Equity mutual funds have remained one of the most sought-after mutual fund investments by retail investors as witnessed by the steady increase in SIP contribution as it promises of long term growth and superior returns which attract investors to these funds. Investing in equity mutual fund is a lot easier now with monthly investment as low as Rs. 500 and ease of access to online investment in mutual funds. Compared to direct investments in stocks, equity mutual fund schemes are affordable yet diversified models of investing which reduces overall risk by taking exposure to different sectors. With the availability of diverse fund schemes – Diversified, Focused, ELSS, Multi-Cap, Sectoral, Value, Contra, etc. you can choose a scheme that suits your objective, required goals and risk profile. However, most of us stop at wondering which the right fund to invest in is. We have simplified this daunting task for you as we at RankMF have come up with the Top Equity Mutual Funds that are top rated and ranked in their respective categories. Through the article, we will give you a brief introduction on –

  1. Equity Mutual Funds.
  2. How to choose a Mutual fund scheme to invest in?.
  3. How to evaluate Equity Mutual Funds?.
  4. How to invest in Equity Mutual Funds through RankMF?.
  5. Top Equity Mutual Funds on RankMF.

Through RankMF knowledge center, we aim to educate you about the basics of equity mutual funds and all the information and details about mutual funds you will need. Before you begin investing through mutual funds in India, it is essential to read through the basics of equity mutual funds.

A. What is an Equity Mutual Fund?

An equity fund is a category of mutual fund which predominantly invests in equity shares of a company. These funds generate higher returns than debt funds and fixed deposits through long-term capital appreciation. Equity Funds are either Active or Passive.  In an Active Fund, a fund manager tries to outperform the market index or its relevant benchmark by researching companies and sectors to find the best stock to invest in. In a Passive Fund, the fund manager builds a portfolio that replicates a popular market index, say Sensex or Nifty 50. They are further categorized on the basis of their investment style, market cap of the companies, sector/ thematic investing, etc. To know more-click here.

B. Categorization as per SEBI norms

Before you invest in an equity mutual fund, you would like to know how your money is invested as every mutual fund scheme must invest their total fund assets in accordance with SEBI norms. In order to ensure uniformity among similar categories, SEBI has come out with regulations which require equity mutual funds to invest in securities depending on the category of a scheme it comes under. The details of the scheme categories under each of the aforesaid groups along with their characteristics and uniform description are given below:

Sr.

No.

Category of Schemes

 

Scheme Characteristics
1 Multi Cap Fund In a Multi-Cap Fund, minimum investment of 65% of total assets should be in equity & equity related instruments of stocks across multi caps viz. large cap, mid cap and small cap.
2 Large Cap Fund Large Cap Funds require a minimum investment of 80% of total assets in equity & equity related instruments of large cap companies.
3 Large & Mid Cap Fund Under this scheme, 35% of total assets must be invested in equity & equity related instruments of large cap companies and another 35% of the assets in mid cap stocks. Thereby, total 70% must be invested in large cap and midcap stocks.
4 Mid Cap Fund Mid cap funds require minimum investment of 65% of total assets in equity & equity related instruments of mid cap stocks.
5 Small Cap Fund Under Small-cap funds, 65% of total assets must be invested in equity & equity related instruments of small cap stock.
6 Dividend Yield Fund A minimum investment of 65% of total assets has to be made in equity of dividend yielding stocks under this fund.
7 Focused Fund A Focused Fund is an equity scheme focused on investing in a maximum of 30 stocks. A minimum investment of 65% of total assets must be made in equity & equity related instruments of stocks of any cap viz., multi cap, large cap, mid cap, small cap in which the scheme intends to focus.
8 Sectoral/ Thematic Sectoral/ Thematic funds require 80% of total assets to be invested in equity & equity related instruments of stocks of a particular sector/ particular theme in accordance with the fund scheme investing across large, mid or small cap.
9 ELSS A minimum investment of 80% of total assets in equity & equity related instruments must be made in accordance   with Equity Linked Saving Scheme, 2005 notified by Ministry of Finance. It is an open ended equity linked saving scheme with a statutory lock in of 3 years and tax benefit.
10 Contra Fund & Value Fund

 

The scheme follows a contrarian/ value investment strategy and must invest a minimum of 65% of total assets in equity & equity related instruments of stocks across large, mid or small cap.

