Thursday, October 18, 2018

Time to check health of your portfolio

This is the best time to rebuild existing portfolio by unlearn what we have learn about financial market and once again learn what is financial market all about and make new portfolio accordingly.

By this weekend gives you best portfolio which i had given in 2008 which had delivered amazing return.

Sunday, August 9, 2015

EPFO’s equity turn: what it means for you



While stocks exposure may increase returns, current limit of up to 5% is too small to have a significant effect


The Employees’ Provident Fund Organization (EPFO) has started investing in the stock market through the exchange-traded fund (ETF) route from Thursday.

An ETF is a basket of securities that tracks the stock prices of the companies on an underlying index, and is traded on the exchanges. Being a passive fund, it not only comes with a much lower expense ratio but also obviates the fund manager risk.

The labour ministry has allowed for 5-15% of Employees’ Provident Fund (EPF) money to be invested in equities. But, to begin with, EPFO has decided to take an exposure of up to 5% of the incremental corpus through ETFs. “We have decided to take it slow and see how it goes. So, we will start with an investment of up to 5% of the incremental corpus in ETFs,” said K.K. Jalan, central provident fund commissioner, EPFO. The Organisation will allocate `5,000 crore by March 2016 in ETF and could increase it to as much as `7,000-8,000 crore, said Jalan.

For now, the Organisation will invest in two schemes of SBI Mutual Fund—SBI-ETF Nifty and SBI Sensex ETF. Jalan said that out of the total investable corpus in equity asset class through ETFs, 75% will go into SBI-ETF Nifty and the remaining 25% in SBI Sensex ETF.

“SBI is our sole banker, so we have decided to go ahead with SBI Mutual Fund for now. Also, we didn’t have time to come out with a tender and spend another year finalizing the asset management company. In future, though, we will consider looking at others as well,” he added.

Before understanding what an equity exposure would mean to the money that you invest in your EPF account, let’s start with a quick look at how EPF works.

How EPF works
Every month, a salaried individual contributes 12% of her salary in the EPF account and the employer matches the contribution. A part of the employer’s contribution goes to the Employees’ Pension Scheme. The contributions made to EPF then compound at a rate declared by the EPFO every year. Currently, the rate of interest on your EPF money is 8.75% p.a.

Contribution by the employee up to `1.5 lakh qualify for a tax deduction under section 80C of the Income-tax Act, 1961. A deduction reduces your taxable income. The interest that your fund accumulates along with the contributions made are tax-free on withdrawal if you withdraw the money after five years of continuous service.

In terms of withdrawing your money, the rules allow EPF withdrawal only at the time of retirement, medical contingency or an unemployment period of two months. Given that EPF has exempt-exempt-exempt treatment of taxation—which means that your contribution and interest are both tax-free—it’s one of the top recommendations by financial planners for a person’s debt investment portfolio.

It is with the aim to improve returns further that EPFO has decided to enter the stock market. “If we remain invested in fixed income alone, then the interest rate is likely to remain subdued and see further downward trend in coming years. If we hadn’t changed our investment philosophy, then it would be difficult to give good rate of returns to subscribers. So, it was considered appropriate to a bring change in the methods of management of funds cautiously and carefully” said Bandaru Dattatreya, Minister of State for Labour and Employment (independent charge).

With equity investments the expectation is that EPF will offer a meaningful real rate of return. “There is no proper social security net for an Indian household. So, they end up putting their money in bank FDs (fixed deposits). In a way this is good for banks but does not do much for the savers,” said Arundhati Bhattacharya, chairperson, State Bank of India. “When inflation is high, bank interest can’t keep pace and doesn’t beat inflation. Hence, despite saving, savers lose money. If you take a longer-term view, equity gives superior returns,” she added.

Equity support for EPF
Currently, EPF invests largely in government securities with the help of five fund managers, namely SBI, ICICI Securities Primary Dealership Ltd, HSBC Asset Management (India) Pvt. Ltd, Reliance Mutual Fund and UTI Asset Management Co. Ltd.

“Currently, we invest around 65% in government securities and the remaining in public sector and private sector bonds. In private sector bonds, our exposure is less than 5%. Since our portfolio is held to maturity, the role of fund managers is not much and so the fund management is very less, of around 0.00005%, which is deducted from the fund,” said Jalan.

Considering that even the equity investments will be managed passively, there will not be a fund manager, but even ETFs come with an expense ratio that will be borne by the investor.

“SBI Mutual Fund has given us a discount on the expense ratio as we will pay only 0.07%. The expense ratio will be deducted from the fund value,” said Jalan. Given that mutual funds are not allowed to offer differential pricing, this discount benefits even individual retail investors.

