Top 5 Equity Mutual Funds for SIP Investments in 2022

Systematic Investment Plan (SIP), a mode of investing in mutual funds, has become a household name today. This is due to the Mutual Funds Sahi Hai campaign launched by the Association of Mutual Funds in India (AMFI).

But bear in mind a fact that not all mutual fund schemes are 'sahi'. Nor can SIP be considered a completely safe investment plan. You cannot avoid the market risk because investments in mutual funds are subject to market risk.

SIP may help to manage the risk to an extent with its integral rupee-cost averaging feature while you endeavour to compound your hard-earned money.

Further, there is no such thing as best SIPs. As an investor, you should evaluate a host of quantitative and qualitative parameters to select the best mutual fund schemes to SIP. Also, recognise your own risk profile to make an appropriate choice.

In this article, we help you zero in on the 5 best equity mutual fund schemes to invest via SIP in 2022.

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Scheme #1: Canara Robeco Bluechip Equity Fund

The large-cap equity fund was launched in August 2010. It currently has an asset size worth Rs 6,020 crore and an expense ratio of 0.38%. The expense ratio is lower than the category average of 1.13%.

It has been one of the consistent schemes. Canara Robeco Bluechip Equity Fund is managed by Mr. Shridatta Bhandwaldar, the Head of Equities at Canara Robeco Asset Management Company, along with his colleague Mr. Vishal Mishra.

The fund has displayed the ability to successfully limit the downside amid market turbulence and bear phases despite being fully invested in equities.

This is mainly because of an effective investment strategy followed and the portfolio constitution of around 50 stocks in which 74% is deployed in largecaps and 9% in midcaps. The fund has refrained from taking any exposure to smallcap as per the portfolio as of 31 January 2022.

The top 10 stock weightage of Canara Robeco Bluechip Equity Fund is 54.4% and includes bluechips and index heavyweights Infosys, ICICI Bank, HDFC Bank, Reliance Industries, State Bank of India, TCS, Larsen & Toubro, Bajaj Finance, Axis Bank, and HDFC.

A well-diversified portfolio and well-managed risk measures have helped the fund clock impressive SIP returns, much better than some of its largecap peers.

A Rs 5,000 monthly SIP in Canara Robeco Bluechip Equity Fund at an appealing 23.0% XIRR in three years, grew to about Rs 2.61 lakh as of 28 February 2022.

Over the longer time period, it has fared better than its benchmark, the S&P BSE 100 - TRI.

If you have an investment time of around 3 to 5 years and a high-risk appetite, you may consider SIPs in Canara Robeco Bluechip Equity Fund. Canara Robeco Mutual Fund as a fund house follows robust investment processes and systems.

Scheme #2: Mirae Asset Emerging Bluechip Fund

For exposure to mid-caps and large-caps in one scheme, Mirae Asset Emerging Bluechip Fund is a worthy choice.

You get the stability of large-cap companies as well as the chance to benefit from the high growth potential of mid-cap companies to boost returns. It comes from a fund house that follows a process-driven approach to fund management.

Incepted originally as a mid-cap biased scheme in July 2010, Mirae Asset Emerging Bluechip Fund was rechristened as a Large & Mid-cap Fund after SEBI's mutual fund categorisation and rationalisation norms came into force.

The fund today manages a massive AUM of Rs 22,097 crore with an expense ratio of 0.70% (lower than the category average expense ratio of 0.98%).

It's managed by a star fund manager, Mr Neelesh Surana who is also the Chief Investment Officer (CIO) at Mirae Asset Investment Managers (India) Private Limited. Ankit Jain is the co-fund manager.

The fund managers look at high growth-oriented stocks across the large-cap and mid-cap segments that are available at fair or attractive valuations.

It follows a combination of a bottom-up and top-down approach to stock picking. It aims to hold a well-diversified portfolio without having any bias towards any particular theme, sector, or style.

Currently, Mirae Asset Emerging Bluechip Fund has around 70 stocks in its portfolio with around 59% in large-cap companies, 39% in mid-caps, and 2% in small-caps.

The top-10 stocks comprise nearly 38% of the overall equity portfolio, It consists of names such as ICICI Bank, HDFC Bank, Infosys, Axis Bank, State Bank of India, Reliance Industries, Max Financial Services, TCS, J.K. Cement, and Gujarat State Petronet.

The fund has exposure to sectors such as banking & financial services, technology, healthcare, auto & auto ancillaries, energy, construction, chemicals, metal & mining, capital goods, consumer durable goods, and fast-moving consumer goods among others.

