The saying ‘the early bird catches the worm’ holds true for an SIP, as you can benefit greatly from starting early. An important aspect of an SIP is the fact that maintaining it is hassle-free; your money will be auto debited from your bank account each month and will also be invested into a mutual fund scheme of your choice. When you go for an SIP for your investing needs, there is no need to time the market. There is also a disciplined approach to investments. What’s more, you can take advantage of two powerful investment strategies: Power of Compounding and Rupee Cost Averaging.
The year 2022 began with major equity indices showing sharp consolidation from their lifetime highs on the back of the fast-spreading Omicron variant of COVID-19, followed by the war in Ukraine. The economic uncertainties and inflationary pressures caused by these two factors, along with fears of global recession, caused foreign investors to shy away from investing in Indian equity markets, thus leading to sharp losses for the investors.
However, the tables turned towards the second half of the calendar year as the Indian economy showed resilience compared to global peers, despite facing high inflation. Consequently, the equity market witnessed a sharp rise and once again tested the previous highs. Overall, on a YTD basis, the Nifty 50 has risen by 5.5% (as of November 18, 2022), while the Nifty 500 index rose by 3.7% during the same period, after having risen 24.1% and 30.2%, respectively in the previous calendar year.
we identify the best mutual fund schemes using our proprietary SMART Score Matrix. We select mutual funds based on 5 variable tests, viz. Systems and Process, Market cycle performance, Asset management style, Risk-reward ratios and Performance Track Record.
| Category | Best Equity Mutual Funds | Absolute (%) | CAGR (%) | |
|---|---|---|---|---|
| 1-Year | 3-Years | 5-Years | ||
| Large Cap Fund | Canara Robeco Blue chip Fund | 1.17 | 14.10 | 13.24 |
| Large & Mid Cap Fund | Kotak Equity Opportunities Fund | 8.10 | 16.12 | 12.76 |
| Mid Cap Fund | PGIM India Midcap Opportunities Fund | 2.04 | 29.35 | 16.98 |
| Small Cap Fund | SBI Small Cap Fund | 9.53 | 24.98 | 13.51 |
| Value Fund | ICICI Pru Value Discovery Fund | 10.49 | 25.91 | 14.11 |
| ELSS | kotak Tax Saver Fund | 6.09 | 14.10 | 12.65 |
Returns as of Feb 19, 2022. Regular Plan – Growth Option considered
As per the SEBI categorisation, Large-cap Funds invest a minimum of 80% of their corpus in equity (stocks) and equity-related instruments of large-cap companies, defined as the top 100 companies in terms of market capitalisation. The advantage of investing in large-cap companies is that they are well-established, with reliable brand equity, competitive advantage, strong balance sheet, and economic moat.
Due to their huge cash reserves and high product demand, large-cap companies are able to manage economic downturns much better than mid and small-cap companies. For this very reason, Large-cap Funds should ideally form a predominant part of every investor’s portfolio. One of the best large-cap mutual funds to invest in 2023 is Canara Robeco Bluechip Equity Fund.
Launched over a decade back in August 2010, Canara Robeco Bluechip Equity Fund has shown a complete turnaround performance in the last few years and registered an extraordinary phase to make it to the list of category outperformers. The fund managers’ strategy of sticking to index heavyweights that have been driving the index over the last few years has turned in its favour and paid off the investors with superior returns.
The returns generated by Canara Robeco Bluechip Equity Fund over the last 3-year, 5-year, and 7-year periods are far better than the category average and it has also managed to generate alpha over the benchmark index. This outperformance has come at a far reasonable risk when compared to the benchmark and category average, which highlights its potential of generating superior risk-adjusted returns even in stressful condition
The SEBI has defined Large & Midcap mutual funds as equity-oriented mutual funds that are mandated to invest a minimum of 35% of their corpus in equity and equity-related instruments of large-cap and mid-cap companies listed as the top 250 companies in terms of market capitalisation. Large-cap and mid-cap mutual funds offer investors the best of both worlds, i.e., stability from large-cap stocks and high growth from mid-cap stocks.
One of the best Large & Mid-cap Funds to invest in 2023 is Kotak Equity Opportunities Fund. The scheme is primarily an opportunities-style fund that looks for investment opportunities across various sectors based on the performance and growth potential of companies within the sectors. Kotak Equity Opportunities Fund holds a well-diversified portfolio of stocks spread across market caps by utilising the bottom-up investment strategy.
