Mutual funds on a roll in the second quarter

CRISIL RANKINGS FOR THE MUTUAL FUND INDUSTRY

Crisil FundServices' composite performance rankings (CPR) recognise the top performers in various investment categories available to mutual fund investors.

This mutual fund performance ranking serves as a guide to investors in terms of asset allocations and picking the best performing schemes.

Crisil FundServices ranked 178 schemes across nine categories on various Crisil-CPR parameters in the quarter ended September 2005. These schemes accounted for 60 per cent of the domestic mutual fund industry's assets under management.

Crisil FundServices analysed the performance of the equity, ELSS, income, balanced, gilt-long schemes, and monthly income plan (MIP) schemes over two years and of liquid, floating rate and income-short schemes over a year. Crisil includes retail options for all schemes ranked.
 

THE FUND TOPPERS
Diversified Equity Schemes	Debt Short Schemes
DSP Merrill Lynch Equity Fund	Prudential ICICI Short Term Plan
Franklin India Prima Fund	Reliance Short Term Fund
Reliance Growth Fund	Liquid Schemes
SBI Magnum Global Fund	HDFC CMF - Savings Plan
SBI Magnum.Umbrella Contra	UTI Liquid Cash Plan
ELSS Schemes	Balanced Schemes
SBI Magnum Tax Gain1993	HDFC Prudence Fund
Income Schemes	SBI Magnum Balanced Fund
Principal Income Fund	Floating Rate Funds
UTI Bond Fund	Grindlays Floating Rate Fund
Gilt Schemes	HDFC Floating Rate Income - STP
Reliance Gilt Securities Fund - LTP	MIP Schemes
Templeton India G-Sec Fund - LTP	FT India Monthly Income Plan

During the quarter ended September 2005, equity schemes were the flavour of the season, mainly because of the buoyancy in the stock markets.

Also, new types of mutual funds such as variable expense ratio funds and split capital funds were launched. The asset under management (AUM) of the mutual fund industry increased by 22 per cent, from Rs 1,64,518 crore in June 2005 to Rs 2,00,769 crore in September 2005.

Mobilisations by way of new fund offerings by existing fund houses were the primary reason for this impressive rise in the AUM. The industry also witnessed consolidation with Birla Mutual Fund acquiring the schemes of Alliance Capital Mutual Fund.

Going forward, local fund managers may soon have some foreign competition with the stated intention of various foreign asset management companies (AMCs) to start operations in the country.

Equity diversified schemes: After moving up sharply in the second quarter of 2005, equity markets continued to surge in the third quarter. Strong buying by mutual funds flush with funds from new scheme offerings, and support from foreign institutional investors, led to equity markets ending the quarter in positive territory.

The BSE Sensex and CNX Nifty posted returns of 21.49 per cent and 19.14 per cent, respectively, for the quarter. During the quarter, the market rally was broad based, since the mid-cap segment of the market, as represented by the CNX Midcap Index, also posted impressive returns of 24 per cent.

For the quarter ended September 2005, forty-seven schemes were eligible for ranking. Crisil-CPR 1 indicates "very good performance" and constitutes the top 10 per cent of the category. DSP Merrill Lynch Equity Fund, Franklin India Prima Fund, Reliance Growth Fund, SBI Magnum Global Fund, and SBI Magnum Sector Umbrella - Contra Fund held the Crisil-CPR 1 rank. Franklin India Prima Fund moved up the rankings to Crisil-CPR 1 on account of its improved performance on the superior return score parameter.

Canequity Diversified is a new entrant in the ranking universe, and qualified on the basis of completing two years of net asset value (NAV) history. JM Equity Fund on the other hand, made its debut in the ranking universe on account of an increase in its corpus size beyond Rs 25 crore during September 2005.

The Crisil Fund-eX, the benchmark for equity diversified schemes, generated point-to-point returns of 25 per cent for the quarter ended September 2005.

The most popular stocks among fund managers of general equity schemes in September 2005 were State Bank Of India, Reliance Industries, Infosys Technologies, Bharat Heavy Electricals and Oil & Natural Gas Corporation. The most popular industries were software, banking and pharmaceuticals.

The next 20 per cent of the schemes in the ranking universe are ranked CPR-2, indicating "good performance". Birla Sun Life Equity Fund, HDFC Capital Builder Fund, HSBC Equity Fund, SBI Magnum Multiplier Plus Scheme 1993, and Tata Equity Opportunities Fund have retained their Crisil-CPR 2 rank. Birla Midcap Fund, DSP Merrill Lynch Opportunities Fund, and DSP Merrill Lynch Top 100 Equity Fund have moved up the ranks to Crisil-CPR 2 on account of better superior return scores.