The portfolio is well-diversified across large-caps, mid-caps, and their respective sectors.

The overall approach of portfolio management has helped Mirae Asset Emerging Bluechip Fund clock striking returns in the Large & Mid-cap Fund category while keeping the risk well within limits.

Across market cycles - bulls and bears - the fund has delivered superior returns. As a result, the SIP returns generated by the fund has been impressive.

A Rs 5,000 monthly SIP in Mirae Asset Emerging Bluechip at remarkable 27.2% XIRR in three years, grew to Rs 2.80 lakh as of 28 February 2022.

The SIP returns generated by Mirae Asset Emerging Bluechip Fund has outperformed the benchmark index, the NIFTY Large Midcap 250 TRI across longer time frames.

When investing in Mirae Asset Emerging Bluechip Fund it is advisable to keep a time horizon of 5 to 7 years and assume high risk. This is because the fund invests in mid-caps as well.

Scheme #3: Axis Midcap Fund

If you want to invest in mid-cap growth companies for potentially high returns, Axis Midcap Fund is a good proposition.

Launched in February 2011, Axis Midcap Fund manages assets worth Rs 16,754 crore with an expense ratio of 0.46% (lower than the category average expense ratio of 0.94%).

Backed by strong investment processes and systems set by the fund house, Axis Midcap Fund under its fund manager, Mr. Shreyash Devalkar, has displayed a commendable performance by investing in quality high growth-oriented mid-cap stocks.

High-quality stocks in the mid and higher mid-cap segment are the ones having the potential to grow cash flows over the medium to long term.

The fund management believes in staying invested in known quality names (irrespective of the sector) where there is earnings visibility. To pick such stocks, the fund mainly follows a bottom-up approach.

Axis Mutual Fund currently holds 61 stocks in its portfolio with around 60% exposure to mid-cap companies, and 40% in larger companies. The portfolio seems well-diversified with top-10 stocks comprising 32.1% of the portfolio. It's comprised of quality names such as Cholamandalam Investment & Finance Co, ICICI Bank, Bajaj Finance, Coforge, Astral, Avenue Supermarts, Mindtree, Mphasis, Tata Elxsi, and Crompton Greaves Consumer Electricals.

The fund has exposure to sectors such as banking & financial services, technology, chemicals, healthcare, auto & auto ancillaries, consumer durable goods, capital goods, construction, and energy among others.

The eye for quality has helped Axis Midcap Fund manage the downside risk and deliver consistent returns across market cycles - bulls and bears.

In fact, it has helped the fund to gain a significant lead over many of its peers. The fund has exposed its investors to lower volatility than its category peers and rewarded investors handsomely.

The SIP returns generated by the fund have been quite extraordinary than many of its peers in the mid-cap Funds category.

A Rs 5,000 monthly SIP in Axis Midcap Fund at remarkable 27.7% XIRR in three years, grew to Rs 2.82 lakh as of 28 February 2022.

The SIP returns have outperformed the benchmark, S&P BSE 150 Midcap TRI, over longer periods.

The growth potential in quality mid-caps could take a long time to yield its true benefits in the form of attractive returns. So make sure you have a longer investment time horizon of 7 to 8 years in mind when investing in Axis Midcap Fund.

Scheme #4: Kotak Small Cap Fund

If you are a very high-risk taker, consider SIP-ping into the Kotak Small Cap Fund.

Incepted in February 2005 as a mid-cap fund, this scheme was recategorised as a small-cap scheme after SEBI's categorisation and rationalisation norms came into force. The fund has an AUM worth Rs 6,811 crore and an expense ratio of 0.49% (lower than the category average expense ratio of 0.75%).

Kotak Small Cap Fund is from a fund house following strong investment processes and systems. It's managed by Mr. Pankaj Tibrewal, a seasoned and star fund manager with over 18 years of experience in fund management. He ranks among the top-10 equity fund managers as per Citywire's rating.

Kotak Small Cap Fund, in line with its mandate, invests nearly 70% of its net assets in smallcaps, 22% in midcaps, and around 3% in largecaps. The fund holds a total of 70 stocks in its portfolio as of 31 January 2022.

The top-10 equity holdings constitute 35.5%. These include names such as Century Plyboards India, Sheela Foam, Carborundum Universal, Galaxy Surfactants, Somany Ceramics, Amber Enterprises India, Persistent Systems, Supreme Industries, Cyient, and Ratnamani Metals & Tubes.