 

C. Historical Returns under each category

Below you will find annualized returns for various fund categories by CRISIL-AMFI Fund Performance Indices which track the performance of funds that come under that category. The data table below gives us information regarding the annualized returns for different time periods specified.

Index 1 Year (%) 2 Year (%) 3 Year (%) 4 Year (%) 5 Year (%) 7 Year (%) 10 Year (%)
CRISIL – AMFI Equity Fund Performance Index 10.58 18.07 9.14 16.94 17.73 12.55 11.8
CRISIL – AMFI Large Cap Fund Performance Index 8.93 16 7.62 13.82 14.92 10.6 10.6
CRISIL – AMFI Diversified Equity Fund Performance Index 10.93 17.85 8.57 16.34 17.15 11.78 11.25
CRISIL – AMFI Small and Midcap Fund Performance Index 12.74 21.64 12.45 23.17 23.74 17.89 14.78
CRISIL – AMFI ELSS Fund Performance Index 10.94 17.53 8.41 16.89 18.24 12.98 11.95

Source: AMFI

2. How to choose a Mutual fund scheme to invest in?

With so many options to choose from picking a fund scheme to invest in can be taxing. Where do you even start? While a scheme may suit someone might not necessarily suit you. So how do you know which one is the right one for you? To determine the right fund for you, the first step you can take is to identify your purpose and objective for investment. You might want to ascertain how much return you want to make to achieve a certain goal for a set time frame and how much risk you are willing to take. Usually, equity funds are meant for an investor who has an investment horizon of at least 5 years or more. Below you will find certain objectives which you might be able to relate to and invest in a fund scheme aligned with that:

· High Returns

Equity mutual funds are known for generating superior returns over long term in comparison to other asset classes. The best way for you to get inflation beating returns is through equity investing. Allocating certain portion of your portfolio to equities will help you maximize gains.

 

Source: FD rates & Gold price: RBI, Sensex: BSE

In the graph above we have taken returns of Fixed Deposits (rates for 1-3 years), Gold and Sensex for the period 1980-2016. Assume that you’ve invested Rs. 10,000 each in FD, gold, and Sensex 36 years ago. As of 31st Dec, 2016 the value is as follows – FD: Rs.1.84 lakhs, Gold: Rs. 1.94 lakhs and Sensex: Rs. 17.96 lakhs. It can be seen that Fixed Deposits (Debt) has multiplied wealth by 18 times, Gold (Commodities) by 19 times and Sensex (Equity) by 179 times. Thereby from our analysis above we can deduce that equity remains an outperforming asset class for investment over long term to earn higher returns.

· Tax saving

If saving tax is your main objective, you can invest in ELSS Funds (Equity Linked Saving Scheme) where you get the tax exemption on investing under section 80C of Income Tax Act of 1961, with the maximum limit of tax exemption on Rs 150,000 and also an opportunity for wealth creation. ELSS comes with a lock-in period of 3 years which is lower compared to other instruments listed under section 80C of the IT Act. Read more about ELSS here.

· Exposure to a certain Cap (Large, Mid, Small)

Cap funds invest in companies based on the market size of the company. Each cap has its own unique set of return and risk characteristics. On the risk-return spectrum, large-cap funds deliver steady returns with relatively lower risk, compared with mid- and small-cap funds. Small cap funds are considered to be riskier than mid-cap funds although it has the highest growth potential. Based on your risk appetite, return expectations and investment horizon, you can invest in a particular cap fund that fits well in the criteria.

