Fund upgrades and downgrades of 2020

By Morningstar |  29-12-20 | 
 

Morningstar analysts reviewed the funds under coverage by evaluating three pillars: People, Process and Parent. Here are funds that were upgraded and downgraded in 2020.

Upgrades

HDFC Corporate Bond

  • Date of Analysis: December 2020.
  • Rationale: Upgraded People score from Average to Above Average.
  • Analyst Summation: The investment team lays more emphasis on risk control, thereby focusing on balancing safety, liquidity, and return. We think the investment process is thorough and that the manager and team are at home with the process.
  • Analyst Rating: Upgraded to Silver from Bronze for its direct share class. Neutral rating retained for the regular share class.

ICICI Prudential Credit Risk Fund  

  • Date: December 2020.
  • Rationale: Upgraded People and Process score from Average to Above Average.
  • Analyst Summation: With a well-organized team structure and robust investment process that has proven its mettle in tackling riskier and volatile times better, this fund merits an upgrade.
  • Analyst Rating: Direct share class upgraded to Bronze from Neutral. Regular share class rating retained at Neutral.  

ICICI Prudential Medium-Term Fund

  • Date of Analysis: November 2020.
  • Rationale: People Pillar and Process pillar upgraded to Above Average.
  • Analyst Summation: With a well-organized team structure and robust investment process, which has proved its proficiency in tackling riskier and volatile times better, this fund merits an upgrade.
  • Analyst Rating: Direct share class upgraded to Bronze from Neutral. Regular share class rating retained at Neutral.

IDFC Bond Fund - Medium Term Plan

  • Date of Analysis: July 2020
  • Rationale: Upgraded Process pillar to Above Average from Average.
  • Analyst Summation: We draw confidence from fund manager Suyash Choudhary’s presence at the helm. His skills, well-defined strategy, and research-driven approach will hold the fund in good stead going ahead.
  • Analyst Rating: Silver to its direct share class and Bronze to the regular share class.

Mirae Asset Emerging Bluechip

  • Date of Analysis: October 2020.
  • Rationale: Upgraded People pillar to High.
  • Analyst Summation: The fund’s long record of excellence, the tenure and depth of its management team, and its adherence to a research-intensive process hold our conviction in its prospects.
  • Analyst Rating: Upgraded to Gold for direct share class and Silver for regular share class. 

Downgrades  

Aditya Birla Sun Life Midcap Fund

  • Date of Analysis: September 2020.
  • Rationale: Change in fund manager.
  • Analyst Summation: The fund’s long-term performance remains mediocre owing to the multiple manager changes that it saw in the past. Overall, we view the well-thought-out process as a positive.
  • Analyst Rating: Neutral across all share classes. 

DSP Credit Risk Fund

  • Date of Analysis: April 2020.
  • Rationale: Process Pillar downgraded from Average to Low.
  • Analyst View: The last one year was challenging for the fund as it witnessed few downgrades and eventually had to mark down the holdings. There is uncertainty on the fund’s positioning and execution capabilities. The execution remained inefficient which points to an inefficient investment process.
  • Analyst Rating: Downgraded from Neutral to Negative for all share classes. 

Franklin India Bluechip Fund  

  • Date of Analysis: March 2020.
  • Change: Process pillar downgraded from High to Above average. People pillar downgraded from High to Above average.
  • Analyst Summation: The fund must reinvent itself and display the ability to deliver outperformance with a new aggressive investment approach. While this makes a case for a downgrade, it still has many positive attributes-an experienced manager, a stable team, and an investor-centric parent--to merit a positive rating.
  • Analyst Rating: Downgraded from Gold to Bronze for all share classes.

Franklin India Equity Advantage

  • Date of Analysis: September 2020.
  • Rationale: Downgraded Process pillar to Average.
  • Analyst View: The execution needs to be better and there is a scope of improvement on that front.
  • Analyst Rating: Downgraded regular share class to Neutral whereas its direct share class retains Bronze rating.

Franklin India Tax Shield

  • Date of Analysis: September 2020.
  • Rationale: Downgraded Process pillar to Average.
  • Analyst Summation: The strategy could have been executed better since a style agnostic approach should have come in handy in such a scenario. There is scope for improvement on that front.
  • Analyst Rating: Downgraded regular share class to Neutral. 

Franklin India Equity Fund

  • Date of Analysis: March 2020.
  • Rationale: Process pillar downgraded from High to Above average.
  • Analyst Summation: The valuation-conscious approach and inability to play momentum will hold the fund back during speculative or bull markets. Given the current strategy, framework and risks attached, we believe the fund has the ingredients to deliver outperformance over the long term. But that would be accompanied by greater volatility.
  • Analyst Rating: Downgraded from Gold to Silver for all share classes.

