One of India’s premier ratings agencies, Morningstar, has released a list of funds whose ratings it has suspended following the SEBI’s new classification came into effect.
The eight funds whose ratings are suspended include Reliance Balanced Advantage Fund, Franklin India Corporate Debt Fund, Principal Credit Risk Fund, JM Dynamic Debt Fund, Invesco India Corporate Bond Fund, Taurus Discovery (Midcap), ICICI Prudential Smallcap and Principal Corporate Bond Fund.
The ratings agency indicated that the actual list is higher because many funds have been moved to categories (such as multi-asset allocation or focused equity) where the agency does not issue ratings. In an emailed response to RupeeIQ, Kaustubh Belapurkar, Director of Fund Research at Morningstar, said the following:
“We have suspended ratings on certain funds where we deemed there was a fairly significant change in mandate. For instance, we suspended the ratings on eight funds, where we noticed there was a significant mandate change. These funds will receive a star rating only once they complete three years under the new mandate.
In addition, there are several other funds that had significant mandate changes, but these funds as per the new categorization now fall into categories for which we do not issue ratings (due to heterogeneous nature of funds within that category e.g. Multi-Asset Allocation, Focused Equity, etc). Thus these funds had an automatic rating suspension (i.e. didn’t require a rating override from us as was the case for the 8 funds mentioned above).”
RupeeIQ had highlighted two of these in its analysis at the time of reclassification. ICICI Prudential Smallcap was a radical departure from ICICI Indo Asia Equity Fund which was earlier oriented towards Asian (foreign) stocks. Reliance Balanced Advantage Fund was earlier Reliance NRI Equity Fund, a thematic fund aimed at NRIs and not a hybrid balanced fund. You can read our reports on ICICI Prudential Smallcap here and Reliance Balanced Advantage here.
Out of these eight, Value Research, India’s other prominent mutual funds ratings agency, continues to rate six. The exceptions are Reliance Balanced Advantage Fund and JM Dynamic Debt Fund.