· Diversification

Diversification is a technique of reducing risk by investing in a variety of assets such as equities, gold, real estate, FDs. You allocate capital in different assets which reduces your exposure to any one particular asset/ asset class risk. For instance, if you hold majorly debt securities or real estate in your portfolio, investing in equity mutual fund can diversify your portfolio in an ideal manner. It is a huge risk to put all your eggs in one basket, as you are at risk of heavy losses if that asset class performs poorly. The right portfolio mix can help build an optimal portfolio which can safeguard you from unpredictable losses and boost your returns.

· Exposure to a specific sector

Sectoral funds are meant to give you exposure to a particular sector as these funds invest in shares of companies in a specific industry/sector. For example, banking and finance fund will invest in companies that are in banking/finance companies of a Pharma fund will invest in pharma stocks. The prime reason for investing in sector funds would be if you feel that a particular sector would do well in the future for the next couple of years. Then in that case buying sectoral funds would help you in beating the diversified fund returns. These funds have a high risk-return ratio and are advisable for the well-informed.

· Theme based investing

Thematic funds could have themes ranging from Multi-Sector, International / Multi – Economy like investing in US stocks or Asian stocks; Commodity like agricultural commodities fund; particular style of investing such as consumer trends fund, ethical fund investing, ESG investing etc. You can make an investment in a thematic fund if you see a growth opportunity in a particular theme.

· Risk Appetite and Tolerance

Based on the table below you can determine the category you fall under and decide which fund is right for you.

Riskometer label Principal at Risk Investor Type Risk Profiling
Low Principal at Low Risk Conservative Securities and instruments such as fixed maturity plans, gilt funds and income funds usually come under this classification.
Moderately Low Principal at Moderately Low Risk Moderately Conservative Short to medium term bonds usually come under this category.
Moderate Principal at Moderate Risk Moderate Instruments such as Arbitrage funds, Hybrid debt-oriented funds fall under this category
Moderately High Principal at Moderately High Risk Moderately Aggressive Balanced equity-oriented funds, diversified equity funds are classified under this label
High Principal at High Risk Aggressive Sectoral funds, thematic funds, International funds are a few examples of funds under this label

 

3. How to evaluate Equity Mutual Funds?

With about 2000 mutual fund schemes out there and the dynamic nature of ratings, we provide you with a platform to simplify your process of mutual fund research, analysis and selection. Login to RankMF and browse through our proprietary ratings of top mutual funds in each category. Go through all the pertinent details put together for you for your own perusal. We also guide you as to which funds are ‘Sahi’ for investment. Some key points to look out for while evaluating equity mutual funds are as follows –

· Ratings

Mutual fund ratings are designed to help you to identify the right mutual funds to invest in. The RankMF research methodology takes a variety of factors into consideration and over 20 million data points, to review and evaluate mutual funds, which are reflected in the rankings and ratings given. Apart from that, RankMF not only provides rankings but also gives personalized recommendations on its homepage to give you a more guided experience.

· Quality of Portfolio

The quality of the asset base will help in delivering superior returns to investors. An important factor which is often overlooked, RankMF keeps a check on the securities that a fund manager invests in and that has a direct correlation to the ranking and rating of the fund. The RankMF algorithm has graded most securities invested in by mutual fund in India. Each security is graded based on a variety of factors. For e.g. Equities are graded based on their profitability, balance sheet health, the industry they operate in and size of the opportunity and business, the efficiency of the business and a lot more factors.

· Performance vs. Benchmark

A benchmark is considered as a point of reference to compare the performance of a mutual fund to determine its performance relative to its appropriate benchmark. On RankMF, under each scheme you are given its relevant benchmark and a tool to compare the fund scheme’s performance vis-a-vis its benchmark and also its relative peers. You can track and assess the performance of these funds and look for consistency in performance over time.

· Fund manager competence

The return and risk profile of mutual fund schemes are dependent on the skills and competence of the fund manager. On RankMF you can find details of the fund manager with regards to his qualifications, experience, schemes managed, past performance and evaluate consistency in his performance measured by key ratios such as Information ratio, Sharpe ratio, etc. To know more, click on Top Fund Managers.

