It is a moment of reckoning for mutual fund investors. After two years of spectacular returns, the 12-months rolling returns for Indian equity investors are about to turn negative. The benchmark BSE Sensex index closed Wednesday at 52,541.4 up just 0.4 percent from 52,344 a year ago.
This means that most diversified equity mutual funds are about to turn negative on a 12-month basis. This is bad news for investors who entrust their money to mutual funds in the hope of outperforming the broader market and other asset classes year after year. It’s fair too.
What’s the point of taking a risk with an equity mutual fund and paying an expense ratio as high as 3 percent of the fund’s annual asset under management (AUM) if the returns are not significantly higher than market returns?
Here are the top 10 mutual funds that continue to defy the broader market and have consistently out-performed in the last three years. We have selected equity funds across all categories. So these top funds include classic multi-cap funds, sectoral funds, thematic funds, and mid-cap and large-cap funds among others.
The funds have been selected based on the consistency of the returns provided by them in the last three years rather than their performance in the last year or last six months. But all these funds have one thing in common — they have beaten the benchmark BSE Sensex handsomely in the last 12 months.
All data has been sourced from ICRA Analytics Mutual Fund Database.
1. Quant Infrastructure Fund comes at the top of the charts. The fund with Assets under management (AUM) of Rs 573.4 crore has consistently outperformed the broader market with 16.15 percent returns in the last 12 months and CAGR returns of 30.46 percent per annum in the last 3 years. Its fund manager has an aggressive investment style and doesn’t shy away from taking risks like investing in high beta stocks such as Adani Enterprises and Vedanta. But it has paid off so far and it may work in future as well.
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2. ICICI Prudential India Opportunity Fund is next on our list. The fund with an AUM of nearly Rs 4700 crore has given 11.8 percent returns in the last 12 months and 17 percent CAGR returns in the last 3 years. It’s a large cap-oriented fund with a low-risk investment strategy and it shows in its portfolio.
3. ICICI Prudential Infrastructure Fund is next on the list with 15.17 percent returns in the last 12 months and 3-year CAGR returns of 15.11 percent. The fund with an AUM of Rs 1893 crore is also a large cap-oriented fund. The top three stocks in its portfolio are NTPC, Triparty Repo and Larsen & Toubro.
4. Kotak Infrastructure & Economic Reform Fund with an AUM of Rs 544 crore is next on our list. The fund is up 13.11 percent in the last 12 months and reported a 14.34 percent CAGR in the last 3 years. It’s a Flexi-cap with a tilt towards mid-cap stocks currently. Auto component maker Schaeffler India is its top investment right now followed by Reliance Industries and Bharti Airtel. It’s a low-risk fund that is a good bet in the current environment.
5. Templeton India Equity Income Fund is next on our list with 11.7 percent returns in the last 12 months and 20.35 CAGR returns in the last 3 years. It’s a large-cap-oriented dividend yield fund with an AUM of Rs 1257 crore. The fund’s top three investments are Power Grid Corporation, NTPC and Infosys showing the fund manager’s cautious style of investment.
6. ICICI Small Cap Fund is next on our list with 10.92 percent returns in the last 12 months and CAGR returns of 22.9 percent in the last three years. It’s a high-risk fund with an AUM of Rs 3610 crore. The fund’s top three investments are Inox Leisure, KEI Industries and Mahindra Lifespace Developers. However, nearly 10 percent of its AUM is invested in Triparty Repo which balances out the risk of its exposure to small-caps. This makes it a good bet in the current market.
7. HDFC Focussed 30 Fund has given 13.74 percent returns in the last 12 months and 12.18 percent CAGR returns in the last three years. It’s a classic large-cap fund with an AUM of Rs 1440 crore. The fund is big on banks with ICICI Bank, HDFC Bank and State Bank of India – the country’s top three banks in the country that have worked for the fund in the current economic environment.
8. Canara Robeco Infrastructure Fund is coming next with 13.06 percent returns in the last 12 months and 15.27 percent CAGR returns in the last three years. It’s a Flexi-cap fund with an AUM of Rs 202 crore. Its top three investments are L&T, Bharat Electronics and ICICI Bank.
9. ICICI Bharat Consumption Fund has given 11.2 percent returns in the last 12 months and 27.45 percent CAGR returns in the last three years. It’s a large-cap fund with Bharti Airtel, TVS Motors and M&M being its top three investments.
10. SBI Consumption Opportunities Fund is last on our list with 13.4 percent returns in the last 12 months and 3-year CAGR returns of 16.3 percent. It’s a multi-cap fund with an AUM of Rs 938 crore. It’s a low-risk fund with ITC, Bharti Airtel and Page Industries being its top three investments.
(Karan Deo Sharma is a Mumbai-based finance and equity markets specialist).
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