A look at two mutual fund schemes that have been rated “number one” in India

Updated: Tuesday, September 9, 2014, 8:34 [IST]

Axis Long Term Equity Fund (G) remains the number one ranked fund in India as ranked by Crisil, along with Reliance Tax Saver. Crisil Ratings are considered very reliable and are based on the global best practices.

Here are why these funds are highly rated?

One of the important parameters that Crisil Ratings uses while rating funds is the superior returns score or SRS. The three-year period of evaluation is divided into four overlapping periods - the latest 36, 27, 18 and nine months. Each period has a progressive weight starting from the longest period: 32.5 per cent, 27.5 per cent , 22.5 per cent and 17.5 per cent. SRS is not the only criteria for rating, but, one of the important ones.

Stupendous returns in the last 3 years

Now, look at the returns of Axis Long Term Equity Fund. In the last six months the fund has given returns of 42.75 per cent; while the one years returns have been 80.5 per cent and the 3 years returns have been a whopping 110.9 per cent.

The returns from Reliance Tax Saver has been breathtaking. In the last six months the fund has given returns of 106.9 per cent, while in the last one year it has given returns of 114.7 per cent and the last three years it has given returns of 164.7 per cent.

Among the other parameters that CRISIL considers while rating funds is also asset quality, liquidity analysis and portfolio concentration analysis.

Let's consider the portfolio which has been used in the rating

Axis Long Term Equity Fund (G) has a solid portfolio comprising the likes of HDFC Bank, Kotak Mahindra Bank, Larsen and Toubro, Tata Consultancy Services, HDFC, ICICI Bank etc.

On the other hand the Reliance Tax Saver has a portfolio comprising TVS Motors, Titan, Wipro and ACC amongst others. Now, going by the portfolio and the returns criteria, Crisil has rated these funds very highly.

Conclusion

Will these funds gain, going forward is difficult to say. Getting similar kind of returns as in the past, maybe almost an impossible task. For those kind of returns to materialize the Sensex will have to keep making successive highs. So, if you want to invest in the Axis Long Term Equity Fund and the Reliance Tax Saver, you would have to invest at very high NAVs currently. Should you want to invest, do not expect 50 and 60 per cent returns as in the past.

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