In the Crisil-CPR 3 cluster indicating "average performance", a majority of schemes retained their ranks. JM Equity Fund entered the ranking universe this quarter at Crisil-CPR 3. Franklin India Bluechip Fund and Prudential ICICI Power moved up the ranking chart to Crisil-CPR 3 because of high superior return scores; Birla Advantage Fund moved up the ranks because of better performance on industry concentration, company concentration, and equity liquidity parameters.

Equity linked savings schemes (ELSS): Nine schemes were eligible for ranking in this category. The ELSS category has witnessed stability with SBI Magnum Tax Gain Scheme 1993 retaining its top slot at Crisil-CPR 1 for the quarter ended September 2005. HDFC Tax Saver Fund and Prudential ICICI Tax Plan jointly hold the Crisil-CPR 2 slot.

HDFC Long Term Advantage Fund moved up the ranks to join Franklin Taxshield Fund and Tata Tax Saving Fund at Crisil-CPR 3 because of improved performance on the company concentration and superior return score parameters.

Income schemes: The performance of income schemes was consistent during the quarter ended September 2005. The Crisil Fund-dX, the benchmark for income schemes, generated point-to-point returns of 1.06 per cent for the quarter ended September 2005.

The debt markets remained range bound during the quarter with the surge in global oil prices being a major area of concern. There is some concern on the inflation front as a result of this rise in global crude oil prices. The benchmark 10-year yield closed at 7.10 per cent for the quarter ended September 2005; it closed at 6.89 per cent a quarter ago.

Sixteen schemes were eligible for ranking in the income schemes category for the quarter ended September 2005. Principal Income Fund and UTI Bond Fund retained their Crisil-CPR 1 rank. Templeton India Income Builder Account - Plan A moved up the ranking charts to end the quarter at Crisil-CPR 2 because of improved performance on the company concentration, debt liquidity, and asset quality parameters.

Birla Income Plus Plan B, Grindlays Super Saver Income Fund, Kotak Bond Wholesale, Sundaram Bond Saver and Templeton India Income Fund retained their Crisil-CPR 3 ranks. HDFC Income Fund has moved up the ranks to Crisil-CPR 3 on the basis of its performance on company concentration and asset quality parameters.

Income short-term schemes: The performance of income short-term schemes was steady over the course of the quarter. The Crisil STBEX, which is a benchmark for short-term schemes, posted returns of 1.40 per cent for the quarter.

In the income short-term category, fifteen schemes were eligible for ranking. Prudential ICICI Short Term Plan moved up the ranks to join Reliance Short Term Fund at the top on Crisil-CPR 1, due to better performance on the asset quality and downside risk probability (DRP) parameters.

DRP is the measure of number of times returns fall below risk free rate over the period of analysis. HDFC High Interest Fund - Short Term Plan is a new entrant in the ranking universe with the scheme having qualified on account of an increase in its corpus size beyond Rs 50 crore during September 2005.

Principal Income Fund - Short Term Plan has retained its Crisil-CPR 2 rank. HSBC Income Fund - Short Term Plan and Tata Short Term Bond Fund have moved up the ranking chart to join the Crisil-CPR 2 cluster.

While HSBC Income Fund - Short Term Plan performed well on the industry concentration and volatility parameters, Tata Short Term Bond Fund improved its performance on the mean return parameter. Mean return is the average of daily returns on scheme net asset values (NAVs) for the period of analysis and volatility is the deviation of these returns.

In the Crisil-CPR 3 cluster, Birla Bond Plus - Retail, Kotak Bond Short Term Plan, and Templeton India Short Term Income Plan retained their ranks. DSP Merrill Lynch Short Term Fund moved up the ranks to end the quarter at Crisil-CPR 3 on account of its good performance on the asset quality parameter.

Floating rate schemes: In the floating rate category, twenty-four schemes were eligible for ranking. Grindlays Floating Rate Fund moved up a notch to join HDFC Floating Rate Income Fund - Short Term Plan at Crisil-CPR 1, because of its performance on the asset quality parameter.

Grindlays Floating Rate Fund - Long Term Plan, Reliance Floating Rate Fund, Kotak Floater - Long Term, Principal Floating Rate Fund - Flexible Maturity Plan, Principal Floating Rate Fund - Short Maturity Plan, ABN Amro Floating Rate Fund - Regular Plan, Prudential ICICI Long Term Floating Rate Plan - Plan A, and SBI Magnum Income Fund - Floating Rate Plan - STP made their debuts in the ranking universe for the quarter ended September 2005. All these schemes have been included in the ranking universe on account of completing one year of NAV history.

