Sensex is Near its Lifetime High! Best Equity Mutual Funds to Invest in Now

Nov 03, 2021

Sensex is Near its Lifetime High! Best Equity Mutual Funds to Invest in Now

Irrespective of whether you are a stock trader or a mutual fund investor, the secret to creating wealth in the stock market remains the same - 'Buy when others are greedy and sell when they are fearful'. But with the S&P BSE Sensex hitting new highs every other day, should you be greedy or fearful?

What should a mutual fund investor do?

Is it time to book profits from the best equity mutual funds now that Sensex is at a lifetime high?

Absolutely not!

You see, the 'buy when others are greedy and sell when they are fearful' rule is grossly misinterpreted. Otherwise why would Warren Buffett hold on to shares of Coca-Cola for 32 years? In those 32 years, the markets must have been extremely overvalued and jubilant on multiple occasions. So, why did Warren Buffett not stick to his own investment advice? Why did he continue buying Coca-Cola stocks even when the markets were overvalued? Shouldn't he have been fearful?

The point that we are trying to drive home is simple: Forget about the market highs. Don't listen to the baseless chatter that the Sensex is extremely overvalued. Zone out the so-called market experts predicting doomsday.

Yes, the Sensex is currently in uncharted territory, and a correction seems imminent. This is not a discovery of a lifetime; it is simply a great example of how the stock market is supposed to work.

If investors stopped investing every time the Sensex hit a lifetime high, they would end up creating a pile of short-term capital gains tax and not wealth.

So, how do you keep your head up, while others around you are losing theirs?

Find your Coca-Cola!

Yes, as a mutual fund investor, your job is simple - Find and invest in the best equity mutual funds and then hold them for the long-term, irrespective of whether the Sensex is hitting lifetime highs or lifetime lows. Investing in the best equity mutual funds for the long-term is the sure-shot, not-so-secret formula to creating wealth in mutual funds.

While the rule of creating wealth in mutual funds is simple, it is the execution that may give you sleepless nights. As per SEBI statistics, as of July 2021, there are nearly 355 equity mutual funds in India, divided among 11 categories.

Which category should you pick?

Which is the best equity mutual fund in the said category?

Most importantly, what qualities must best equity mutual funds possess?

A typical mutual fund investor might have the following filters while shortlisting the best equity mutual funds -

  • High AMC pedigree - meaning the fund should follow robust investment processes and systems

  • Highest return in the respective sub-category

  • Respectable AUM

  • Low expense ratio etc.

Seems like an adequate filtering process, doesn't it? Unfortunately, the very simplicity of this filtering process is its Achilles' heel. Remember, returns generated by a fund are not steady nor are they guaranteed. Even the best equity mutual funds will have periods of poor performance. Here's a real-life example: Axis Bluechip Fund is one of the best equity mutual funds in India today. Every research house is going gaga over the fund and it is a 5-star rated fund. But this wasn't always the case earlier.

The Axis Bluechip Fund struggled to make decent returns for its investors in the beginning. Between 31st December 2010 and 2012, Axis Bluechip Fund generated a return of 2.03%. In contrast, during the same time period, HDFC Top 100 Fund, a stalwart of the 2000-era generated a CAGR of 32.43%! But now look at how the tables have turned. Today, HDFC Top 100 Fund is a SELL on the majority of mutual fund advisory platforms. Hence, contrary to popular belief, the best equity mutual funds aren't necessarily the ones that always generate the highest returns for you. So, the point to note is past returns are not indicative of future returns.

Also, neither do the best equity mutual funds come from the biggest asset management companies (AMC) or mutual fund houses with mammoth AUMs. This is especially true for Mirae Asset Hybrid Equity Fund, one of the best aggressive hybrid funds in India. PersonalFN had recommended this fund as part of its undiscovered funds' portfolio for 2019. Its AUM as of April 2019 was a mere Rs 1,842 crore. And two years down the line, as of September 2021, its AUM stood at Rs 6,109 crore as a function of its appealing track record that attracted many investors. That said, this increase in the AUM of Mirae Asset Hybrid Equity Fund is nothing in comparison to the AUM of Rs 18,908.77 crores of HDFC Hybrid Equity Fund as of September 2021.