“We are already seeing the spill-off as the race to the bottom has begun. Reliance and ICICI Pru mutual funds have reduced their expense ratios from 0.5% to 0.03% on their Sensex and Nifty ETFs in the hope to get a share of the EPF money. For retail investors, this is certainly good news as it will reduce tracking error of the funds,” said Manoj Nagpal, chief executive officer, Outlook Asia Pvt. Ltd.

Returns kicker missing
What will equity investment mean for your EPF money? It’s too early to say, feel most financial planners. “This move will help create a buzz around EPFO and people may start watching this asset class. However, we don’t expect interest rates to improve as of now since the exposure (to equity) is very small and won’t have such a big effect on the overall investments,” said Surya Bhatia, a Delhi-based financial planner.

Others agree that the 5% limit imposed is very small. “The amount that will be exposed to ETF is minuscule. It is difficult to say if it will give better returns since it is only 5% of the overall corpus,” said Suresh Sadagopan, a Mumbai-based financial planner. This means that you may not really see a significant improvement in your returns.

“Investing 5% of the incremental corpus may mean that the returns improve by about 10 basis points. For equities to have a significant impact, they (EPFO) will need to increase the investment to 10-12% of the incremental corpus,” added Nagpal. One basis point is one-hundredth of a percentage point.
However, unlike mutual fund investments, which show the net asset value (NAV) of your investment on any given day to help you track the performance of the fund, the EPF money going into ETFs will for now continue with the same system of declaring a rate of interest on your overall portfolio.

EPFO declares a rate of interest at the beginning of the year, which is the rate at which your money will compound for the year. In future, this rate will also reflect the returns made from the equity market, and EPFO is working towards making the system more transparent. “We are studying the various pension systems around the world and will come with an accounting methodology soon. In some cases, a part of equity returns are distributed whereas a part is kept as reserves which can be dipped into if the markets turn volatile. We are looking at various ways and should be able to finalize soon,” said Jalan.

For the stock markets, too, the move is good news as it will bring in long-term money, which lends to stability.

“Given that EPFO will invest in equities on a regular basis, it’s like having an SIP (systematic investment plan). The current SIP book is about `2,000 crore and I see this book doubling with EPF money in the coming years. This will reduce volatility,” said Nagpal.

For you, the good news is that EPF has finally entered the stock market and as contributions begin to increase over the long term, it may mean better returns on your investments.

Source: http://www.livemint.com/Money/nYf04GWyTbEYtdY3EPkNVK/EPFOs-equity-turn-what-it-means-for-you.html

EPFO makes stock market debut today

India’s pension fund will invest R410 cr each month during FY16 through ETF route
As India’s retirement fund body gets ready to invest in the stock markets starting Thursday, the Street is optimistic and believes the institution’s entry will have multiple benefits for the Indian equity markets.

The government on Thursday will officially announce the Employment Provident Fund Organisation (EPFO)-investment into equity markets through an exchange traded fund (ETF). The fund will be managed by SBI AMC. In the initial stages, the EPFO will invest about R410 crore or 5% of its incremental deposits each month during fiscal 2016, making EPFO the second largest domestic institutional investor after LIC.

Experts opined that EPFO’s entry will bring quality long-term money into Indian equities. More importantly, it will bring better balance to equity markets at the time of foreign fund outflows.
Milind Barve, MD, HDFC AMC views the entry of EPFO as a great opportunity for the markets as it would get access to funds of close to R1 lakh crore per year based on 10-15% investment of its corpus.

“It is potentially a great opportunity… Although initially the money would come through the ETF route because actively maintained funds are not yet permitted to manage EPFO money, it will increase the amount of funds allocated to equity markets through mutual funds and most importantly, it will be high quality investment as it will come for the long term,” Barve told FE.

The equity ETFs market in India is at a nascent stage with total assets of other ETFs at R7,322 crore as on June 2015, data from the Association of Mutual Funds of India (Amfi) showed.

Nilesh Shah, MD, Kotak AMC foresees a ‘tsunami’ coming into financial markets from domestic investors, anticipating about R2 lakh crore of money over a long-term period. “The DII flows will consolidate further in the coming months as pensions funds arrive in equity markets. The pension funds have not invested even a single rupee into equities, and now they have been allowed to invest anywhere between 5% to 15%. Globally, pension funds are the biggest owners of equity markets. It will benefit both the markets and the pensioners,” Shah told FE.

The Central Board of Trustees’ headed by the labour minister Bandaru Dattatreya had decided in March to start investments in stock market. However, it was assured to the trustees in the meeting that being cautious about the volatile nature of stock market and with no prior experience of such investments, EPFO will start with investing in ETF during the current fiscal.

