Equity funds on a roll, bonds stay afloat

CRISIL RANKINGS FOR MUTUAL FUNDS IN THE SEPTEMBER QUARTER

f/crisil06_01.pdf">Click here for Large Cap table  Equity diversified schemes  In this category, 47 schemes were eligible for ranking for the quarter ended September 2006. DSP Merrill Lynch India TIGER Fund, Reliance Growth Fund, SBI Magnum Global Fund, SBI Magnum Sector Umbrella - Contra Fund and Sundaram BNP Paribas Select Midcap Fund were ranked CRISIL~CPR 1 mainly on the basis of a higher SRS.  DSP Merrill Lynch India TIGER Fund benefited from its exposure in State Bank Of India, Bharti Televentures and Reliance Communication Ventures. SBI Magnum Sector Umbrella - Contra Fund gained from its exposure to State Bank Of India and Oriental Bank Of Commerce whose prices gained over 40 percent during the quarter.  SBI Magnum Global Fund had an over 5 percent exposure in Shree Cement which appreciated nearly 30 per cent during the quarter. Reliance Growth Fund benefited by an almost 70 per cent price appreciation in the quarter through its exposure in Divis Laboratories. Sundaram BNP Paribas Select Midcap gained through its higher exposure in Jaiprakash Associates, Sundaram-Clayton and Bank Of Baroda over the quarter.  In the CRISIL~CPR 2 cluster, the schemes included - Birla Sun Life Equity Fund, DSP Merrill Lynch Equity Fund, HDFC Equity Fund, Kotak Opportunities, Prudential ICICI Discovery Fund, Prudential ICICI Power, SBI Magnum Multiplier Plus Scheme 1993, Sundaram BNP Paribas India Leadership Fund and UTI Infrastructure Fund. All except Birla Sun Life Equity Fund were at second position on the SRS score.  Click here for Equity Schemes table  Sectoral equity - IT  The information technology funds have been included in the ranking universe since there are more than five schemes that met the criteria for starting a new ranking category.  Seven schemes qualified for ranking. SBI Magnum Sector Umbrella - Infotech Fund secured the top position at CRISIL~CPR 1. At the CRISIL~CPR 2 spot was DSP Merrill Lynch Technology Fund, while the CRISIL~CPR 3 cluster comprised of Birla Sun Life New Millennium Fund, Franklin Infotech Fund and UTI Growth Sectors Fund-Software Fund.  Infosys Technologies ruled the popularity charts among the fund managers of the Sectoral - IT schemes. Other popular stocks were Tata Consultancy Services and Satyam Computer Services.  Click here for Sectoral IT table  Equity Linked Savings Schemes (ELSS)  In the case of ELSS, 13 schemes were eligible for ranking in this category. Birla Sun Life Tax Relief 96, entered the category after satisfying the AUM criteria. The AUM of the ELSS schemes increased by 22 percent over the quarter, though as a percentage of industry AUM, the figure has been flat at 2 percent.  SBI Magnum Tax Gain Scheme 1993 retained its top slot at CRISIL~CPR 1 for the quarter ended September 2006. HDFC Tax Saver Fund and Prudential ICICI Tax Plan continued to jointly hold the CRISIL~CPR 2 slot, while Principal Tax Saving Fund moved up a notch from CRISIL~CPR 3 to CRISIL~CPR 2 due to better performance on the SRS parameter, which largely decides the cluster rank.  In the CRISIL~CPR 3 cluster, Birla Sun Life Tax Relief 96 was the new entry, while one scheme exited. Principal Tax Saving Fund was the beneficiary for its exposure in Infosys Technologies, State Bank of India and Pantaloon Fashions. SBI and Pantaloon have gained by almost 40 percent in the quarter.  Click here for ELSS table  Income schemes  Bond markets were bullish as yields fell during the quarter with the 10-year benchmark yield falling to 7.59 percent on September 29 from 8.14 percent on June 30 - a fall of 55 basis points. The fall in bond yields was mainly owing to a pause to interest rate hikes by the US Federal Reserve during the quarter as well as due to falling oil prices.  Indian bond yields were in line with 10-year US bond yields which fell to 4.63 percent on September 29 from 5.14 percent on June 30 - a 51 basis point fall, almost the same as that of the Indian 10-year paper. The juxtaposed yield curves of US and Indian 10-year government bond yields indicate their synchronised movement. Oil prices falling by almost 25 percent during the quarter also lent momentum to the bond market.  