The chart below shows the AUM and 5-year return comparison of Mirae Asset Hybrid Equity Fund against other aggressive hybrid funds.

Graph 1: Performance V/s AUM of Aggressive Hybrid Funds

Graph 1: Performance V/s AUM of Aggressive Hybrid Funds
*AUM as of September 2021. **5-year returns as of 2nd November 2021.
(Source: ACE MF, PersonalFN Research)

Despite having the lowest AUM, Mirae Asset Hybrid Equity Fund has managed to generate the second highest CAGR return of 16.62% (as of 2nd November 2021) in the hybrid fund category and has emerged as one of the best aggressive hybrid funds.

[Read More: Best Aggressive Hybrid Mutual Funds to Invest in 2021]

Remember, the best equity mutual funds aren't those that have mammoth AUMs or come from the biggest AMCs. Best equity mutual funds come from fund houses that hold a worthy underlying portfolio by following a notable investment strategy backed by robust investment processes and systems.

Now that we have proved what qualities best equity mutual funds don't possess, let us look at the characteristics of the best equity mutual funds for long-term wealth creation.

Characteristics of the Best Equity Mutual Funds

  • The best equity mutual funds must protect against the downside risk. When the stock market rallies, even a fundamentally poor fund can generate superior returns. That's why it is said, a rising tide lifts all boats.

    Don't let the short-term market-induced performance fool you. The best equity mutual funds must be able to outperform in a rising market, but most importantly they must protect your downside risk when the market is falling. Thus always check the performance across market phases (bulls and bears) and not just across the time periods.

    UTI Flexi-cap Fund is one of the best flexi-cap mutual funds in India. The reason why UTI Flexi-cap Fund is one of the best equity mutual funds is because of its ability to protect the downside risk. The graph below shows the performance of UTI Flexi-cap Fund against Nifty 500 -TRI during bear markets.

    Graph 2: Performance of UTI Flexi-cap Fund across Bear Markets

    Graph 2: Performance of UTI Flexi-cap Fund across Bear Markets
    (Source: ACE MF, PersonalFN Research)

    Remember, even the best equity mutual funds are not immune to market falls. So, if you search for equity mutual funds which do not fall even when the overall market is down, then you'll keep on searching forever and not find anything. Instead, look for equity mutual funds that have fallen less than their respective benchmark index.

    In the graph above, UTI Flexi-cap fund fell by 20.11% between 5th November 2010 to 20th December 2011 while its benchmark index Nifty 500 - TRI fell by 28.17% in this bear market phase. Remember, best equity mutual funds are those that can consistently protect the downside risk like UTI Flexi-cap Fund has managed to accomplish against Nifty 500 -TRI.

  • Best equity mutual funds don't come from star fund managers. They are a result of robust investment processes and systems being followed by the fund house and the fund manager adhering to it. While evaluating the best equity mutual funds, at PersonalFN we focus on fund processes and not fund managers. At the end of the day, fund managers are employees of the AMC and can shift from one AMC to another in lieu of lucrative offers. This does not mean that you should switch your fund every time the fund manager changes. Remember, best equity mutual funds are those whose investment mandate and management style is based on time-tested strategies and not fund manager hunches.

Now that you know what to look for and avoid when selecting the best equity mutual funds, let us now unveil the 5 best equity mutual funds to invest when the S&P BSE Sensex is at 60,000. These best equity mutual funds come from 5 best, most appropriate, lucrative mutual fund categories when Sensex is at 60,000.


Before we reveal the list of best equity mutual funds to buy when the Sensex is at 60,000, let us validate our selection of these five mutual fund categories with this analogy. Creating a mutual fund portfolio is similar to creating a cricket team. Think of yourself as the captain of this team. Even if you are playing a One Day International (ODI 50-overs), will you only select the big hitters like Hardik Pandya? Would you not want to also bring in a Shikhar Dhawan or Ajinkya Rahane for some stability? So, while it is tempting to add a small-cap fund to the portfolio, you need to ask yourself - Are you playing a T-20 or an ODI?

