Indian equities in the past few years have been highly volatile with the years 2005 to 2009 producing moves in excess of 40% each year for the benchmark Sensex--either way--while stocks moved up about 18% and fell 24% in 2010 and 2011, respectively.
With such volatility, it becomes imperative for mutual funds to be able to navigate both up and down markets well.
Screening for mutual-fund schemes that have shown this ability, we looked for funds that have shown upside- and downside-capture ratios that are better than the category average over the past five-year period.
The upside-capture ratio measures how much of an index's gains a fund achieved in a rising market while the downside-capture ratio similarly shows how much of the index's losses the fund captured on the downside.
A ratio of 100 means the fund has captured all of its index's gains/losses. Thus, the higher the upside-capture the better; the lower the downside-capture ratio the better.
To add another filter of quality, we stipulated the fund must also be positively rated by our analysts--that is, they should have a Morningstar Analyst Rating of Gold, Silver or Bronze.
Morningstar Analyst Ratings are our qualitative view on the fund's ability to outperform peers over the long term. You can read more about Analyst Ratings here.
Here are the funds that came on our search. We have also produced excerpts from the Analyst Report for each fund.
HDFC Equity
Upside-capture ratio (five-year): 98.02
Downside-capture ratio: 82.31
Five-year return (annualised): 8.47%
Morningstar Analyst Rating: 
Prashant Jain is one of the best managers in the country. We also see his research-driven investment style as strong and well executed. Over the years, he has seamlessly combined top-down and bottom-up analysis (emphasizing the latter to a great degree) to identify companies with strong balance sheets and business models. Jain pays heed to valuations while picking stocks, freely combining relative and absolute valuation methods.
Read complete Analyst Report
HDFC Top 200
Upside-capture ratio: 103.13
Downside-capture ratio: 89.45
Five-year return: 9.34%
Morningstar Analyst Rating:
In this fund, Jain predominantly invests in stocks from the BSE 200 index. But he has shown immense flair with portfolio positioning; his in-depth research has given him the confidence to take meaningful variances from benchmark weights at both the stock and sector levels. This has resulted in the fund bettering both the benchmark index and the category average over the long haul.
Read complete Analyst Report
Franklin India Flexi Cap
Upside-capture ratio: 94.65
Downside-capture ratio: 88.75
Five-year return: 5.14%
Morningstar Analyst Rating: 
The merits of this fund are clear: The investment team is among the best in the industry in our view, anchored here by the presence of an accomplished portfolio manager in K.N. Sivasubramanian, who has been managing this fund since inception in March 2005. Sivasubramanian is one of the longest-serving managers in the Indian industry, with roughly 18 years of experience in portfolio management. Over the years, he has built an impressive track record across a number of funds. The strong stewardship qualities of the fund’s AMC, Franklin Templeton, adds to the fund’s allure.
Read complete Analyst Report
Templeton India Equity Income
Upside-capture ratio: 98.68
Downside-capture ratio: 88.74
Five-year return: 6.85%
Morningstar Analyst Rating: 
This fund is managed using a team-based approach under the guidance of Dr. J Mark Mobius. Mobius is a pioneer in emerging-markets investing and leads the Templeton Emerging Markets Research Team, which comprises 30 members. He oversees the investment processes at the group, whereas assistant managers Chetan Sehgal and Vikas Chiranewal are involved in the daily management of this fund. Sehgal and Chinarewal are seasoned investors who are well ingrained in the team’s value investing philosophy. Overall, we are fairly impressed with the caliber and stability of the team.
Read complete Analyst Report
Birla Sun Life Frontline Equity
Upside-capture ratio: 92.90
Downside-capture ratio: 82.46
Five-year return: 7.04%
Morningstar Analyst Rating: 
Investors in the fund benefit from a competent manager and a well-executed investment approach. Manager Mahesh Patil took charge of Birla Sun Life Frontline Equity Fund in Nov 2005. From that time through March 2012, he has built an impressive track record, outscoring 89% of the competition on both the return and risk-adjusted return fronts. The fund’s success can be attributed in no small measure to the presence of manager Patil and a deftly implemented investment approach.
Read complete Analyst Report
