5 Best Equity Mutual Funds for SIP in 2023 - Top Performing Mutual Funds in India for SIPs

Dec 09, 2022 / Reading Time: Approx. 20 min

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Are you looking for the best equity mutual funds for SIPs in 2023 or top-performing SIPs in India today?

Yes? Well before I reveal the list of the best SIPs to you, allow me to give you a backdrop of how the year 2022 has been, and then tell you how the year 2023 is likely to be for Indian equity markets.

 

How has the year 2022 been for Indian equities?

The year 2022 started on a blissful note for Indian investors with equity markets trading near their lifetime high levels and the economy emerging steadily from the pandemic shocks. However, the first six months of the year turned out to be quite painful for the markets, especially after a full-blown war between Russia and Ukraine further complicated the geo-political crisis.

The subsequent western embargo on Russian oil and extended lockdowns in China exacerbated the inflationary pressure, and consequently to control inflation, central banks raised interest rates almost synchronously. With yields moving up, Foreign Portfolio Investors (FPIs), too, began to exit emerging markets and the Indian rupee to came under pressure.

While in the second half of the year we have seen a dramatic market recovery of Indian bellwether making a new lifetime high, the on-ground situation hasn't improved much. Perhaps the markets have factored in the worst or confident of the Indian economy at large.

Going by the market reaction, it appears that the Indian equity market isn't expecting a serious or prolonged impact of a potential global recession in 2023 as warned by the World Bank and the IMF.

How is the equity market scenario likely to be in 2023?

The World Bank is confident that a global slowdown will have a much lower impact on India compared to the other emerging markets. Recently, the World Bank upgraded India's GDP growth forecast for FY23 to 6.9% from the earlier estimate of 6.5% released in October 2022.

The RBI governor, Mr Shaktikanta Das sees a low risk of a recession in 2023 for India since it is differently paced.

Good prospects for the agriculture sector, India's thrust on manufacturing, import substitution, improving consumer sentiment, falling crude oil prices, surplus liquidity, comfortable forex position and impressive credit growth are expected to augur well for the Indian economy in the future.

Nevertheless, owing to accentuated headwinds from protracted geopolitical tensions, tightening financial conditions, and external demand, the RBI in its last bi-monthly monetary policy review meeting has marginally slashed its FY23 real GDP growth estimates to 6.8% from the earlier projection of 7.0%

The inflation conundrum, too, looks far from over with supply-chain equations getting redefined. It appears that inflation is likely to be structural for longer than anticipated earlier. If the geopolitical situation turns adverse, supply chain disruptions could keep food and fuel prices higher. Plus, the risk of 'imported inflation' owing to a weak Indian rupee will need to be watched closely.

By and large, the pace of global monetary policy tightening, global growth and inflationary trends may have a bearing on India's economic growth. I maintain that India may not remain fully insulated or immune to global macroeconomic conditions.

The pronouncements of the Union Budget 2023 -- the last full-year budget of the Modi 2.0 government before the 2024 Lok Sabha elections -- also requires to be read carefully. If higher budgetary spends are announced, it may bode well for the economy. But with it, how the government walks the fiscal consolidation path also remains to be seen. The government has been targeting a deficit of 6.4% in the current fiscal and aims to bring it down to 4.5% by FY26.

 

Does it make sense to SIP into equity mutual funds in 2023? 

Since markets hover at record-high levels and valuations aren't cheap, the earnings recovery is going to be the most crucial factor for Indian markets in 2023. Given that, you need to walk the path to wealth creation carefully by choosing the best equity mutual funds.

[Read: 7 Best Mutual Funds to Invest in 2023]

I am glad that many thoughtful mutual fund investors are taking the SIP route when investing in mutual funds.

Graph 1: Trends in Monthly SIP Collections

Graph 1
Data as of 31st October 2022
(Source: AMFI, PersonalFN Research)
 

It's noteworthy that in FY2016-17, the Indian mutual fund industry had a SIP book of Rs 43,921 crore which swelled to Rs 1,24,566 crore in FY22.

At the beginning of FY23, India had 5.39 crore SIP accounts which grew to 5.93 crores by October 2022. And in the first seven months of FY23, the mutual fund industry has collected Rs 87,275 crore via the SIP route. As of October 2022, the SIP AUM stands at Rs 6,64,781 crore.