In the present scenario, the EPFO has received an average monthly incremental deposits of R8,200 crore during this financial year so far. By the end of twelve months of investing, EPFO will invest close to R5,000 crore in equity ETFs out of its total annual investible fund of R6.5 lakh crore. An ETF is a security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange.

Source: http://www.financialexpress.com/article/markets/indian-markets/epfo-makes-stock-market-debut-today/114423/

Tuesday, June 2, 2015

India on marathon path; markets don't need steroids: Uday Kotak

Confident that India is on a 'marathon' growth path, eminent banker Uday Kotak has said that the markets should not look for any 'steroids' even as he warned against excessive debt exposure of the corporates.

Kotak also said that it has been an "euphoric phase" since the Narendra Modi-led NDA government came into power a year ago, while there is perception emerging now that expectations were ahead of reality.

"This perception stems from excessive exuberance, which needs to be moderated. However, in reality, I am confident that growth will be steady, stable and upwards.

"I am convinced that the India Marathon story is already playing out. The watchers of the Indian economy as well as the markets should not look for steroids," the Kotak Mahindra bank chief said.

Kotak also said that one of the biggest challenges today was the history of excessive leverage by India Inc.

"This has slowed down parts of the Indian banking system. As these events unfold and unravel, I sincerely hope that it does not create any accidents and challenge the capacity of the financial system in supporting the growth of the Indian economy," Kotak said in his annual letter to the shareholders of Kotak Mahindra Bank.

Elaborating on his views about the first year of the Modi government, Kotak said, "While the euphoria may have faded, the country has made progress. India's macroeconomic signals have become stronger and stable. Crucial parameters such as current account deficit, fiscal deficit and levels of inflation have improved."

Listing out the possible challenges for the India growth story, Kotak said, "It is unlikely to be a great snapshot, but certainly will make for a wonderful movie.

"India is poised to witness stable and sustainable growth in the long term."

On banking sector, Kotak said that public sector banks currently account for about 70 per cent of the savings and deposits, while private sector banks account for the rest.

"With new issues challenging the banking system, it is time for us to ponder how we structure the future of Indian banking. I believe that over the next 10 years the ratio will be equitable between public and private sector banks."

Kotak said this presents "significant challenges and opportunities" for Kotak group and it needs to "build an institution that has the capacity to defy gravity" and create a 'Bigger, Bolder, Better Kotak'.

He said that the group has already taken steps in that direction, including with the mega merger of ING Vysya Bank with Kotak Mahindra Bank that has created a combined entity with total employee base of over 40,000 and the combined consolidated balance sheet of around Rs 2 lakh crore.

Other strategic decisions include acquisition of domestic schemes of PineBridge Mutual Fund and a 15 per cent stake in India's largest commodity exchange - MCX, Kotak said.

"Fourth, we are foraying into the general insurance business, which will be a 100 per cent subsidiary of the Bank.

"And finally, we have agreed to invest up to 20 per cent in a proposed payments bank by Airtel M Commerce Services Limited - an area where we see immense potential."

Kotak said that the different arms of the group have shown healthy growth and its asset quality has been "top notch, riding on low gross NPAs and net NPAs, and lowest restructured assets in the Indian banking sector".

"We expect our fee income from foreign exchange business, equities, brokerage, or distribution of products in the mutual fund space to grow further, as we build our franchise. We are also emerging stronger on account of our robust liabilities and assets.

"Further, we have deepened and widened our customer base, which is growing steadily. With the merger of ING Vysya Bank, our national footprint has grown. Our brand campaign 'Kona Kona Kotak' signifies our expanded reach across hundreds of towns and cities of the country.

"As I evaluate our 'Concentrated India, Diversified Financial Services' business model, I am excited about all segments of our business," he said.

Kotak said he also sees tremendous growth potential in the capital markets and investment banking businesses, while other promising businesses are life insurance and asset management.

"I see a turnaround in both the businesses as we leverage the additional distribution network. There is also some traction in our alternate asset businesses.

"Therefore, banking and financing, capital markets and investment banking, life insurance and asset management give us a complete menu of diversified financial services, which we believe will help us leapfrog to significantly higher growth rates in the coming years.

"I am a great believer in creating long-term shareholder value... If you look at the Kotak story, an investor who invested Rs 1 lakh in Kotak in November 1985 - when we just started the company, would today have a shareholding worth over Rs 1,100 crore," he said.

"The journey has been enjoyable so far and I am looking forward to an even more exciting time in the context of India's Marathon story. I am confident that brand India and the potential that it promises will provide us the platform to build an institution of global repute, size and stature," Kotak said.