The early part of the quarter, however, saw an interest rate hike by the RBI on July 25 as part of its quarterly review for the June ended quarter. The RBI hiked the repo and reverse repo rate by 25 bps to 7 percent and 6 percent respectively.  The rate hike became necessary, as spiralling oil prices had taken the inflation rate beyond 5 percent in June. The latest inflation figures released for the week ended September 30 have also raised the same alarms where the Wholesale Price Index (WPI) based inflation rate rose to 5.16 per cent.  In the Income segment, nineteen schemes were eligible for ranking for the quarter ended September 2006. There were no new entrants to this category. Principal Income Fund and UTI Bond Fund retained their CRISIL~CPR 1 rank while Birla Income Plus Plan B and Kotak Bond Regular retained its position at CRISIL~CPR 2. Birla Sun Life Income Fund - Growth and Prudential ICICI Income Plan - Growth, moved one notch up from CRISIL~CPR 3 to CRISIL~CPR 2.  SBI Magnum Income Fund - Growth moved up two notches to CRISIL~CPR 3 from CRISIL~CPR 5. The scheme improved in SRS and also gained on liquidity score. JM Income Fund - Growth moved up one notch to CRISIL~CPR 3 from CRISIL~CPR 4.  The average maturity of ranked income schemes has seen an increase over the latest quarter from 1.7 years in June to 3.36 years in September. The main reason for the increase in average maturities is the falling yields or rising prices of long tenor paper owing to a bullish debt market.  Investing in longer term paper has been beneficial over the past quarter as yields have re-traced to levels of May 2006. Falling yields have a positive impact on the value of the bond when marked to market.  Click here for Debt Income Schemes table  Income Short-Term Schemes  The performance of Income short-term schemes improved during the quarter under review with the CRISIL STBEX, which is a benchmark for short-term schemes, posting returns of 1.86 percent for the quarter compared to 1.71 percent for the previous quarter.  The 91-day t-bill auction cut off yield rose from 6.36 percent on June 30 to 6.60 percent on September 29 - a rise of 24 bps. The RBI too raised repo and reverse repo rates by 25 bps each, to 7 percent and 6 percent, respectively, effective July 25.  In the Income short-term category, seventeen schemes were eligible for ranking with two new entrant, viz., JM Short term Fund and DBS Chola Freedom Income - Short Term Fund - Regular, entering the ranking universe at CRISIL~CPR 3 and CRISIL~CPR 4 respectively, on meeting the entry level AUM criteria of Rs.25 crore. Reliance Short Term Fund and UTI Liquid Short Term Plan maintained their top rank at CRISIL~CPR 1.  In the CRISIL~CPR 2 cluster, Principal Income Fund - Short Term Plan and Birla Bond Plus - Retail maintained their ranks at CRISIL~CPR 2 while Prudential ICICI Short Term Plan entered the cluster by moving one notch up from CRISIL~CPR 3. Prudential ICICI Short Term Plan performed better on parameters like Volatility, Asset Size, Asset Quality, Sectoral Concentration and Average Maturity.  The average maturity of all ranked schemes over the quarter has risen from 265 days in June 2006 to 375 days in September 2006 mainly due to falling government bond yields of long tenor bonds. Yields and bonds prices have an inverse relation.  Click here for Debt Short Schemes table  Floating Rate Schemes - Long Term  The AUM of ranked schemes for long term floaters has declined from Rs.1802 crore in June 2006 to Rs.671 crore in September 2006, while in the case of short-term floaters, the decline has been from Rs 13,562 crore to Rs.10603 crore.  Six schemes were ranked under Long Term Floaters as compared to nine last quarter as AUMs have dropped. Principal Floating Rate Fund - Flexible Maturity Plan continued to top the list at CRISIL~CPR 1 while Kotak Floater - Long Term maintained its position at CRISIL~CPR 2.  