Prudential ICICI Floating Rate Plan - Option B maintained its position at Crisil-CPR 2. Grindlays Floating Rate Fund - Long Term Plan entered the Crisil-CPR 2 cluster because of good performance on the asset quality parameter; Reliance Floating Rate Fund entered this cluster because of performing well on the volatility and DRP parameters. Tata Floating Rate Fund - Short Term moved up the ranking chart to reach Crisil-CPR 2 because of good performance on the volatility and asset quality parameters.

Floating rate fund: In the Crisil-CPR 3 cluster, HDFC Floating Rate Income Fund - Long Term Plan, JM Floater Fund - Long Term Plan, Kotak Floater - Short Term, Templeton Floating Rate Income Fund - Short Term Plan, and UTI Floating Rate Fund - STP retained their ranks.

Deutsche Floating Rate Fund moved up the ranks, to end the quarter at Crisil-CPR 3 cluster due to its good performance on the mean return and DRP parameters. Principal Floating Rate Fund - Flexible Maturity Plan, and Principal Floating Rate Fund - Short Maturity Plan make their debuts at Crisil-CPR 3 because of improved performances on the asset quality parameter. Kotak Floater - Long Term entered Crisil-CPR 3 due to its performance on the mean return and DRP parameters.

Monthly income plans: The Crisil MIPEX, the benchmark for MIPs, remained in positive territory and generated returns of 3.5 per cent for the quarter ended September 2005.

In the MIP category, twelve schemes were eligible for ranking. JM MIP Fund made its debut in this quarter, having completed two years of NAV history. FT India Monthly Income Plan remained at Crisil-CPR 1.

DSP Merrill Lynch Savings Plus Fund - Moderate moved up the ranks to end the quarter at Crisil-CPR 2, because of its improved performance on the superior return score parameter. Prudential ICICI MIP Plan - Cumulative continues to be at Crisil-CPR 2.

Birla Monthly Income Plan C, Tata Monthly Income Fund, and SBI Magnum Monthly Income Plan retained their Crisil-CPR 3 ranks. LICMF Monthly Income Plan moved up the ranks to Crisil-CPR 3, having performed well on the superior return score and company concentration parameters. JM MIP Fund makes its debut at Crisil-CPR 3 because of strong performance in the equity liquidity parameter.

Liquid schemes: The Crisil-LX, the benchmark for liquid schemes, generated a point-to-point return of 1.21 per cent for the quarter ended September 2005. ABN Amro Cash Fund - Regular Plan is a new entrant in the ranking universe, and qualified by completing one year of NAV history.

Twenty-three schemes were ranked on Crisil-CPR parameters in the liquid scheme category for the quarter ended September 2005. HDFC Cash Management Fund - Savings Plan and UTI Liquid Cash Plan retained their Crisil-CPR 1 ranks.

In the Crisil-CPR 2 cluster, Birla Cash Plus - Retail, HDFC Liquid Fund, and Tata Liquid Fund - RIP retained their ranks. They were joined by Chola Liquid Fund - Regular and DSP Merrill Lynch Liquidity Fund, which moved up the ranking chart on account of good performance on the mean return, DRP, and asset quality parameters.

JM High Liquidity Fund, Kotak Liquid, Principal CMF - Liquid, Prudential ICICI Liquid Plan, Reliance Liquid Fund - Treasury Plan, and Templeton India Treasury Management Account retained their Crisil"�CPR 3 ranks. Sundaram Money Fund moved up the ranks to Crisil-CPR 3 because of its performance on the volatility, DRP and asset quality parameters.

Gilt-long schemes: The Gilt-long category schemes were consistent performers over the course of the quarter, with the Crisil MF-Gilt Index generating point-to-point returns of 1.10 per cent for the quarter ending September 2005.

Fifteen gilt schemes were eligible for CPR rankings for the quarter ended September 2005. Reliance Gilt Securities Fund - Long Term Plan makes its debut at Crisil-CPR 1 along with Templeton India G-Sec Fund - Long Term Plan.

Prudential ICICI Gilt - Investment, Templeton India G-Sec Fund - Composite Plan, and UTI Gilt Advantage Fund - Long Term Plan remained steady at Crisil"�CPR 2.

There was not much movement in the Crisil-CPR 3 cluster with Birla Gilt Plus - PF Plan, Birla Gilt Plus - Regular Plan, CanGilt (PGS), HDFC Gilt Fund - Long Term Plan, and Kotak Gilt - Investment - Regular all retaining their respective ranks.