Now, while SIPs cannot be construed as a safe investment plan, they can help you manage the risk to an extent with its integral rupee-cost averaging feature, free you from timing the market, and help you focus on the envisioned to financial while you endeavour to compound your hard-earned money.

Watch this video on the 5 benefits of starting a SIP.

 

You can generate a corpus of staggering Rs 7 crore over 30 years by starting a monthly SIP of Rs 20,000 in the best mutual fund schemes, assuming a moderate return of 12% CAGR.

What you require are the best equity mutual fund schemes to SIP evaluating a host of quantitative and qualitative parameters.

5 Best Equity Mutual Funds for SIP in 2023 - Top Performing Mutual Funds in India for SIPs
(Image source: freepik.com)
 

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Which are the 5 best equity mutual funds to SIP in 2023?

I have selected one equity mutual fund scheme each from five different sub-categories: flexicap, largecap, large & midcap, midcap, and a contra/value-oriented scheme.

Best Equity Mutual Fund for SIP in 2023 #1 - Canara Robeco Flexi Cap Fund

Launched in September 2003, Canara Robeco Flexi Cap Fund aims to generate capital appreciation by investing in equity and equity-related securities.

As of 31st October 2022, the fund had an AUM (Asset Under Management) of Rs 8,677 crore and the expense ratio of its direct plan was 0.49%.

Mr Shridatta Bhandwaldar, the Head of Equities at Canara Robeco Asset Management Company, has been the fund manager of Canara Robeco Flexi Cap Fund.

Canara Robeco Flexi Cap Fund has consistently identified attractive opportunities across timeframes and market phases. It has refrained from constant churning of the portfolio and relied on the long-term prospects of stocks. As a result, the fund has generated superior risk-adjusted returns as compared to its benchmark and many of its category peers.

As of 31st October 2022, Canara Robeco Flexi Cap Fund held a well-diversified portfolio of 54 stocks. It largely remained invested in equity assets which accounted for 95.5% of the portfolio. With a weightage of 72.5%, largecaps constituted the core portfolio of the fund while midcaps and smallcaps accounted for 21.2% and 1.9% of the portfolio respectively.

The index heavyweights dominated its top-10 holdings and accounted for 49.9% of the portfolio including the likes of ICICI Bank, HDFC Bank, Infosys, Reliance Industries, Axis Bank, State Bank of India, Hindustan Unilever, Larsen & Toubro and Bajaj Finance amongst others.

The fund held 4.5% in cash and cash equivalent assets. The presence of Tri-Party Repo (TREPS) suggests that the fund manager has kept cash handy to take care of redemptions as well as capitalise on sudden opportunities presented by the market.

Graph 2: SIP Returns of Canara Robeco Flexi Cap Fund

Graph 2
Data as of 5th December 2022
The growth option and Direct Plan of the scheme are taken into consideration
(Source: ACE MF, PersonalFN Research)
 

A monthly SIP of Rs 5,000 in Canara Robeco Flexi Cap Fund would have fetched you 20.6% XIRR returns over the last three years, thereby building a corpus of Rs 2.5 lakh as of 5th December 2022.

Best Equity Mutual Fund for SIP in 2023 #2 - ICICI Prudential Bluechip Fund

Launched in May 2008, ICICI Prudential Bluechip Fund aims to generate long-term capital appreciation and income distribution to investors from a portfolio that is predominantly invested in equity and equity-related securities of largecap companies.

As of 31st October 2022, the weightage of largecaps, midcaps and smallcaps was 81.9%, 8.2% and 0.6% respectively. A total of 69 stocks are held in its portfolio which together made up 90.7% of its portfolio.

The top 10 holdings comprised ICICI Bank, Reliance Industries, HDFC Bank, Infosys, Larsen & Toubro, Axis Bank, Bharti Airtel, SBI Life Insurance Company, Maruti Suzuki India and Ultratech Cements.

Besides holding frontline index stocks in its portfolio, the fund also invests in beaten-down stocks and does not shy away from taking contra bets on themes/sectors as well as on individual companies.

