India's Best Mutual Funds

India's Best Mutual Funds

The Business Today-Value Research Best Mutual Fund Study profiles the funds and managers who came out on top in an uncertain environment.Full coverage: India's Best Mutual Funds

The financial meltdown of 2008 caught many investors, who had bought mutual fund schemes in the hope of high returns, on the wrong foot. But since then, mutual fund investors have turned cautious. In the year through March 2013, the Bombay Stock Exchange's benchmark Sensex gained eight per cent. In the normal course, that should have led to an increase in assets under management (AUM) of mutual funds that invest in equities. But the AUM of equity mutual funds fell five per cent during the year as investors booked profits. This brought down their share in total industry assets to a tad above 21 per cent from almost 27 per cent.

Still, a handful of funds and fund managers have defied the odds. The Business Today-Value Research Best Mutual Fund Study 2012 celebrates these successes. As you will read in the following pages, the managers who topped this year have been conservative and believe in value investing.

Overall, the mutual fund industry's assets grew by a respectable 19 per cent in 2012/13. How did that happen? It is because investors are moving their money into safer schemes that invest mostly in fixed-income instruments such as corporate bonds and government securities. What's in store in the year ahead? For the fund managers who want to lure investors into equity schemes, the road is full of obstacles.

They can't take comfort from history either - not a single equity fund in the past 10 years has beaten the Sensex or the National Stock Exchange's Nifty index on a month-on-month basis.

However, Dhirendra Kumar, CEO of mutual fund tracker Value Research, Business Today's partner in the survey, is optimistic. "Despite all the gloom and doom, there are many underlying positives in the Indian economy and businesses," he says. The Securities and Exchange Board of India has also come out with rules that will benefit the industry. Last October, the capital-markets regulator ordered fund houses to discontinue multiple plans for a single scheme to avoid confusion among investors. It has also asked fund houses to introduce schemes that investors can buy without going to a distributor or broker.

Last year, Business Today and Value Research reworked their methodology of arriving at the Best Mutual Funds rankings to capture better the performance of funds in this changing environment and keep pace with rising investor awareness. Our ranking classifies funds based on investors' appetite for risk, rather than by mere AUM. This takes into account two key points.

One, returns matter more than the amount of money funds handle. And two, since the categories are tailored to risk appetite, there is a better chance of identifying a fund that matches with one's investment philosophy. Sounds interesting? To learn more about the best funds and how they came out on top.