Balanced schemes: The surge in the equity markets was evident in the performance of balanced schemes, with the Crisil Fund-bX generating point-to-point returns of 17.33 per cent during the quarter.

ING Vysya Balanced Fund and LICMF Balanced Fund - Plan C are new entrants in the ranking universe. ING Vysya Balanced Fund qualified for the ranking on the basis of increase in its corpus size beyond Rs 50 crore during September 2005.

Seventeen schemes were eligible for ranking on Crisil-CPR parameters for the quarter ended September 2005. HDFC Prudence Fund - Growth moved up the ranks to join SBI Magnum Balanced Fund at Crisil"�CPR 1, because of its improved performance on the superior return score parameter.

Kotak Balance retained its Crisil-CPR 2 rank; Prudential ICICI Balance Fund moved up the ranking chart to Crisil"�CPR 2 because of its performance on the superior return score parameter.

Birla Sun Life 95 Fund, FT India Balanced Fund, Principal Balanced Fund, and Sundaram Balanced Fund retained their Crisil-CPR 3 rank. GIC Balanced Fund moved up the ranking chart to Crisil"�CPR 3 because of good performance on the superior return score, debt liquidity, and equity liquidity parameters.

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 Ltd.

The methodology

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Crisil composite performance ranking (CRISIL-CPR) is the relative performance ranking of mutual fund schemes within their respective peer groups in eight different categories.

The basic eligibility criteria for inclusion in ranking universe are two-year NAV (net asset value) history (one-year for liquid, floaters and debt-short categories), minimum corpus depending on asset class and 100 per cent portfolio disclosure for the three months on the ranking date. The ranking is done on following parameters depending on the asset class.

Superior return score (SRS): The superior return score is the relative measure of the return and risk for schemes compared to their peer group. It is computed for schemes in the diversified equity, debt, balance, monthly income plan and gilt categories for a two-year period.

The weightages for the four six-monthly periods starting from the latest are 32.5 per cent, 27.5 per cent, 22.5 per cent and 17.5 per cent, respectively.

Mean return and volatility: For the liquid, floaters and debt-short term categories, mean return and volatility are considered separately. Mean return is the average of daily returns on scheme NAVs for a one-year period and volatility is the deviation of these returns.

The weightages for the four quarterly periods starting from the latest are 32.5 per cent, 27.5 per cent, 22.5 per cent and 17.5 per cent, respectively.

Portfolio concentration analysis: Concentration measures the risk arising out of improper diversification. For equity portfolios Nifty is used as the benchmark and deviations from the index are computed for both over and under exposures.

For the debt related portfolios, the concentration is analysed for over exposure in gilt, manufacturing, NBFC, securitized debt and banking, financial institutions and housing finance sectors. For liquid and floaters, only fixed deposits are considered for concentration analysis.

Liquidity analysis: It measures the ease with which the portfolios can be liquidated. In case of equity portfolios, the liquidity is computed by comparing the turnover of individual securities with the average six monthly turnover of the respective securities on the BSE and NSE.

Gilt liquidity is measured by comparing the security level turnover with the market turnover, days traded and size of trades for a six-month period for that security. Corporate debt liquidity is computed by classifying securities in the portfolios into 3 components - liquid, semi liquid and illiquid.

Asset quality: Asset quality measures the quality of credit and is indicated by debt servicing ability. Regrouping the debt portfolio in the various rating categories and weighting the per cent exposure in each rating category by relevant default/ migration statistics gives a measure of asset quality.

Average maturity: Average maturity is considered across all debt categories to capture the interest rate sensitivity of the portfolio. Lower the value better would be the impact.

Downside risk probability (DRP): DRP gives the probability of capital erosion. It is measured by summing of number of times a scheme¿s return falls below the risk free return over the period of analysis. Risk free return is taken as the 91-day t-bill yield over the period of analysis.

Asset size: It is considered only for debt-short, floaters and liquid categories to take into account the effect of large fund flows on fund performance. Higher the asset size better is the cushioning impact against large fund flows.

The definition of various Crisil-CPR categories is as follows:

Crisil-CPR 1: Very good performance in the category (top 10 per cent of the universe)

Crisil-CPR 2: Good performance in the category (next 20 per cent)

Crisil-CPR 3: Average performance in the category (next 40 per cent)

Crisil-CPR 4: Below average performance in the category (next 20 per cent )

Crisil-CPR 5: Poorest performance in the category (last 10 per cent )