We have identified the best debt-oriented schemes available in the market today based on the following 3 parameters: the past performance as indicated by the one and two year returns, the Sharpe ratio and Fama (net selectivity). Sharpe indicates risk-adjusted returns, giving the returns earned in excess of the risk-free rate for each unit of the risk taken. FAMA measures the returns generated through selectivity, ie the returns generated because of the fund manager's ability to pick the right instruments and his duration management. 
We have selected the top 10 schemes upon ranking on each of the above 3 parameters and then calculated the mean value of each of the 4 parameters for the top 10 schemes. Thereafter, we have calculated the underperformance or over performance of each scheme (relative performance) in each of the 4 parameters vis-à-vis their respective mean values. For our final selection of schemes, we have generated a total score for each scheme giving 30% weightage each to the relative performance as indicated by the one and two year returns, 30% weightage to the relative performance as indicated by the Sharpe ratio and the remaining 10% to the relative performance as indicated by the FAMA of the scheme. All the returns stated, for less than one year are simple annualised and for more than one year the returns are annualised. We present our recommendations in the debt oriented mutual fund category.
Click here to read report: Sharekhan's top debt fund picks
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