Mutual Funds

Our study covers a period of five years which have been excellent for Indian investors and for the fund industry. The number of fund houses operating in India has gone up to 41 (from 37) in the past three years. However, for this study, we have considered fund houses with equity assets of at least Rs1,000 crore that have been operational in the Indian market for more than five years. This left us with only 19 fund houses to rank. The ranking was based on four factors.

The first factor is the average performance of equity growth funds which have been in existence for more than five years. This gave us 146 equity growth schemes of 19 fund houses in three categories—diversified, sector and index funds. We calculated the average returns provided by them during the past five years and annualised them. We then took the average of such returns provided by the various schemes of each fund house to arrive at the average return for each fund house. This yielded the performance rank.

Second, we believe that returns are just one part of the story and equity investors must be concerned about losses as well. This is captured by an average of the Sortino ratio for schemes offered by each fund house, which gave us the measure of the downside risk associated with each fund house. This was aggregated and averaged for each fund house and was ranked again. The Sortino ratio allows investors to better assess the risk. It is a variation of the Sharpe ratio which captures all volatility. Sortino separates downside volatility from volatility in general.

Third, we ranked fund houses by the number of NFOs offered by them when the going was good (periods of rising markets). We have provided negative weights for NFOs—the more the NFOs, the lower is the rank.  

The fourth factor that we considered was the size of assets managed, as of December 2010. The larger the size, the better; to some extent, this reflected the acceptability of funds among distributors and investors.  We weighted each of these four parameters and arrived at a composite rank based on them. This gave us our final list of best fund houses. We have changed the ranking values this time. We have ranked the schemes on a scale of 1-19, instead of ranking them on a scale of 1-100. This has yielded more accurate relative ranks.


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Indian stocks to see sideways opening: Thursday Market Preview

The recent hike in fuel prices, along with the RBI’s tightening measures, has led to concerns about a slowdown across all sectors

The local bourses are likely to see a listless opening as investor sentiment is being weighed down by higher inflation, which is pushing manufacturing costs higher. The government will release the weekly food inflation numbers today, which will give some direction to the market later in the day.

On the global front, markets in the US closed higher overnight, snapping their three-day losing streak on assertions from the Federal Reserve that it would continue with its easy monetary policy for some more time. The ones in Asia were mostly in the positive in early trade as gains in commodities gave signals that the economic recovery is still on. The SGX Nifty was just one point higher than its previous close of 5,427.

The market opened with small gains on Wednesday taking cues from the Asian bourses which were up in morning trade. The Sensex opened 40 points higher at 18,177 and the Nifty added nine points to its previous close to resume trade at 5,448. The indices rose to their intra-day highs in initial trade, with the Sensex at 18,218 and the Nifty at 5,461. The market could not retain the gains and hovered near the neutral line in the absence of any triggers. A bout of selling in frontline stocks around noon pushed the indices lower.

The oil & gas sector was the top loser, following reports of a directive from the oil ministry asking Reliance Industries to drill two wells in the KG-D6 block by next month and another nine by the end of the fiscal, to raise gas output. Higher crude prices also weighed on the sector.

The market touched the day's low in noon trade, with the Sensex losing 116 points to 18,021 and the Nifty dropping 38 points to 5,401. Recovery attempts in the post-noon session were shot down by institutional sellers, which ensured that the indices stayed range-bound in the negative. The market restricted its losses, but still ended in the red for the third straight day. The Sensex closed 51 points down at 18,086 and the Nifty shed 18 points to settle at 5,421.

Yesterday the Nifty fell below its first support of 5,450. The fall is acquiring strength now and the next support to watch is 5,340.

The US markets finished higher on Wednesday as the minutes of the Federal Reserve meeting revealed that it would continue with its easy monetary policy for some more time. Higher commodity prices supported energy stocks as Chevron gained 2.4% and Exxon Mobil rose 1.7%. Dell, which announced its first quarter numbers late Tuesday, jumped 5.4%.

Oil prices rebounded after an unexpected fall in crude supplies.  US light, sweet crude gained 3.29% to settle at $100.10 a barrel, while in London, Brent crude rose 2.1% to close at $112.30.

The Dow surged 80.60 points (0.65%) to 12,560.18. The S&P 500 added 11.70 points (0.88%) to 1,340.68 and the Nasdaq gained 31.79 points (1.14%) to 2,815.

Markets in Asia were mostly in the green in early trade on Thursday, supported by gains in commodities. The gains came even as Japan’s GDP growth declined 3.7% in the March quarter following the devastating earthquake and ensuing tsunami. The economy fell a revised 3% in the previous quarter, sending the nation to its third recession, defined by economists as two consecutive quarters of contraction, in a decade.

The Shanghai Composite gained 0.27%, the Hang Seng surged 0.97%, the Jakarta Composite rose 0.40%, the KLSE Composite advanced 0.19%, the Straits Times climbed 1.03% and the Taiwan Weighted was up 0.82%. On the other hand, the Nikkei 225 fell by 0.11% and the Seoul Composite declined 0.40% in early trade.

Back home, the Reserve Bank of India (RBI) on Wednesday tightened the prudential norms for banks and raised provisioning requirement for bad loans by up to 10%, a development that would impact bottomlines of banks.

Advances classified as sub-standard will attract a provision of 15% against the existing 10%, RBI said in a notification. An asset would be classified as sub-standard asset, if it remains non-performing for a period of 12 months.


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