The winners
Mid and Small Cap
The mid- and small-cap category were the undisputed winners with an average return of 72%, compared to 52% delivered by the IISL CNX Mid-cap index. In fact, the top 5 performers delivered an eye-popping average return of 97%. Sundaram S.M.I.L.E. was the only one to cross the 100% return mark. The fund delivered a return of 102% and was the most successful fund of the year across all categories.
Returns for these top performers came primarily by way of larger investments in the small-cap space. These funds, on an average, held nearly 54% of their portfolio in small-cap stocks, compared to a category average of 26%.
The performance numbers once again threw light on the importance of right fund selection. The top 5 returned more than double than those of the bottom 5. Having said that, it is worth mentioning that the latter were mid-cap focussed or mid-cap index funds, thereby losing out on the allocation to smaller fare. For example, Pramerica Midcap Opportunities, which returned 39% and was one of the bottom performers, had an average allocation of just 19% to small caps during the year. So was the case with Edelweiss Select Midcap, which had an allocation of 3% to small caps and was a bottom performer, delivering 48%.
Flexi Cap
The Top 5 in this space delivered an average return of 77%. Franklin India High Growth Companies was the top performing fund in this space as it returned 79%. The fund was helped by a higher than peer allocation to the small- and mid- cap space (50%), specifically small caps, compared to 30% held by the category. Other funds to feature in top 5 were L&T India Value, Tata Equity P/E, Escorts Growth and PineBridge India Equity. While each of these portfolios differed, some common stocks like Axis Bank and MindTree helped boost returns.
Large Cap
On its own, the category made investors happy. When compared to smaller fare, the performance was rather underwhelming.
The top 5 funds in this category delivered an average return of 57%. Interestingly, the top 2 funds belonged to the same fund house – Birla Sun Life Mutual Fund. Birla Sun Life Special Situations and Birla Sun Life Advantage each delivered 59% in 2014. Barring a few differences, both funds largely benefitted from similar sector and stock selections. They gained from their higher exposure to financial services, consumer cyclicals and industrials. Yes Bank, IndusInd Bank, Maruti Suzuki and Motherson Sumi Systems were some of the common major contributors. Franklin India Opportunities, Kotak Select Focus and JM Multi Strategy were the other top funds with similar sector allocations.
Funds with tax benefits
The equity linked savings schemes, or ELSS, as a category also performed well in 2014. The category which had delivered an average return of 6% in 2013, managed to close 2014 with a return of 48%. Top 5 funds in this category delivered an average return of 64%. Reliance Tax Saver topped the list with a return of 80%, followed by IDBI Equity Advantage, Axis Long-term Equity, Escorts Tax Plan and HDFC Tax Saver.
The top performers as a whole benefitted from higher investments in sectors like consumer cyclicals, industrials and financial services. At the stock level, investments in stocks like TVS Motors, ALSTOM T&D India, ICICI Bank were leading contributors to the outperformance of this space.
The ones at the bottom of the rung were tax-saving funds from Tata, Taurus, Edelweiss, UTI and Quantum asset management companies.
Banking funds
Banking sectors funds, which were severely beaten down in 2013, made a roaring come back last year. The category delivered an average return of 60%, compared to -11% delivered in 2013.
ICICI Prudential Banking & Financial Services and Birla Sun Life Banking and Financial Services, delivered 68% and 63%, respectively. Motilal Oswal Financial Services, Union Bank of India, Kotak Mahindra Bank and Cholamandalam Investment and Finance Company were the winning stocks in their portfolios. Religare Invesco Banking and Sundaram Financial Services Opportunities delivered 54% and 56%, respectively, and were the bottom performers in this space.
Infrastructure funds
Infrastructure funds finally managed to cast away the stigma associated with them and closed 2014 on a high. High allocation to financial services and cement stocks helped. The overall sentiment in the economy and the focus on development by the Modi government gave this sector the much needed boost. Franklin Build India was the top performer in this space helped by its allocation to stocks such as JK Lakshmi Cement, Oriental Cement, Whirlpool India, ICICI Bank and Axis Bank. The fund returned 90% in 2014.
