How we categorize our funds

By Morningstar Analysts |  30-03-17 | 
 

Ever since the fund awards, we have been getting a lot of queries on how we categorize our equity funds. Hence, we thought it wise to explain it clearly.

The market capitalization for stocks is defined as per Asia ex-Japan. The current break points are:

market cap

When we categorize funds, we look at the portfolios over a minimum period of three years, and not just the latest portfolio.

  • Morningstar Category: Large-Cap
  • Morningstar Category Index: S&P BSE 100

Large-Cap funds primarily consist of stocks from the top 70% market capitalization of the equity market. These funds invest at least 65% of total assets in Indian equities, and the balance can be invested in other asset classes such as fixed income, gold and overseas equities, among others. Funds in this category would invest at least 65% of their total assets in large-cap stocks.

  • Morningstar Category: Small/Mid-Cap
  • Morningstar Category Index: S&P BSE Mid Cap

Small/Mid-Cap funds primarily consist of stocks from the bottom 30% market capitalization of the equity market. These funds invest at least 65% of total assets in Indian equities, and the balance can be invested in other asset classes such as fixed income, gold and overseas equities, among others. Funds in this category would invest at least 65% of their total assets in small/mid-cap stocks.

  • Morningstar Category: Flexicap
  • Morningstar Category Index: S&P BSE 500

Flexicap funds invest at least 65% of their total assets in Indian equities, and the balance can be invested in other asset classes such as fixed income, gold and overseas equities, among others. Funds in this category would invest not more than 65% of total assets in either large-cap stocks or small/mid-cap stocks.

  • Morningstar Category: ELSS
  • Morningstar Category Index: S&P BSE 200

These funds are notified as Equity Linked Saving Schemes by SEBI under Section 10 (23D). Investments of up to Rs 150,000 in a financial year in these funds are exempt from Income Tax under Section 80C of the Income Tax Act, 1961. Investments in ELSS are subject to a lock-in of three years from the date of investment.

  • Morningstar Category: Sector – Energy
  • Morningstar Category Index: S&P BSE Oil & Gas

Sector – Energy funds invest in companies from the oil and gas, and power sectors. These include companies that produce or refine oil and gas, oil field service and equipment companies, pipeline operators, companies engaged in the mining of coal, companies engaged in generation, transmission, distribution of electricity, companies providing power infrastructure, and manufacturers of equipment required for power generation. These funds invest at least 65% of total assets in Indian equities and at least 50% of total assets in equities from the aforementioned industries.

  • Morningstar Category: Sector – Financial Services
  • Morningstar Category Index: S&P BSE BANKEX

Sector – Financial Services funds invest in industries such as banking, non-banking financial services, broking, exchanges, rating agencies, asset management and insurance. These funds invest at least 65% of total assets in Indian equities and at least 50% of total assets in equities from the aforementioned industries.

  • Morningstar Category: Sector – FMCG
  • Morningstar Category Index: S&P BSE FMCG

Sector – FMCG funds invest in industries such as food and beverages, household and personal products, packaging and tobacco. These funds invest at least 65% of total assets in Indian equities and at least 50% of total assets in equities from the aforementioned industries.

  • Morningstar Category: Sector – Healthcare
  • Morningstar Category Index: S&P BSE Healthcare

Sector – Healthcare funds invest in industries such as biotechnology, pharmaceuticals, research services, home healthcare, hospitals, long-term care facilities, medical equipment and supplies. These funds invest at least 65% of total assets in Indian equities and at least 50% of total assets in equities from the aforementioned industries.

  • Morningstar Category: Sector – Technology
  • Morningstar Category Index: S&P BSE IT

Sector – Technology funds invest in industries such as software, communication equipment, computer hardware, online media, semiconductors and outsourcing service providers such as BPO and KPO. These funds invest at least 65% of total assets in Indian equities and at least 50% of total assets in equities from the aforementioned industries.

  • Morningstar Category: Sector – Infrastructure
  • Morningstar Category Index: S&P BSE 500 India

Infrastructure funds invest primarily in infrastructure and infrastructure related industries such as power, oil and gas, telecom, water, housing, real estate, construction, roads, ports, airports, shipping & ship building, logistics. These funds invest at least 65% of total assets in Indian equities and at least 50% of total assets in equities from the aforementioned industries.

  • Morningstar Category: Equity – Other
  • Funds in this category do not receive a Morningstar Rating™ due to the diverse nature of the constituents.

Equity – Other funds include those funds that invest at least 65% of total assets in Indian equities and cannot be classified in the other equity categories.

  • Morningstar Category: Global – Other
  • Funds in this category do not receive a Morningstar Rating™ due to the diverse nature of the constituents.

Global – Other funds include those funds that invest at least 35% of total assets in instruments issued by overseas i.e. non-Indian companies. In addition, funds that invest at least 35% of total assets in exchange traded funds, fund of funds domiciled outside India are also included in this category

  • Morningstar Category: Sector – Precious Metals

Sector – Precious Metals Sector – Precious Metals funds invest in companies engaged in the areas of mining of precious metals such as gold, silver, platinum, among others. These funds invest at least 65% of total assets in Indian equities and at least 50% of total assets in equities from the aforementioned industries. In addition, funds that invest more than 50% of assets in precious metal-exchange traded funds domiciled in India are also included in this category.

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