Best Mutual Funds to Invest in India in 2020

Mirae Asset Large Cap Fund is the best performer (by a margin) on almost all the parameters. It remains our top pick in the large cap category. Even its near term performance remains top notch. Although the fund was a multi cap fund for better part of its life, we still do not dock this fund given that the standard deviation is still 7.7%, lower than average SD of 8.7% in the large cap category.

Another factor to note is that the Fund has had a recent manager change. Mr. Nilesh Surana has handed over the fund to Mr. Gaurav Misra. Despite this fact, we continue to like this fund because we believe that, being the flagship fund of Mirae AMC, the investment style will continue to remain very similar.

We have included DSP Top 100 Equity Fund in our list. Purely from past perfromance perspective, this fund would not have figured in our list. However, the fund is now being managed by Mr. Gopal Agrawal. It should be noted that Mr. Agrawal was the CIO of Mirae till 2017 and bulk of the past performance of Mirae Large Cap (erstwhile Mirae Asset India Opportunities) came under the stewardship of Mr. Agrwal.

Finally, we have also included Axis Bluechip and Nippon India Large Cap in our list. Axis Bluechip is included because of stellar track record over past 2 years even though we do not have enough historical performance data. Nippon India Large Cap continues to have a consistent long-term track record as well as a decent near-term performance.

Finally, we have dropped ICICI Pru Bluechip Fund despite its stellar historical record. This is because change in Fund Manager in 2017 is now crearly reflecting in the near-term performance (near-term percentile rank of 45%

It is important to note that the multi cap category itself has shrunk in size after SEBI’s re-categorization of schemes. Under the new categories, a lot of erstwhile multi cap funds have now moved to Value and Focused categories.

In our rankings, we consider all of them under the same category of multi cap funds since the underlying assets can be across market cap segments.

Axis Multicap Fund is our top pick despite no historical track record. The fund was launched in Nov 2017. The reason is the performance of fund manager Mr. Shreyash Devalkar and his track record as a mid cap manager (explained in mid cap rationale section). As a multi cap manager, it is very important to be a good mid cap stock picker. Plus, you need the ability to stay out of move between mid and large caps based on your reading of market conditions.

Performance of Axis Multicap Fund since inception (best performing fund in the category for last 2 years), gives us confidence about the FMs ability to read the larger macro picture around relative performance of mid and large caps. It should be noted that the outperformance of Axis Multicap Fund was primarily driven by the fund staying largely invested into quality large cap names.

Our next pick is SBI Focused Equity Fund. While there are other multi cap funds that have relatively better historical track record, since the fund was took over by its current manager Mr. R Srinivasan in May 2009 (fund started in 2004), it has been one of the top performing funds. Near-term performance remains strong as well.

Another surprise entry is Mirae Asset Focused Fund. The fund was launched in May 2019 so obviously has no historical track record. But the FM Mr. Gaurav Misra comes from a PMS background (ASK PMS). He has a stellar track record with ASK PMS. Plus, as a PMS manager, it gives him a unique advantage in managing a focused strategy. PMS, just like focused mutual funds, run a very concentrated strategy of around 25-30 stocks.

In terms of pure historical track record, Kotak Standard Multicap Fund is the best of the lot. We are however not comfortable with an AUM size which is now inching towards almost ₹ 30,000 cr.

Axis Mid Cap Fund as the top fund is a surprise entry here. In terms of pure historical performance, the fund is actually worse than the other 2 in the list. However, there’s a big subjective factor that tips the scale in its favor.

Axis Mid Cap has been in existence since Feb 2011. However, the current fund manager Mr. Shreyash Devalkar took over the fund only in Nov 2016. Since then, the fund has been the best performing mid cap fund by a margin. In order to dig out more performance data, we looked at the track record of BNP Paribas Midcap Fund, which was managed by Mr. Devalkar from 2011 to 2016. Interestingly, during this period, this fund was one of the top performing mid cap funds. Further, the fund sits on a very comfortable AUM of around ₹ 3,800 cr.

HDFC Mid-Cap Opportunities Fund, despite being the best performer historically, has been dropped to number 3 slot because of the sheer size of it's AUM - ₹ 22,792 cr. We believe that at this scale, it will be very difficult to beat its peers with much smaller AUM. And this size burden is also reflected in a near-term percentile rank of 57%. We still keep it on our list because its historical track is very diffuclt to ignore.

We keep SBI Small Cap Fund as our top choice as it has the best long term as well as near term performance. The fund manager has been with the fund since 2013 and the AUM is confortable ₹ 3,000 cr. Our only issue with this fund is that it is not open for lump sum investment.

Our second pick in the category, HDFC Small Cap Fund is a story of a new fund manager turning around the fortune of the fund. In terms of historical performance, the fund looks pretty average. However, since Mr. Chirag Setalvad took over, the fund has done exceptionally well and has been one of the best perfroming fund in the category. The only issue is that the fund is now almost ₹ 9,000 cr. However, near term performance doesn't seem to suggest any big concern yet.

We have dropped L&T Emerging Business Fund from our reco as Mr. SN Lahiri has recently quity L&T.

We also keep an eye on Axis Small Cap Fund. While the entire unverse of small cap funds were delivering negative returns for last 1 year, Axis Small Cap has consistently been positive and has beaten every other small cap fund by a margin. We have not yet included it due to very limited track recrod.

This is a tricky category. Large-and-Mid Cap was a new category introduced by SEBI in 2018. Post this re-categorization, 21 schemes were reclassified as large-and-mid cap. Of these, 13 schemes were earlier multi cap, 5 were mid cap and 3 were large cap schemes.

Owing to this diversity, comparison of performance becomes tricky.

Not surprisingly, all the funds in top 3 were previously mid cap funds. During good times, mid cap funds will outperform large and multi cap funds most of the times. Barring the crash of 2008 (which was not seen by Mirae Emerging Bluechip and Principal Emerging Bluechip), we have pretty much seen good times till 2017.

However, since then its been a choppy markets. And this has led to 2 new funds being introduced into the ranking in place of Principal Emerging Bluechip Fund and Canara Rob Emerging Equities Fund, both of which had very poor near term performance. Their place has been taken by SBI Large & Midcap Fund and Kotak Equity Opp Fund. Both these funds have has a solid near-term performance (coupled with a decent historical track record as well.

We have placed Kotak Equity Opp Fund above SBI Large & Midcap Fund despite slightly weaker historical perfromance. This is primarily because the FM of Kotak Equity Opp Fund is Mr. Harsha Upadhyaya who has been managing one of the most successful multi cap fund - Kotak Standard Multi Cap. At the same time, SBI Large & Midcap Fund's current FM has been managing this fund since 2016.

Mirae Asset Tax Saver Fund is out top pick here. Although, it is a relatively new fund (launched in Nov 2015), it has been the best performing ELSS fund since then. Plus, the fund manager Mr. Nilesh Surana has the track record of managing Mirae Large Cap and Mirae Emerging Bluechip funds.

Axis Long Term Equity Fund has also been once of the best performing ELSS funds since it started in 2009. Given almost 10 years of consistent track record, we place it on our list despite an AUM of almosyt ₹ 21,000 cr. We note that the AUM size had not had an impact on near term performance which remains solid.

DSP Tax Saver Fund finds its way into our list of top ELSS funds simply because of a track record of consistent performance over a very long period (launched in 2007). It should be noted that a new FM took over the fund in 2015. Importantly, the relative performance of fund actually improved since 2015 and hence we continue to keep it on our list.