Crisil rates mutual funds on various parameters, which we have highlighted below. Based on these parameters, which we have highlighted from Crisil, we have chosen 7- mutual fund schemes, where the rating agency has a 5-star rating and suitable for SIP investment. These are across categories.
How Crisil ranks Equity Mutual Funds?
Crisil ranks these mutual funds based on various parameters.
1) Mean return and volatility
Mean return and volatility are considered as separate parameters across all categories. Mean return is the average of daily returns based on the scheme's NAV for the period under analysis and volatility is the standard deviation of these returns.
2) Exposure to sensitive sectors
In case of debt schemes, industry concentration is analysed for exposure to sensitive sectors which are arrived based on Industry Risk Score (IRS) for various sectors. Crisil's assessment of IRS quantifies the credit risk associated with an industry on a uniform scale to ensure comparability across industries.
It measures the ease with which a portfolio can be liquidated. The lower the score, the better. In case of equities, it measures the number of days to liquidate the portfolio. Liquidity is calculated by taking the average portfolio liquidity score of the past three months
4) Asset quality
Asset quality measures the probability of default by the issuer of a debt security to honour the debt obligation in time.
5) Tracking error This is used only for index schemes. The tracking error is an estimation of the variability in a scheme's performance vis-à-vis the index that it tracks. The lower the tracking error, the better.
6. Count of Negative Returns The count of negative returns is used as parameter in arbitrage funds to capture downside risk of the funds
List of 5-star rated mutual funds across categories to invest in
|Name of fund||Type of fund||3-year returns, annualized|
|Mirae Asset Emerging Bluechip Fund||Large and midcap||22.36%|
|UTI Core Equity Fund||Large and Midcap||14.27%|
|Canara Robeco Bluechip Equity Fund||Largecap||17.14%|
|IDBI India Top 100 Equity Fund||Largecap||14.53%|
|Franklin India Bluechip Fund||Largecap||12.27%|
|PGIM India Flexi Cap Fund||Flexicap||23.47%|
|UTI Flexi Cap Fund||Flexicap||18.82%|
Our take on SIPs
The Sensex at the moment is at 58,000 points and according to reports, the Sensex is trading at 18% premium to long term averages. Against this backdrop it is best to invest through Systematic Investment Plans. We suggest that your SIP amount needs to be small, given where the markets are. In case the markets fall, you can aggressively increase your Systematic Investment Plans amount.
For the time being we suggest that investor invest only small amounts, so risks are hedged to an extent.
The mutual funds mentioned in this story are taken from the ratings of CRISIL. Please do consult a professional advisor before you invest in mutual funds. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and authors do not accept culpability for losses and/or damages arising based on information in the article. Caution needs to be exercised as mutual funds are subject to risks associated with the stock markets.