Click here for Floaters LT table  Floating Rate Schemes - Short Term  Seventeen schemes were ranked under short term floaters. DBS Chola Short term floating rate fund entered the ranking on fulfilling the one-year NAV history criteria. CanFloating Rate - STP and UTI Floating Rate Fund - STP moved one notch up to secure positions at CRISIL~CPR 1. CanFloating Rate - STP moved up the ranking league on account of a better score on parameters such as Asset Size, Company Concentration and Asset Quality.  Click here for Floaters ST table  Monthly Income Plans  The MIP category has been sub-categorised into MIP - conservative and MIP - aggressive. The conservative category includes schemes with a maximum equity component of less than 15 percent, whereas MIP - aggressive includes schemes with a maximum equity investment of up to 30 percent. A common feature in both categories is the regular declaration of dividends (mostly monthly) by the AMC as the name of the category suggests.  MIP schemes performance as measured by CRISIL MIPEX returned 4.27 percent for the quarter ended September 2006 compared to negative 0.11 percent returns in the previous quarter.  Monthly Income Plan - Aggressive  In this category, 14 schemes were eligible for ranking. HDFC Monthly Income Plan - LTP bagged the CRISIL~CPR 1 rank. Birla MIP II - Wealth 25 Plan, DSP Merrill Lynch Savings Plus Fund - Aggressive and UTI MIS Advantage Plan are ranked CRISIL~CPR 2. HDFC Monthly Income Plan - LTP increased its exposure to equity from 14 percent in August 2006 to 22.34 percent in September 2006.  Click here for MIP Aggressive table  Monthly Income Plan - Conservative  In this category, nine schemes were eligible for ranking. With the equity market in a bullish phase, there are more schemes in the aggressive category owing to a higher equity component than the conservative category. Prudential ICICI MIP Plan was ranked at CRISIL~CPR 1.  SBI Magnum Monthly Income Plan and UTI Monthly Income Scheme were ranked CRISIL~CPR 2. Birla Monthly Income Plan C, Birla Sun Life Monthly Income, Templeton Monthly Income Plan featured in the CRISIL~CPR 3 cluster.  Click here for MIP Conservative table  Liquid Schemes  Call rates remained around the reverse repo rate throughout the quarter except during September when over Rs 20,000 crore moved out of the system as corporate advance tax. Liquidity was generally comfortable except during this period. However, money market liquidity is yet to be fully restored as call rates continue to be above the reverse repo rate of 6 percent.  Liquid schemes returns continued to improve, a reflection of the rising short-term interest rates. The benchmark CRISIL~LX return improved to 1.59 per cent for the quarter to September 2006 compared to 1.48 per cent in the previous quarter. The share of liquid schemes in the industry AUM fell to 35 percent in September 2006 from 41 percent in June 2006 owing to the advance tax outflows.  Click here for Liquid Institutional table  Liquid Category  CRISIL has segregated the plans Liquid scheme based on the minimum amount invested. The retail option is, however, being retained as before. This means that in the liquid category, the investor will see the same scheme (but a variety of plans) appearing under the three liquid ranking categories.  Twenty-two Liquid Schemes were ranked on CRISIL~CPR parameters for the quarter ended September 2006. In CRISIL~CPR 1, while UTI Liquid Cash Plan maintained its rank in CRISIL~CPR 1 for the seventh consecutive quarter. HDFC Cash Management Fund - Savings Plan entered the cluster on accounts of improved performance on Volatility, Asset Size, Company Concentration and Downside Risk Probability.  CRISIL~CPR 2 cluster has DSP Merrill Lynch Liquidity Fund, LICMF Liquid Fund, Prudential ICICI Liquid Plan and Tata Liquid Fund - RIP. LICMF Liquid Fund moved up one notch to be at the second spot.  Grindlays Cash Fund moved up one notch in the CRISIL~CPR 3 cluster owing to a better performance on mean return, asset size and asset quality.

