat the inflation.
I am a live example, I used to follow the traditional approach of investing in endowment and other cocktail plans due to influence of elders at home but then I realised it is not going to serve any purpose. I started doing my own research and investments, burned my hands too in a few bad decisions but today when I look back it was all worth. There is still a long way to go but at least I feel I am on right track now.
@Vivek K, Learning from your own mistakes is the best form of experience.
@Vivek K,
Yes you are on right track.
@Vivek K,
I agree with most of what you have said.
I think investing in mutual funds is the best way of return.my view that one should invest his money where his return always beat the inflation and mutual fund is the only place where we may get an average return of 18 to 25%.but the time must be for atleast 3/5 years.
@Sukhen,
Very rightly said MF are for a very long term, we should keep it for atleast 5 years. And now on the returns 25% is a little to much to expect but that’s not impossible, on a realistic levels i think 15% is quite achievable.
“one should invest his money where his return always beat the inflation”
I think the above strategy could make a portfolio very risky. You have to have a combination of equity, debt and gold and not all of them will beat inflation all the time. The portfolio should be well diversified driven by your goals and their duration.
Thanks for the article. I am 36 and just about starting with my financial planning. I had a few random MFs and small amount of SIPs in multiple . I have now set SIP on follow 4. Please share your thought on this.
HDFC 200 (This was existing)
IDFC Premier equity
UTI Opportunity
Franklin Bluechip
Can you suggest 1 or 2 good debt funds to go along with.
@Dip,
All the funds selected by you are good, make sure you monitor them every six months, if any of them are under-performing you may want to switch to better funds. As for debt funds you may look at DSPBR Balanced or HDFC Prudence.
Does it make sense to select HDFC Ballance Fund in stead of HDFC Prudence considering the low NAV?
Low NAV doesn’t make any difference. Lower NAV doesn’t mean that growth will be more or High NAV doesn’t mean that growth will be less. It completely depends on the fund manager and his strategy.
You may read below article on how to select a MF and then pick one of the two balanced funds: –
https://www.thewealthwisher.com/2012/04/11/how-to-select-a-mutual-fund-in-india/
Agree with Vivek, low NAV should not be reason to choose a fund, performance matters. Many investors fall prey to NFO’s and funds with low NAV, they feel its good to buy at 10 and it will rise to 20 soon but that’s a bad strategy. If the fund manager is not good the NAV may fall to 5.
Your fund selection is good Dip, I have all these in my portfolio 🙂
For debt funds, in addition to what Rakesh suggested, you may also consider HDFC Balanced, Canara Robeco Balance Fund and Tata Balanced Fund.
Thanks Rakesh, Vivek.
I read an excellent article on mutual fund investment. Mutual fund investment is an important tools for most of the investors. this article has given the insights about balanced mutual funds and how to reap out the benefits of balanced mutual funds. I am referring the link for further knowledge : http://www.confidyne.in/balanced-mutual-fund-time-to-invest/