· Strength of the Portfolio

The Strength Indicator on RankMF identifies the strength of the fund which could be low, average or good. Various pointers such as Alpha, Beta, Standard deviation, R-squared, Tracking error, Sharpe ratio, etc. are factored in. Like for instance lower volatility is desired hence lower standard deviation means lesser volatility in return. During market downturn, many stocks may go through corrections. Their ability to bounce back when the markets stabilize and go up again is what determines its strength.

 

4. Top Equity Mutual Funds on RankMF

Investments in any asset should be made after considering various factors such as risk appetite, investment goals, time horizon, etc. Following is a list of top equity mutual funds on RankMF:

A. Top 5 Equity Mutual Funds with key information:

 

1.Uti-equity Fund-growth Plan – Growth

Fund Manager: Ajay Tyagi

Fund Strategy: The scheme is to generate long term capital appreciation by investing in equity and equity related securities of companies across the market capitalization spectrum.

RankMF Rank 1
Minimum Investment Amount Rs. 5000
Inception Date Aug 1st , 2005
NAV Rs. 132.50
Type Multi Cap Fund
AUM Rs. 8525.71 Cr
Expense Ratio 2.23%
Exit Load 1% on or before 1 year; Nil after 1 year
Risk Moderately high
Benchmark NIFTY 50 – TRI

S&P BSE 200 – TRI

3 year 12.23%
5 year 15.42%
Inception 11.95%

 

2. Axis Focused 25 Fund – Growth 

Fund Manager: Jinesh Gopani

Fund Strategy: The scheme is to generate long term capital appreciation by investing in a concentrated portfolio of equity & equity related instruments of up to 25 companies.

RankMF Rank 5
Minimum Amount Rs. 5000
Inception Date June 29, 2012
NAV Rs. 25.24
Type Focused Fund
AUM Rs. 6510.79 Cr
Expense Ratio 2.2%
Exit Load Nil upto 10% of Investment; for remaining investments 1% on or before 1 year; Nil after 1 year
Benchmark NIFTY 50 – TRI

S&P BSE 200 – TRI

3 year 14.85%
5 year 16.73%
Inception 15.04%

 

3. Axis Bluechip Fund – Growth

Fund Manager: Shreyash Devalkar

Fund Strategy: The scheme is to generate income and capital appreciation from a portfolio primarily investing in large cap companies.

RankMF Rank 6
Minimum Amount Rs. 5000
Inception Date Jan 04, 2010
NAV Rs. 26.75
Type Large Cap Fund
AUM Rs. 3961.03 Cr
Expense Ratio 2.29%
Exit Load Nil upto 10% of Investment; for remaining investments 1% on or before 1 year; Nil after 1 year
Benchmark NIFTY 50 – TRI

S&P BSE SENSEX – TRI

3 year 13.89%
5 year 15.25%
Inception 11.46%

 

4. Axis Long Term Equity Fund Growth

Fund Manager: Jinesh Gopani

Fund Strategy: The scheme is to generate income and long-term capital appreciation from a diversified portfolio of predominantly equity and equity-related securities.

RankMF Rank 12
Minimum Amount Rs. 500
Inception Date Dec 29, 2009
NAV Rs. 40.79
Type ELSS Fund
AUM Rs. 17089.75 Cr
Expense Ratio 1.88%
Exit Load Nil (Lock-in period of 3 years)
Benchmark NIFTY 50 – TRI

S&P BSE 200 – TRI

3 year 11.18%
5 year 19.30%
Inception 16.65%

 

 5. Invesco India Growth Opportunities Fund – Growth

Fund Manager: Amit Ganatra, Taher Badshah

Fund Strategy: The scheme is to generate capital appreciation from a diversified portfolio of predominantly equity and equity related instruments of large and midcap companies.