The fund has invested in sectors such as chemicals, construction, metals & mining, energy, capital goods, consumer durables, fast-moving consumer goods, technology, healthcare, banking & financial services, and auto ancillaries among others. So, it is well-diversified and sector agnostic.

That said, given the fortunes of the scheme is mainly linked with small-cap stocks, Kotak Small Cap Fund is not for the faint-hearted. The scheme is exposed to the very high risk of small-cap stocks.

Nevertheless, it has rewarded its investors when it comes to returns i.e. it has successfully generated alpha for investors.

A Rs 5,000 monthly SIP in Kotak Small Cap Fund at extraordinary 44.9% XIRR in three years, grew to about Rs 3.81 lakh as of 28 February 2022.

The SIP returns have outperformed the benchmark, Nifty Smallcap 250 - TRI, across time periods.

However, when you are considering investing in this fund, keep an investment time horizon of 7 to 8 years given the possible high risk involved in small-caps in the short-term to medium-term.

Small-caps, like the mid-caps, may take a long time to yield their true benefits in the form of attractive returns.

Scheme #5: UTI Flexi Cap Fund

The performance of companies/stocks from different market capitalisations, i.e. large-caps, mid-caps, and small-caps, may vary as per the market conditions.

To mitigate the risk of investing in one particular market cap segment, it makes sense to take exposure across market capitalisations with full flexibility. Owning a Flexi-cap fund in your portfolio provides this flexibility.

UTI Flexi Cap Fund is a meaningful choice in the Flexi-cap Fund category. Incepted in May 1992 as UTI Equity Fund was rechristened as UTI Flexi Cap Fund after SEBI recategorisation and rationalisation norms came into force. The fund is from the stable of one of the oldest fund houses with robust investment processes and systems.

It has an AUM worth Rs 24,638 crore and an expense ratio of 0.93% (slightly lower than the category average expense ratio of 0.94%).

Mr. Ajay Tyagi, the Head of Equities at UTI Mutual Fund is the fund manager of UTI Flexi Cap Fund. He has decades of rich experience in equity research and fund management at UTI Mutual Fund. Mr. Tyagi has won many awards and accolades for his performance both domestically and globally.

UTI Flexi Cap Fund follows a bottom-up stock selection process with well-defined metrics of free cash flows, capital efficiency and the ability to compound earnings. Currently, as per the portfolio as of 31 January 2022, UTI Flexi Cap Fund holds around 63% of its net assets in largecaps, 32% in midcaps, and 4% in smallcaps.

The fund currently holds a total of 63 stocks in its portfolio as of 31 January 2022. The top-10 stocks constitute 40.3% of the portfolio. These are Bajaj Finance, Larsen & Toubro Infotech, HDFC Bank, Infosys, Kotak Mahindra Bank, ICICI Bank, HDFC, Avenue Supermarts, Mindtree, and Astral.

The fund's exposure to sectors includes banking & financial services, technology, healthcare, chemicals, auto & auto ancillaries, capital goods, construction, metals & mining, consumer durables, fast-moving consumer goods, and textiles, among others.

It's due to its quality portfolio backed by an astute strategy and nimble approach, the UTI Flexi Cap Fund has displayed its ability to manage the downside risk. At the same time, the fund participated well during the recovery phases of the equity market. Hence it has been able to show a consistent performance across market cycles - bulls and bears.

The fund has exposed its investors to average risk (in line with its category average) and rewarded them with attractive returns.

A Rs 5,000 monthly SIP in UTI Flexi Cap Fund at appealing 25.3% XIRR in three years, grew to about Rs 2.71 lakh as of 28 February 2022.

The SIP returns have outperformed the benchmark, Nifty 500 - TRI, across longer time periods.

Hence, when investing in UTI Flexi Cap Fund keep an investment time horizon of at least 5 years and be ready to assume high risk.

To conclude...

If you invest in the best mutual funds with a consistent performance track record supported by quality portfolio characteristics, SIPs can prove to be a rewarding experience.

That said, make it a point to review your mutual fund portfolio regularly (once in six months). This will ensure you are on the right path to wealth creation and building the required corpus to fulfil your financial goals.

Happy Investing!

Disclaimer: This article has been authored by PersonalFN exclusively for Equitymaster.com. PersonalFN is a Mumbai-based Financial Planning and Mutual Fund research firm known for offering unbiased and honest opinions on investing.