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The best & worst mutual funds
Value Research
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June 23, 2006

When looking at a mutual fund, it is not sufficient to monitor the results only during good times when the stock market is going great guns. Besides the fund giving great returns, it is as important to see how it fares when the market collapses. 

The month of May was tough for equity investors. But some mutual fund investors were not that badly hit. A majority of the diversified equity funds were able to better the market.

Only 39 funds did worse than the loss of 13.65% posted by the Sensex during that month. An overwhelming majority of 127 funds lost less than the Sensex during that month.

The fund that lost the least was Principal Global Opportunities, but that is because it invests in stocks abroad which lost much less than the Indian stock market.

The two best performing funds, Sundaram Select Midcap and Quantum Long Term Equity, had high cash holdings that helped them stay afloat.

DWS Alpha Equity and Taurus Discovery Stock were the worst performing funds.

DWS Alpha Equity is going through the most eventful time of its life. After being a laggard for a long time, the fund suddenly turned the tables to deliver impressive returns since the last quarter of 2005. But that did not last long and the fund was the worst hit in May.

Taurus Discovery Stock has a tendency to race ahead in good times and fall harder in bad times.

Here we look at the winners and the losers of May 2006 by looking at their one-month returns.

Diversified equity funds

The Best (%)

Average returns of funds in this category

-12.39

Sundaram Select Midcap

-3.74

Quantum Long Term Equity

-3.77

DBS Chola Opportunities

-6.94

The Worst (%)

Average returns of funds in this category

-12.39

DWS Alpha Equity

-18.08

Taurus Discovery Stock

-17.38

LICMF Equity

-17.25

Tax-planning funds

The Best (%)

Average returns of funds in this category

-12.95

HDFC [Get Quote] LT Advantage

-10.28

DBS Chola Taxsaver

-10.42

Birla Sun Life Tax Relief '96

-10.67

The Worst (%)

Average returns of funds in this category

-12.95

LICMF Tax Plan

-16.32

ABN AMRO Tax Advantage

-15.25

Tata Tax Saving

-15.03

So when you make your fund selection, see how badly they fall in tough times and how high they soar in good times. If they beat teh Sensex in both instances, they are a good bet. What this means is that when the Sensex rises, do their returns rise by a great percentage? And, when the Sensex dips, do their returns fall by a lesser percentage? If yes, then they are said to beat the Sensex.

But, also look and see how they have fared against their own benchmark. Each fund has a benchmark against which they monitor their performance against. And, of course, how they have performed in comparison with their peers in the same category.

Value Research

 

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