Click here for Liquid Super Institutional table  Gilt-Long Schemes Gilt schemes continued to lose AUM, which fell from Rs.2566 crore in June 2006 to Rs.2133 crore in September. The segment, however, performed well with the benchmark CRISIL MF~Gilt Index returning 2.51 percent during the quarter ended September 2006 compared to 0.43 percent during the previous quarter. The average residual maturity for the ranked schemes increased during the quarter from 2.90 years in June to 6.29 years in September.  In the gilt-Long schemes category, Principal Gilt Fund - Investment Plan and Prudential ICICI Gilt - Investment - PF Option, are the new entrants and are ranked CRISIL~CPR 1. Kotak Gilt - Investment - Regular, Principal G-Sec Fund - PF Plan, Reliance Gilt Securities Fund - Long Term Plan and UTI Gilt Advantage Fund - Long Term Plan featured in the CRISIL~CPR 2 cluster.  Click here for Gilt Schemes table  Balanced Schemes  Established funds in the balanced category proved their stability yet again with HDFC Prudence and FT India Balanced maintaining their top position at CRISIL~CPR 1. A number of balanced funds increased allocation to equity to be classified as an equity-oriented fund for taxation purposes.  In the Balanced schemes category, sixteen schemes were eligible for CRISIL~CPR rankings for the quarter ended September 2006, same as in the previous quarter. HDFC Prudence Fund, SBI Magnum Balanced Fund maintained its CRISIL~CPR 1 rank. HDFC Prudence Fund increased its equity investment to 74 percent. SBI Magnum Balanced Fund earned returns by increasing it exposure in State Bank of India, which gained 41 percent over the last quarter. CAN Balanced II, Kotak Balance and Tata Balanced Fund also maintained their rank at CRISIL~CPR 2.  Click here for Balanced Schemes table  Note: An entity wishing to use the CRISIL~CPR rankings in its prospectus / offer document / advertisement / promotion/ sales literature, or wishing to re-disseminate these rankings, may do so only after obtaining the written permission of the ranking entity, CRISIL FundServices, CRISIL Limited  The best of Mutual Funds  Six new categories have been added to CRISIL FundServices' Composite Performance Rankings (CRISIL~CPR) for the quarter ended September 2006. The categories are introduced after assessment of the investor needs for further classification and extensive discussions with industry players. IT funds have been included in the ranking universe since there are more than five schemes that met the criteria for starting a new ranking category. The additional five categories are under equity diversified, monthly income plan (MIP) and liquid schemes. Large cap-oriented equity schemes category has been carved out of the diversified equity scheme category. In liquid category, ranking has been extended to liquid- institutional and liquid-super institutional plans, while the monthly income plan (MIP) category has been rationalised into conservative and aggressive MIP.  CRISIL FundServices ranked 252 schemes across fifteen categories on various CRISIL~CPR parameters for the quarter ended September 2006. These schemes accounted for over 55 percent of the total Indian mutual fund industry's assets under management as at the end of report period.  Equity funds were back in action with a bullish equity market while income funds gained purely on the back of Fixed Maturity plans which were the market favour owing to their unique advantages over fixed deposits. Income funds gained almost 5 per cent in terms of industry AUM over the quarter, while liquid funds lost almost 6 per cent owing to corporate advance tax outflows. Capital Protection Oriented Funds were in the news towards the quarter end after SEBI's detailed guidelines on the new segment.  A noteworthy feature in the debt segment was the increase in average maturity over the quarter mainly due to falling bond yields in a bullish debt market. Indian 10-year benchmark government bonds saw yields dropping by 55 basis points over the quarter to 7.59 per cent. The average maturity of ranked income schemes saw an increase from 1.7 years in June to 3.36 years in September 2006. In case of ranked Debt Short Schemes the average maturity rose from 265 days in June to 375 days in September 2006. Both the debt and debt short segment saw a repeat performance by the toppers of the previous quarter.

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 The Methodology  CRISIL~Composite Performance Ranking (CRISIL~CPR) is the relative performance ranking of mutual fund schemes within the peer group. The basic eligibility criteria for inclusion in the ranking universe are two-years NAV history, assets under management in excess of category cut-off limits and complete portfolio disclosure. The ranking is done on the following parameters depending on the category to which the scheme belongs.  Superior Return Score
The Superior Return Score (SRS) is the relative measure of the return and the risk for the schemes compared to their peer group.  Mean Return and Volatility
Mean Return and Volatility are considered separately in case of Liquid Plans, Floating Rate and Debt-Short term schemes for a one-year period.  Portfolio Concentration Analysis
Concentration measures the risk arising out of improper diversification. For Equity portfolios, NIFTY is used as the benchmark in measuring Industry Concentration and deviations are computed for over exposure.  Liquidity Analysis
It measures the ease with which the portfolio can be liquidated. In case of Equity, the liquidity is computed by comparing the security level turnover of the security with average six monthly turnover of that particular security on BSE and NSE.  Asset Quality
Asset Quality measures the probability of default by the issuer to honour the debt obligation in time.  Average Maturity
Average Maturity is considered across all debt categories to capture the interest rate of the portfolio. Lower the value better it is.  Downside Risk Probability
DRP gives the probability of capital destruction.  Asset Size
It is considered only for floating rate fund (short