While selecting mutual funds, one must keep in mind a few factors. One of the most important ones among them is diversification. Diversification is important because, first and foremost, one needs to protect their capital. Mutual funds save us from the hassle of analyzing and picking individual stocks, therefore it is expected that they should provide us with the comfort of risk mitigation through diversification. Let’s look at some of the top mutual funds in India that you should consider to invest for the long term.
1. Kotak Emerging Equity Fund (Direct)
The scheme seeks to generate long-term capital appreciation from a portfolio of equities by investing predominantly in mid-cap companies.
Its largest holding is in capital goods, financial, materials, and chemicals with 19.2%, 13.7%, 10.6%, and 9.6% respectively, and 64% of its investments in mid-caps.
The fund has been around for more than 10 years and has given a return of 24.6% return compared to 22% from its benchmark index. However, it trailed behind its index by 1.2 in the last 5 years’ return.
With a low expense ratio of 0.38%, this fund has a great proven track record with a long-term view of 10 years and above.
Risk – The fund has a high PE of 31.5 and PB of 4.75 due to very high returns from the midcap index, driving the valuations higher.
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2. UTI Nifty 200 Momentum 30 Index Fund (Direct)
As the name suggests, this fund invests in the Nifty 200 index. The philosophy of this fund is to invest in 30 momentum stocks out of Nifty 200 which have either given a breakout or are about to give one.
In other words, these are trending stocks and are showing high price momentum. These funds invest in momentum stocks through something called ‘Smart beta’ investing. Smart beta indexes are based on one or multiple factors like value, quality, volatility, alpha, etc.
This fund has given a whopping 65% return in the last year compared to a 35% return from its benchmark index Nifty 200. Its last 3-year return of 35% has beaten the Nifty 50 and Nifty 200.
Risk- This is a very high-risk fund as it buys high and sells even higher.
3. Mirae Large and Mid Cap Fund
This fund has been a consistent performer over the last 10 years giving a return of 24.5% compared to a 16.2% return from its benchmark index, therefore beating its index by a margin of 8% and its peers by 6%.
Its major constituents are financials- 27.5%, services- 10%, and energy- 8.7%. Its 60% portfolio is in large and 35% in midcap giving it a good balance and a reasonable degree of flexibility to rotate between the two.
Keeping in mind that large-cap hasn’t given the kind of bull run that mid and small-cap indexes have given, this could be a great SIP option for 2024.
4. Quant Infrastructure Fund Direct Plan
This is a fund that has beaten its peers in the last 3 years, 5 years, and 10 years period. Its last 3 yrs’ trailing returns have been 44.8% and 5 years return 33.5% beating its index by a comfortable 10%.
It ranks no.1 in its category with an alpha return of 13.7% extra return over its benchmark index. A SIP of Rs. 10,000 a month for the last 12 months would have given a 78% return.
It has energy, metals & mining, and construction as 64% of its constituents. Its 55% portfolio is in large cap and 30% in midcap with a high concentration of 55% invested in its top 10 stocks.
An outperformer in its categories, this fund can be considered for 2024 especially keeping in mind that there is a major allocation of the government budget in the sectors it invests in.
Risk- Due to extraordinary returns in the last 3 years, a correction in the index might be well worth a wait.
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5. Nippon Small Cap Fund
Small-cap funds have outperformed the large and the mid-cap in the last 2 decades and this fund has been a consistent performer in that category for the longest time.
It has delivered a return of 28.65% in the last 10 years beating the smallcap index by a huge 9% and its peers by 6%. Its last 3 and 5-year returns are over 30%.
These high returns could be because of the phenomenal run-up of 56% that we have witnessed in the small-cap index in the last year. It delivers a 9.79% alpha over its index compared to its which delivers 5.08% and ranks No.2 in its category. The majority of its portfolio is in capital goods and services.
Risk- One needs to be mindful that it has a portfolio PE of 29.44 and a book value of 4.10 which is higher than the Nifty 50 PE and PB, therefore a correction in the smallcap index might be well worth a wait, before entering into this fund.