The fund's high-conviction bets have worked well so far. ICICI Prudential Bluechip Fund has outperformed its peers as well as its benchmark index quite consistently.

Jointly managed by Mr Anish Tawakley (Deputy CIO and Head Research), Priyanka Khandelwal and Vaibhav Dusad, ICICI Prudential Bluechip Fund has rewarded its investor well on a risk-adjusted basis.

The AUM of ICICI Prudential Bluechip Fund is Rs 34,823 crore as of 31st October 2022 and its expense ratio was 1.07%.

The cash and cash equivalent component accounted for 8.1% of the portfolio.

Graph 3: SIP Returns of ICICI Prudential Bluechip Fund

Graph 3
Data as of 5th December 2022
The growth option and Direct Plan of the scheme are taken into consideration
(Source: ACE MF, PersonalFN Research)
 

A monthly SIP of Rs 5,000 in ICICI Prudential Bluechip Fund has generated 23.2% XIRR returns over the last three years thereby resulting in the creation of a corpus of Rs 2.62 lakh as of 5th December 2022.

Best Equity Mutual Fund for SIP in 2023 #3 - Kotak Equity Opportunities Fund

Launched in September 2004, Kotak Equity Opportunities Fund aims to generate capital appreciation from a diversified portfolio of equity and equity-related securities. The Scheme invests predominantly in a mix of large and midcap stocks from various sectors, which look promising in the growth pattern of the economy.

Following a blended strategy of top-down and bottom-up, Kotak Equity Opportunities Fund's portfolio holding traits are fairly constant which hints at its long-term orientation.

As of 31st October 2022, Kotak Equity Opportunities Fund held a well-diversified portfolio of 63 stocks. Largecaps accounted for 55% of the portfolio while the weightage of midcaps and smallcaps was 36.4% and 5% respectively.

The top-10 holdings comprise ICICI Bank, State Bank Of India, Axis Bank, Reliance Industries, Larsen & Toubro, SRF, Infosys, Maruti Suzuki India, and ITC among others.

In recent times, the fund has increased its exposure to financials and PSU companies. Both these themes have done well during the market recovery phase of the past few months.

The AUM of Kotak Equity Opportunities Fund was Rs 11,370 crore as of 31st October 2022 and the scheme had an expense ratio of 0.59%.

Mr Harsha Upadhyaya (CIO-equity and President at Kotak Mahindra AMC) has been the fund manager of Kotak Equity Opportunities Fund delivering consistent performance and has managed to outperform its benchmark on a risk-adjusted basis.

Graph 4: SIP Returns of Kotak Equity Opportunities Fund

Graph 4
Data as of 5th December 2022
The growth option and Direct Plan of the scheme are taken into consideration
(Source: ACE MF, PersonalFN Research)
 

A SIP of Rs 5,000 per month has generated 23.4% XIRR returns over the last three years, thus fetching Rs 2.63 lakh as of 5th December 2022.

Best Equity Mutual Fund for SIP in 2023 #4 - PGIM India Midcap Opportunities Fund

Launched in December 2013, PGIM India Midcap Opportunities Fund aims to generate long-term capital appreciation by predominantly investing in equity and equity-related instruments of midcap companies.

As of 31st October 2022, the fund has an asset base of Rs 7,257 crore. Its expense ratio of 0.38% has been extremely competitive, especially considering the midcap nature of the fund.

Mr Aniruddha Naha, Puneet Pal and Vivek Sharma have been jointly managing PGIM India Midcap Opportunities Fund.

As of 31st October 2022, a portfolio of 49 stocks had a total equity exposure of 96.3%. Within equity assets, the fund's allocation to midcaps was 70.3% while that to largecaps and smallcaps was 10.9% and 15.1% respectively. The remaining are cash and cash equivalent assets held to take care of liquidity requirements.

The Fund's top-10 holdings are TVS Motor Company, ICICI Bank, The Indian Hotels Company, ABB India, Timken India, Cummins India, Jubilant FoodWorks, Aditya Birla Fashion and Retail, Dalmia Bharat and CCIL, which collectively comprise nearly 36% of the portfolio.

Making the most of thematic opportunities and sector rotation moves, PGIM India Midcap Opportunities Fund has generated attractive returns for its investors across timeframes.

