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Changing Fortunes

The downturn has been good for some equity funds, while some other got thrashed, as their ratings display

The downturn has been good for some equity funds. In the sense, they never set trail blazing returns when the market was on fire. But they have managed to emerge as winners, or rather the least of the losers, when the bears took over. On the other hand, we have those that astounded during the bull run only to get soundly thrashed later. Naturally, as the performance fluctuates, the star rating that Value Research assigns also changes.

The risk-adjusted, return calculation results in a rating on a scale of one-to-five stars. The return is based on the historic performance of a minimum of three years. Here we compare the latest ratings (February 2009) for open-ended funds under the equity diversified and tax-planning category with those of December 2007.

15 funds gained 2 stars
The rating of the funds as on December 2007, which was the end of the bull run, indicated that these funds failed to impress when compared to their peers. So basically, these funds were laggards or middle-of-the-road performers during the bull run. It is their ability to contain downside in a bear market that has earned them the stars.

Out of the total of 17 funds, four were 3-star rated but have now joined the elite group of 5-star funds. There are seven 2-star funds that now boast of a 4-star rating while four 1-star funds are now 3-stars. Let’s look at the 5-star funds.

ICICI Prudential Dynamic has slipped all the way down to a 2-star rating in November 2007 from a 4-star. It then crept up to gain a 3-star rating for a brief period of three months till February 2008 before bagging the 4-star rating fund the next month and then a 5-star rating since January 2009.

DWS Investment Opportunities got rated for the first time in September 2007 and was a 3-star fund till January 2008. It earned a 4-star rating in February 2008 and since April 2008 has been a 5-star fund. DWS Alpha Equity gained a 5-star rating in August 2008, slipped to a 4-star in October 2008 for a month before regaining its 5-star status the very next month.

Sahara Growth got a 5-star rating for the first time in its rating history in November 2008 and has maintained it since then.

2 funds gained 3 stars
The funds that gained the maximum stars are Birla Sun Life Dividend Yield Plus and Taurus Tax Shield. Birla Sun Life Dividend Yield Plus has been a 1-star fund for most of its rating history. It was in February 2008 that it earned a 2-star rating which it maintained till September. It moved up to a 4-star rating in February 2009.

Taurus Tax Shield gained its 4-star rating in January 2009. A move from its 1-star rating since December 2007.

The losers
There were nine losers and all dropped by two stars simply because they could not hold their own in a market downside. Sundaram BNP Paribas India Leadership, a 4-star fund dropped to a 2-star rating while five funds from the category of 5-star funds were downgraded to 3-star. DSPBR T.I.G.E.R., an infrastructure fund, was 5-star till October 2008 but is now a 3-star.

Down to 1-star There are three funds that neither outshone their peers in the rising market nor were able to shield their investors in a market downturn. They slipped from a 3-star rating to a 1-star.