Source: http://economictimes.indiatimes.com/markets/stocks/news/india-on-marathon-path-markets-dont-need-steroids-uday-kotak/articleshow/47489253.cms

Saturday, May 30, 2015

Mutual fund industry body AMFI scouts for a new CEO

Mutual fund industry body AMFI has begun the search for a new chief executive and set up a three-member committee to find a successor to the current CEO H N Sinor.

Sinor's term ends in September. He had joined AMFI in 2010 as its CEO after A P Kurian's retirement.

Sinor was re-appointed as the CEO earlier this year after his term ended in December 2014.

The next CEO will be selected in the next Annual General Meeting (AGM) of Association of Mutual Funds of India (AMFI), which is expected in September, official sources said.

The search panel comprises of AMFI chairman Sundeep Sikka, who is also managing director and chief executive of Reliance MF, HDFC MF managing director Milind Barve and Birla Sun Life MF chief executive A Balasubramanian.

The ideal candidate to fill the top post at AMFI would be a person having decades of experience in the financial markets.

During Sinor's tenure, the mutual fund industry has dealt with sweeping regulatory changes.

Among the initiatives taken during his term, AMFI has put a one per cent cap on upfront commission paid to distributors and initiated investor awareness campaign.

Sinor is a former ICICI Bank executive and chief executive of the Indian Banks' Association.

AMFI, which is the industry association of mutual funds, interacts with market regulator Sebi regarding mutual fund related issues and also represents the industry to government, RBI and other organisations. It also serves as a self- regulatory body for mutual funds.

Source: http://timesofindia.indiatimes.com/business/mf-simplified/mf-news/Mutual-fund-industry-body-AMFI-scouts-for-a-new-CEO/articleshowhsbc/47456770.cms

Wednesday, May 27, 2015

BofA-ML retains December Sensex target at 33,000

American brokerage Bank of America-Merrill Lynch (BofA-ML) on Monday retained its Sensex target at 33,000 by December, but said in the medium term, the Dalal Street will see more volatility.
“We continue to maintain our December Sensex target of 33,000 points. But near-term the markets will remain subdued and range bound with a negative bias, as quarterly earnings are low and more earnings downgrades are likely over the medium term,” BofA-ML analyst Jyotivardhan Jaipuria said in note.

“Also, the India versus GEM premium is near all-time at 35% the GE averages,” Jaipuria said. The markets are likely to witness another quarter of weak growth in the ongoing earnings season. Mirroring the previous quarter when aggregate Sensex profit fell 1% year-on, profit growth is once again going to be subdued at 1%, he said, adding he sees more earnings downgrades for the next few months before stabilising and earnings upgrades may not start until next year.

On a top-down basis, we expect 2015-16 consensus growth estimates of 18% to get downgraded to 12-13% growth, he added. However, he noted that foreign institutional investors (FIIs) have the all-time high overweight on the domestic market. This is on the back of nine consecutive quarters of positive FII inflows.

Strong FII inflows have resulted in all-time high foreign ownership for the markets at about 28%. While GEM funds have a 12.8% weight on the country against the index weight of 7.7%, which is a massive 510 bps OW.

Noting that the Sensex has rich valuations, he said post-2014 polls, the markets re-rated and have been trading at 16 times one-year forward PE. And despite the recent bloodbath, the valuations are still a 10% premium to long term averages. Also, in the GEM context it is currently at a 35% premium to GEM, he said.

On the Modi government’s first year reforms report card, Jaipuria said slow and steady reforms were anticipated and the reported loss of faith in the Modi regime to accelerate reforms is partly due to unrealistic expectations. “Returns last year were led by re-rating, but returns this year would be led by earnings. With earnings being sluggish, the markets would give a flat to slightly negative return for the majority part of the year and the YTD return has been negative 1.5%.

“We see earnings improving only late 2015 and the market returns being back-ended with a flat to slightly phase in Q2 and Q3 of 2015,” Jaipuria noted. He attributed three reasons for the present investor jittery-sluggish recovery, the minimum alternate tax (MAT) controversy and delay in getting the new land law in place. The economy continues to be sluggish and earnings growth in the December quarter was the weakest in 20 quarters and the current quarter is unlikely to be different, he said, adding the dispute on MAT has reignited fears of harsh taxation rules.

On the new land law, he said this underlines difficulty in reform legislation. Investors have been keenly watching the progress of the new land acquisition bill and are hoping the government can quickly pass the Bill through a joint session of Parliament.

He also warned that investors could be disappointed if the land acquisition bill and the goods and services tax bill are not passed in the Budget session, Jaipuria said, adding the chances of these Bills getting House nod look distant.

Source: http://www.livemint.com/Money/hBHnH7dvge8FKWZnKIM7ZL/BofAML-retains-December-Sensex-target-at-33000.html

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