Franklin India Prima Fund

  • Date of Analysis: December 2020.
  • Rationale: Downgraded Process score from High to Above Average.
  • Analyst Summation: While the investment strategy is sound, the execution could have been better. The execution lacked in terms of taking prompt corrective measures in cases where the investment thesis hasn’t panned out as expected.
  • Analyst Rating: Downgraded to Silver from Gold for its direct share class. Retained Silver rating for the fund’s regular share class.

HDFC Equity Fund

  • Date of Analysis: June 2020.
  • Rationale: Process pillar downgraded from High to Above Average.
  • Analyst Summation: While fund manager Prashant Jain’s strategy has delivered pleasing results over the long term, it has not been able to fully adapt to changing market dynamics.
  • Analyst Rating: Downgraded to Silver from Gold for both regular and direct share classes.

HDFC Top 100 Fund

  • Date of Analysis: June 2020.
  • Rationale: Process Pillar downgraded from High to Above Average.
  • Analyst Summation: We continue to have conviction in the strategy to deliver outperformance over a market cycle, but that would tag along with relatively higher volatility.
  • Analyst Rating: Downgraded to Silver from Gold for both regular and direct share classes.

HDFC Balanced Advantage  

  • Date of Analysis: September 2020.
  • Rationale: Downgraded Process Pillar to Above Average from High.
  • Analyst Summation: The fund has the means to perform well over the long term but there is enhanced risk in the strategy.
  • Analyst Rating: Downgraded to Bronze from Silver for all share classes.

HDFC Medium Term Debt Plan

  • Date of Analysis: December 2020.
  • Rationale: Downgraded process score from High to Above Average.
  • Analyst Summation: We continue to believe that the investment strategy has the wherewithal to deliver outperformance over the long term; under this new scenario, we would like to see how it stacks up against its peers going ahead.
  • Analyst Rating: Downgraded to Bronze from Silver for the direct share class and Neutral for regular share class. 

Nippon India Income Fund 

  • Date of Analysis: December 2020
  • Rationale: People pillar downgraded from Above Average to Average.
  • Analyst Summation: The fund faces a tough task to reclaim its former position owing to its extremely high expenses and recent change in the portfolio manager.
  • Analyst Rating: Negative for regular share class.

Nippon India Credit Risk

  • Date of Analysis: December 2020
  • Rationale: Change in fund manager.
  • Analyst Summation: There has been a recent change in lead manager. The execution has been inefficient and the fund has witnessed huge redemptions during the tight liquidity situation in the lower-rated bond market.
  • Analyst Rating: Downgraded to Negative for all share classes.

Nippon India Corporate Bond  

  • Date of Analysis: December 2020.
  • Rationale: Change in fund manager.
  • Analyst Summation: We lack confidence in the new manager as he doesn’t have relevant experience managing such a strategy. The high expense ratio for its regular share class also limits our conviction.
  • Analyst Rating: Neutral for all share classes.

Nippon India Large Cap  

  • Date of Analysis: December 2020.
  • Rationale: Downgraded Process score from High to Above Average.
  • Analyst Summation: We continue to draw confidence from the presence of a skilled manager and his strategy to deliver outperformance over a market cycle, but that would tag along with relatively higher volatility.
  • Analyst Rating: Downgraded from Silver to Bronze for all share classes.

UTI Dynamic Bond Fund  

  • Date of Analysis: June 2020.
  • Rationale: Process pillar downgraded from Above Average to Average.
  • Analyst View: The fund has experienced outflows since 2018, initially owing to its underperformance and followed by the fund’s exposure to downgraded papers. The fund’s exposure to stressed papers and the ongoing dialogue with respect to a resolution on them could lead to a delayed realization of investor monies.
  • Analyst Rating: Downgraded from Bronze to Neutral for all share classes.

UTI Bond Fund

  • Date of Analysis: June 2020.
  • Rationale: Process pillar downgraded from Above Average to Average.
  • Analyst Summation: The market volatility, illiquidity, multiple downgrades, and the resultant negative investor sentiment have had a negative impact on the fund’s performance.
  • Analyst Rating: Downgraded from Bronze to Neutral for all share classes.

© 2020 Morningstar. All rights reserved. The Morningstar name is a registered trademark of Morningstar, Inc. in India and other jurisdictions. Research on securities, referred to for the purpose of this document as “Investment Research”, is issued by Morningstar Investment Adviser India Private Limited, which is registered with SEBI as an Investment Adviser (Registration number INA000001357), providing investment advice and research, and as a Portfolio Manager (Registration number INP000006156). For the complete disclaimers, click here.

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nagarajan balasubramanian
Dec 29 2020 11:41 PM
 Thanks. An useful guide.
bala
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