Graph 5: SIP Returns of PGIM India Midcap Opportunities Fund

Graph 5
Data as of 5th December 2022
The growth option and Direct Plan of the scheme are taken into consideration
(Source: ACE MF, PersonalFN Research)
 

A SIP in PGIM India Midcap Opportunities Funds has yielded 36.6% XIRR over the last three years. If you opted for a monthly SIP of Rs 5,000 three years ago, it could have helped you build a corpus of 3.29 lakh as of 5th December 2022.

Best Equity Mutual Fund for SIP in 2023 #5 - SBI Contra Fund

Launched in July 1999, SBI Contra Fund aims to provide investors with opportunities for long-term capital appreciation through active management of investments following a contrarian investment strategy.

Following the contrarian approach, SBI Contra Fund has outperformed its benchmark index across timeframes. Being true to its label, the fund has demonstrated boldness by increasing allocation to cash and cash equivalent assets even during the euphoric phases. At the same time, SBI Contra Fund has invested in less popular themes/sectors and companies across the market cap curve.

As of 31st October 2022, SBI Contra Fund held 74 stocks in its portfolio. Owing to expensive valuations and challenging economic conditions, SBI contra Fund has held a moderate equity exposure of 76% and the remaining 24% are debt, cash and cash equivalents and other assets.

The top-10 holdings as of October 31, 2022, comprise of stocks such as ICICI Bank, HDFC Bank, Infosys, Tube Investments of India, State Bank of India, HCL Technologies, Aster DM Healthcare, ITC, Axis Bank, and Tech Mahindra.

Over the last few months, the fund has increased its exposure to beaten-down financial stocks and invested selectively in cyclicals.

As of 31st October 2022, the fund had an AUM of Rs 6,694 crore and its expense ratio was 1.04%. Mr Dinesh Balachandran has been the fund manager of SBI Contra Fund since May 2018 and has rewarded investors well on risk-adjusted returns.

[Read: Are You Setting Your Risk-Return Expectations Right While Investing in Mutual Funds?]

Graph 6: SIP Returns of SBI Contra Fund

Graph 6
Data as of 5th December 2022
The growth option and Direct Plan of the scheme are taken into consideration
(Source: ACE MF, PersonalFN Research)
 

A SIP in SBI Contra Fund has yielded 37.2% XIRR returns over the last three years. In other words, a monthly SIP of Rs 5,000 in the SBI Contra Fund started three years ago would have helped you garner Rs 3.33 lakh as of 5th December 2022.

What should be your investment horizon for SIPs in best equity mutual funds?

The longer the SIP duration is, the better could be outcomes for you. Ideally, 3-5 years is a minimum time horizon for SIP-ping in equity mutual funds. And in the case of midcap funds and contra/value-oriented schemes, you should stick to your SIPs for longer, say 7-10 years, since the schemes belonging to these categories may take longer to perform to their true potential.

To yield the best return, as far as possible opt for the Direct Plans to SIP in equity mutual fund SIPs in 2023 and beyond. The lower expense ratio of a Direct Plan helps enhance the portfolio returns than that of the Regular plan.

If you wish to know which mutual funds should you invest in based on your financial goals and the time in hand to achieve them, use PersonalFN's SMART Fund Explorer.

All you need to do is enter details about your goal, such as the type of goal (buying a home, retirement, etc.), the number of years to goal, the amount required, and the lump sum and/or SIP investment amount you can contribute, and the SMART Fund Explorer will suggest you mutual fund schemes (including debt schemes and gold) indicatively considering the risk.

At PersonalFN, we apply a host of qualitative and quantitative parameters using the S.M.A.R.T score matrix helping you zero in on the best mutual fund schemes.

S - Systems and Processes

M - Market Cycle Performance

A - Asset Management Style

R - Risk-Reward Ratios

T - Performance Track Record

The stringent process has helped our valued mutual fund research subscribers to own some of the best mutual fund schemes in their investment portfolio with a commendable long-term performance track record.

If you are serious about investing in a rewarding mutual fund scheme, consider using PersonalFN's SMART Fund Explorer today!

Happy Investing!

 

Warm Regards,
Rounaq Neroy
Editor, Daily Wealth Letter



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