RankMF Rank 14
Minimum Amount Rs. 5000
Inception Date Aug 09, 2007
NAV Rs. 31.72
Type Large & Mid Cap Fund
AUM Rs. 1074.65  Cr
Expense Ratio 2.27%
Exit Load 1% on or before 1 year; Nil after 1 year
Benchmark NIFTY 50 – TRI

S&P BSE 250 LargeMidCap 65:35 Index – TRI

3 year 13.96%
5 year 16.57%
Inception 10.68%

 

B. Top Mutual Funds under each category:

Here is a list of best equity schemes under each category:

Scheme Name NAV AUM (Rs. In Cr.) 3 Year Return 5 Year Return
Large Cap:
 Axis Bluechip Fund – Growth 26.75 3961.03 15.58% 14.95%
Uti-mastershare Unit Scheme – Growth Plan 113.97 5576.82 12.39% 13.68%
 Dsp Top 100 Equity Fund – Regular Plan – Growth 187.98 2641.69 11.14% 11.20%
Large & Mid Cap:
 Invesco India Growth Opportunities Fund – Growth 31.56 1074.65 15.36% 15.77%
 Tata Large & Mid Cap Fund Regular Plan – Growth 184.13 1285.98 11.17% 14.19%
Principal Emerging Bluechip Fund Regular Plan Growth 94.86 1997.45 16.98% 21.42%
Multi Cap:
Uti-equity Fund-growth Plan-growth 132.51 8525.71 13.30% 14.84%
Parag Parikh Long Term Equity Fund- Regular Plan Growth 23.95 1530.60 14.88% 17.37%
Idfc Multi Cap Fund -regular Plan-growth 85.94 5199.69 9.87% 15.45%
Mid Cap:
Dsp Midcap Fund – Regular Plan – Growth 49.56 5503.40 15.12% 20.40%
Axis Mid Cap Fund – Growth Plan – Growth 34.04 1779.24 15.76% 20.55%
Bnp Paribas Mid Cap Fund Growth 28.95 709.14 8.94% 17.36%
Small Cap:
Franklin India Smaller Companies Fund-growth 49 6858.71 11.10% 20.64%
ELSS:
Axis Long Term Equity Fund Growth 40.73 17089.75 13.10% 18.46%
Idbi Equity Advantage Fund Regular Plan – Growth 24.40 594.85 9.60% 17.24%
Invesco India Tax Plan – Growth 47.45 696.47 14.66% 17.57%
Sectoral:
 Uti-transportation And Logistic Sector – Growth Plan 91.30 1368.05 5.38% 17.88%
Dsp Natural Resources And New Energy Fund – Regular Plan – Growth 28.64 383.96 19.95% 19.24%
Icici Prudential Technology Fund – Growth 60.31 483.87 14.79% 12.85%
Thematic:
Magnum Global Fund 160.39 3527.54 9.80% 16.81%
Uti-mnc Fund – Growth Plan 188.77 2112.10 11.36% 19.28%
Aditya Birla Sun Life Digital India Fund-growth 52.66 470.76 16.78% 13.64%
Value:
Tata Equity Pe Fund – Growth 125.12 5029.03 17.98% 19.91%
Hdfc Capital Builder Value Fund – Regular Plan – Growth 274.86 4159.02 15.52% 16.62%
Uti Value Opportunities Fund – Growth Plan 56.85 4298.67 11.67% 11.32%

Source: RankMF as on Feb 22, 2019

Notes:

1) All the above funds are open-ended, actively managed equity mutual funds.

2) Only schemes with a corpus of at least Rs 250 crore were taken into consideration.

3) Only those funds which had a buy recommendation on RankMF based on our ranking parameters for evaluating mutual funds are included.

4) For a fund to qualify, the fund scheme had to be in duration for at least 5 years.

With this, we conclude our discussion on the topic of Best Equity Mutual Funds. For more information about investing in mutual funds, stock trading and useful related articles, visit RankMF.com or our investor education center.

 (Note: This content is for information purpose only. Avoid trading and investing based on the information given above. Before investing in stocks or mutual funds, please conduct proper due diligence).

 

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