Kotak Equity Opportunities Fund has a track record of outperforming the benchmark and the category average over longer time periods. Over the long-term period of 5-year and 7-year, KEOF has outpaced many of its peers while its performance has been reasonable compared to the benchmark.
While Kotak Equity opportunities Fund remains heavyweight on cyclicals to ride the market boom and rallies, it also makes well use of defensives during extreme market conditions. This helps the fund perform well across market phases and reward investors over the complete market cycle.
Mid-cap mutual funds have the mandate to invest a minimum of 65% of their assets in equity and equity-related instruments of mid-cap companies, ranked from 101st to 250th in terms of market capitalisation.
Since these stocks belong to relatively smaller/niche companies, they are less resilient during market downturns. However, they have the potential to generate superior returns in a bull market phase as the stocks of the underlying companies are yet to enter their growth spurt. This is why we would recommend investing in these only if you have a high risk appetite and an investment horizon of at least 5-7 years. One of the best mid-cap funds to invest in 2023 is PGIM India Midcap Opportunities Fund.
PGIM India Midcap Opportunities Fund is an actively managed small-sized scheme in the Mid-cap Fund category and follows aggressive investment strategies. Despite being small in size, the fund has registered extraordinary performance and handsomely rewarded its investors in the last couple of years. It is now a top-performing midcap fund with superior returns across time frames.
PGIM India Midcap Opportunities Fund constantly looks for opportunities across stocks and sectors and is also quick in its approach to shift allocation between market caps depending on the market conditions, which has resulted in significant alpha for its investors.
Compared to the other categories, this is by far the riskiest one on our list of best equity mutual funds to invest in 2023. Small-cap Funds are equity-oriented mutual funds mandated to invest at least 65% of their assets in equity and equity-related instruments of small-cap companies. Small-caps are defined as companies ranking beyond 250 in terms of full market capitalisation.
Though Small-caps have high return potential, there are various risks associated with them. At times, if there is a constraint on resources, they may face risk to survival in case of economic downturn. These factors make Small Cap Funds suitable only for investors with very high risk appetite and an investment horizon of at least 7-10 years. One of the best mid-cap funds to invest in 2023 is SBI Small Cap Fund.
Launched in September 2009, SBI Small Cap Fund is the second-largest scheme in the Small-cap fund category. The fund has well established itself in the Small-cap Fund category due to its superior long-term track record, wherein it stands among the top quartile performers. Over the longer time period of 5 years and 7 years, the fund outpaced its benchmark by a noticeable margin of around 8 percentage points.
SBI Small Cap Fund is one of the well-managed schemes in the small-cap fund category that has built a solid track record for itself and has rewarded its investors well since its inception. It has a proven track record of timely identifying fundamentally sound stocks in the small-cap space that have turned into multi-baggers and have helped the fund regain its spot among top category performers.
Value investing is a time-tested strategy that involves identifying/finding stocks that are trading below their intrinsic value.
A Value Fund is mandated to invest a minimum of 65% of its assets in value stocks across market capitalisation. While value funds tend to underperform during momentum-based market rallies led by growth stocks, time and again, it has been proven that value stocks are the best bet during market downturns. But remember, patience and a long-term investment horizon are necessary when investing in value funds.
One of the best Value Funds to invest in 2023 is ICICI Pru Value Discovery Fund. Launched in August 2004, ICICI Prudential Value Discovery Fund is a true-to-style value-oriented scheme that looks for undervalued stocks having the potential to deliver superior returns.
The fund currently stands among the top quartile performers in the category across time frames. Moreover, its risk-adjusted returns are among the best in the category and much ahead of the benchmark.
The fund’s cautious approach and strong inclination towards value helped it stand strong and limit losses during bearish phases. Moreover, the fund has outpaced the benchmark and many of its peers during market uptrends. The fund avoids investing in momentum-driven bets, which helps it to outpace its peers in the long run, while its large-cap bias adds stability to the portfolio.
ELSS, also known as tax-saving mutual funds, are diversified equity funds that come with the dual advantage of wealth-building potential and tax-saving benefits. As per SEBI’s categorisation norms for mutual funds, ELSS are open-ended schemes with a statutory lock-in of 3 years and tax benefits. ELSS invests a minimum of 80% of its assets in equity & equity-related instruments.
Investment in ELSS is eligible for a deduction under Section 80C of the Income Tax Act up to Rs 1.5 lakh in a financial year. One of the decent ELSS to invest in 2023 is KOTAK Tax Saver Fund.
we apply a host of qualitative and quantitative parameters using the S.M.A.R.T score matrix.