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Mehraan Dixit - 15 July 2019


Mutual funds as an investment avenue have been available to investors for decades. They offer various benefits like diversification, professional management, liquidity and tax benefits to investors which make them an ideal investment. Mutual funds help investors to diversify across asset classes like equity, debt, gold and money market. They can be used to meet long term as well as short term goals by investing in various categories of funds available. Mutual funds are great investment products and investors should look to allocate their savings into Mutual Funds.

The mutual fund industry has seen enormous growth over the last two decades, however, despite the record inflows, their penetration in India remains low compared to other geographies. It is currently just 11 per cent of GDP which indicates that there is still huge untapped potential.  While the penetration of Mutual funds is reasonable in the metros and several larger cities. Mutual funds are still relatively unknown in smaller towns and cities. However, this is now changing, with the market regulator taking efforts and running various campaigns to help increase the penetration of such products among investors.

Outlook Money in association with mutual fund research firm Morningstar, has come out with the Top 10 funds of various categories across Equity, Fixed Income and Hybrid allocation. The analysis is designed to help investors identify the most exceptional funds within each category.

When it comes to picking mutual funds, choosing the right mutual fund from a universe of more than 2,000 schemes is not easy. We have considered various parameters in our analysis and have compressed the universe of funds to help investors to choose the best and the most consistent funds within each category. The factors considered to assess the funds are based on historic performance and does not in any way indicate the future potential of a fund.


We Have Ranked Mutual Funds Under The Following Broad Categories:


  1. Large Cap
  2. Large and Mid Cap
  3. Midcap
  4. Small Cap
  5. Multicap



  1. Low Duration
  2. Short Duration
  3. Medium Duration
  4. Medium and Long Duration
  5. Dynamic Bond
  6. Corporate Bond
  7. Credit Risk
  8. Government Bond


Hybrid Funds

  1. Aggressive Allocation
  2. Conservative Allocation



The rankings are restricted to open-ended funds who declare daily NAVs and disclose 100 per cent portfolios. We have applied AUM filter which varies depending on the category and hence ignored the smaller funds. Also, for a fund to qualify, the fund manager needs a minimum two-year experience as lead manager of the fund.

The methodology used for ranking is not purely based on returns, but even portfolio-based attributes are considered for evaluation. We have considered key parameters such as Morningstar risk adjusted returns (MRAR), downside capture ratio, upside capture ratio, annual report net expense ratio, alpha, portfolio diversity, sector diversity, credit score, standard deviation, preservation of capital and average effective maturity.

Parameters that are relevant to funds from a particular category are identified. Every fund gets compared to the best fund within a parameter (Re-Base) to arrive at parameter level score for each fund. Percentage weights are assigned to these parameters. These scores are multiplied by the percentage weight assigned to that parameter to get the weighted scores. The weighted scores are then summed up to arrive at the final score of the fund. Funds are then arranged in the descending order on the basis of their final score to get the rank of the top 10 funds.

The MRAR used in this analysis is adjusted for risk by calculating a risk penalty for each investment’s return based on “expected utility theory.” It assumes that investors are more concerned about potential losses than unexpected gains and are therefore willing to trade some fraction of their expected return in exchange for a greater certainty of return. Thus, the loss of utility that MRAR imposes on negative returns is higher than the gain in utility it assigns to positive returns. Additionally, greater the variation in the fund’s return, larger is the penalty. If two funds have the exact same return, the one with more variation in its return is given the larger risk penalty.

Funds with less than two years of performance history will not be rated. For funds with three-year records, the MRAR score will be weighted at 40 per cent for the one year performance and 60 per cent for the three year performance. Similarly, for the five year the MRAR score will be weighted at 50 per cent for the five-year, 30 per cent for the three-year, and 20 per cent for the one-year.

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