Download the Investeezy app to check if your overall portfolio is heavy on certain segments like small cap, mid cap, or sectors.
6. JM Flexicap Fund
Flexicap is different from other funds in terms of the freedom the fund management team gets to invest in companies of different sizes, depending on where it expects the maximum gains. It is not restricted to large, mid, or small cap, therefore providing more versatility to fund managers.
This fund has given a massive 59% return in the last year, 24% in 5 years, and 21% in 10 years, outperforming its benchmark index BSE 500. Its investments in PSU banks and IT have paid off well in the last 1 year and it still has a portfolio PE of 18.8 and a PB of 2.88 which is lower than Nifty 50.
This fund has an evenly spread weightage among all caps, due to the flexibility in investing. It is an excellent fund for 3-5 years of investing horizon.
Before you invest in a new fund, log onto the Investeezy app and check the overlap in stocks, sectors, and segments between your existing portfolio and selected funds.
7. Quant ELSS Tax Saver
ELSS is an excellent option for saving tax under 80C of the Income Tax Act, especially when compared to other tax-saving instruments like PPF or LIC. Not only does it offer the same benefits as claiming deductions like 1.5 lacs, but also gives much higher post-tax returns.
This fund has given a 35.75% return compared to its benchmark index S&P BSE 500 return of 18.85%. It ranks No.1 in its category with a 12.2% alpha return over its index compared to the 2.09% delivered by its peers.
Almost 83% of its portfolio is invested in very large and large caps with only 16% in midcap stocks. Its portfolio consists of mainly energy, finance, metal, and mining, with a high concentration on energy, and Reliance and Adani are its top picks.
Risk- 90% of the investment is concentrated in 15 stocks, therefore, making it vulnerable to higher beta than its peers.
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8. UTI Nifty 50 Index Fund
Among all indices, Nifty 50 is the most sought-after index for passive investing. An index funds portfolio is constructed to match or track the components of a financial market index. These funds follow their benchmark index regardless of the state of the markets.
This fund, like any other index fund, tracks the nifty 50 and has given a return of 14.3% over the last 10 years and 16.29% over the last 5 years.
An index mutual fund provides broad market exposure, low operating expenses, and low portfolio turnover. So the very long-term investing index makes a lot of sense as it saves the investors from picking up the sector-specific funds.
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9. HNGSNGBEES
After 3 decades of a miracle growth story, the Chinese economy is struggling to grow even by 5% this year. Its property bubble has finally burst due to high levels of debt and high unsold inventory in the property market.
However, the Chinese government may not sit quietly for long as it is losing FDI to other countries. For the first time in the last 25 years, it registered a negative FDI, an outflow of funds. To achieve a decent growth level of around 5%, the Chinese government is likely to keep providing various stimuli and keep the interest rates low, which are presently at 3.45%, to boost the economy.
Hangseng, Hong Kong indices (a proxy for the Chinese market) which is down 21% in the last 12 months and 42% in the last 5 years, could be a good bet for those who would want to diversify and venture out of the Indian market. Indians can buy Hngsngbees ETF and do an SIP for the same.
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10. Motilal Oswal Microcap
A relatively new category, this fund is for those who believe in the microcap story. The investment strategy would again be passive which would track its benchmark index, that is Nifty Microcap 250.
This fund has a small AUM of 726 cr as on 31st Jan 24, but the category is becoming popular among investors. With a low expense ratio of 0.38%, it has a good tracking error of 0.11% only.
The fund has invested 89% in small-cap and 11% in midcap; it has delivered a return of 20.6% in just 6 months, beating its benchmark index by 2.5%.
Risk- Although it has invested in 251 stocks which spreads its risk evenly, investors still have to be mindful that it is a new fund, and, therefore historical data is not available on its performance and risk parameters.
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Conclusion
All Investments in the stock markets should be strictly done with a long-term view and it is also important to keep track of your portfolio from time to time. It’s a good practice to rotate mutual funds that are delivering lower returns from their benchmark indices.
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