In any case, there's a limit to the risk you can take in your portfolio. So, irrespective of your risk profile, PersonalFN always recommends allocation to Large-cap Funds even though large-cap stocks may rise strikingly in a stock market rally. So, while they will generate lower returns than midcap funds, they will offer you a safety net, which is paramount when investing for the long haul.

[Read More: Best Large Cap Mutual Funds to Invest in 2021]

Midcap funds and Flexi-cap funds are the big hitters of your portfolio. They will drive the maximum growth of your portfolio as Sensex scales new highs in the future. But keep in mind that midcap stocks belong to lesser-known companies which are yet to experience their growth spurt. They do not sit on piles of cash or have fixed cash flows as large-cap stocks do. So, there is a significant risk in investing in mid-caps. Thus, you should ideally limit your exposure to quality midcap mutual funds to 20%-25% of your mutual fund portfolio.

[Read More: Best Midcap Mutual Funds to Invest in 2021]

Another unpopular mutual fund category that we are recommending is Value Funds. Recall that one of the key characteristics of the best equity mutual funds is that they should protect the downside risk. Value funds invest in stocks that are trading below their intrinsic value. Hence, value stocks have unlimited upside when the market rallies as they are generally beaten down in the market. Hence, we would recommend 5%-10% exposure to value funds if you are creating a long-term portfolio near market highs.

[Read More: Best Value Funds to Invest in 2021]

With these five categories in mind, let us finally take a look at the best equity mutual funds to invest in when Sensex is at lifetime highs.

Best Equity Mutual Funds - Sensex at Lifetime High

Category Best Equity Mutual Funds 1-Year 3-Years 5-Years AUM (Rs in crore) Expense Ratio
Large-cap Canara Robeco Bluechip Equity Fund 51.7% 25.9% 18.7% 4,702 0.35%
Mid-cap DSP Midcap Fund 51.9% 25.1% 16.1% 14,161 0.77%
Aggressive Hybrid SBI Equity Hybrid Fund 44.8% 19.8% 14.5% 47,470 0.90%
Value Fund UTI Value Opportunities Fund 59.0% 22.9% 15.8% 6,623 1.27%
Flexi-cap Fund Parag Parikh Flexi Cap Fund 64.6% 31.2% 22.7% 16,076 0.85%
NAV data as of 1st November 2021; portfolio data as of 30th September 2021.
(Source: Ace MF, PersonalFN Research)

This concludes our discussion on the best equity mutual funds to invest in when the equity markets are at a high. But what is the definition of 'high'? We are sure that in 2007-08 when Sensex was at 21,000 points, the majority thought: "This is it. It can't get any higher than this."

But here we are in 2021, witnessing the S&P BSE Sensex scale 60,000 points.

So, you see, market highs and lows are part of the game. You cannot avoid getting wet if you want to become a swimmer, right? Similarly, you cannot avoid market ups and downs if you want to create long-term wealth in the market. So, the only way out is, invest in the best equity mutual funds irrespective of whether the market is at lifetime highs or lows.

If you are looking to add quality mutual fund schemes to your investment portfolio, subscribe to PersonalFN's premium research service, FundSelect.

PersonalFN's FundSelect service provides insightful and practical guidance on which mutual fund schemes to Buy, Hold, and Sell.

We will also help you choose some of the best Equity Linked Saving Schemes (ELSS) for your tax-saving with PersonalFN's premium research service, FundSelect.

At PersonalFN we follow a S.M.A.R.T Score Matrix, wherein we evaluate the following:

S - Systems and Processes

M - Market Cycle Performance

A - Asset Management Style

R - Risk-Reward Ratios

T - Performance Track Record

This 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.

Currently, with the subscription to FundSelect, you could also get free access to PersonalFN's Debt Fund recommendation service DebtSelect.

Under DebtSelect, we give high weightage to schemes displaying worthy portfolio characteristics. We avoid debt mutual fund schemes that hunt for higher yields by taking undue credit risk with substantial exposure in instruments issued by private issuers.

PersonalFN's FundSelect service is apt if you are looking for insightful guidance and recommendations on some worthy mutual funds.

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Happy Investing!

Warm Regards
PersonalFN Content & Research Team


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