Quantum Tax Savings Fund NFO

Quantum Mutual Fund has launched its first open-end equity-linked savings scheme – Quantum Tax Savings Fund.
Investment Strategy:

The fund will maintain a diversified portfolio of stocks picked up from the BSE 200 index on the basis of attractive valuations. The fund can fully allocate its assets in equity and up to 20 per cent in debt and money market instruments.
Fund Manager:

Atul Kumar is the fund manager of the scheme. He has eight years of experience in the equity market. Currently, he is the Fund Manager –Equity at Quantum AMC and manages Quantum Long Term Equity Fund. The fund has generated a negative return of 51.61 per cent as against its benchmark BSE TRI Sensex which fell by 54.5 per cent (Jan 2008-Nov 2008).

Basic Details:

NFO Opens: December 10, 2008

NFO Closes: December 13, 2008

Benchmark: BSE 30

Plans: Growth & Dividend

Options: Dividend Payout & Dividend Re-investment

Load Structure: Entry Load - Nil, Exit Load – Nil

Minimum Application Amount: Rs500

Lock In Period: 3 years

Fund Manager: Mr. Atul Kumar

King of Good Times

Due to its concentrated bets in growth stocks, the returns of JM Financial's funds can deviate substantially from category norms. In a bull run, it may have some of the savviest skippers going. But its dramatic fall in slumps is a turn off.
If you find that hard to believe, consider JM Emerging Leaders and JM Basic. Both these funds were amongst the top 5 performers of 2007, JM Basic bagging the coveted No. 1 slot. In this market slump, Emerging Leaders fell by 72.46 per cent and Basic, 66.17 per cent, when the category average was a 49.74 per cent fall (Year-to-date return as on October 13). As for JM Equity, it makes for no comparison with its siblings. It actually underperformed the category average in 2007, when the other two were on a roll, and fell harder than the average when the market slumped. Make no mistake. We think Sandip Sabharwal, Chief Investment Officer-Equity, is a skilled manager who has the courage to ride his convictions. But that said, we think this fund house is only appropriate for aggressive investors. And even then, they may want to limit their exposure, given the high risk and performance fluctuations.
When JM Financial Mutual Fund started in 1994, its first products were a complete basket of a diversified equity, balanced and income fund. But over time, it became recognised as a debt fund house.
The fund house historically maintained a very aggressive posture in managing its debt funds, which was evident from the high average maturity profiles most of the time. This, coupled with a relatively lower expense ratio for the short-term funds, held it in good stead. But over the years, the performance of its debt funds have faltered.
In two years they launched a slew of thematic and sector funds. One of Sabharwal's first moves was to revamp the portfolio of JM Basic. The fund soared and was India's best performing equity fund in 2007.
All in all, this is an opportunistic fund company which bets on momentum and growth stocks and sports high beta equity portfolios.

Debt funds, gilts in demand

Banks are investing their surplus funds in government securities and debt mutual funds as credit demand from companies has dried up in the face of the economic slowdown.
Data available with the Reserve Bank of India show that barring on the first day no bank has borrowed from the apex bank through its repo auction in this month. All bids were in the reverse repo counter.
Under the repo auction, the RBI lends money to banks. Under the reverse repo auction, the RBI borrows money for the short term from banks against government securities.
The reverse repo auctions of the RBI had attracted many banks since the first week of November.
The average daily volume of transaction rose sharply from the beginning of this month.
However, after the RBI cut the reverse repo rate to 5 per cent from 6 per cent on Saturday, the auction volume fell steeply to Rs 1,070 crore on Monday from a daily average of more than Rs 25,000 crore in the first five days of the month.
In the face of a tight liquidity condition in the economy in September that led to a redemption crisis in the mutual fund industry, the RBI reduced the cash reserve ratio (CRR) steeply from 9 per cent to 5.5 per cent between October 6 and November 2.
The CRR is the percentage of deposits that banks compulsorily keep with the apex bank.
The CRR cut was followed by a reduction in the statutory liquidity ratio (the percentage of deposits that banks have to invest in government securities) to 24 per cent from 25 per cent and repo and reverse repo rates to 5 per cent and 6.5 per cent, respectively.
Liquidity in the banking system was so tight that there was very little reverse repo auction throughout October. All banks turned borrowers in the repo market.
After the cash reserve ratio was cut on October 6, the daily volume of transactions fell from Rs 70,295 crore on October 1 to Rs 550 crore on November 3.
Banks became lenders in the reverse repo market for the most part of last month, when the average daily volume in the reverse repo market far exceeded the volume in the repo market.
In the current month, there was repo trading only on one day, and the daily average volume shot up in excess of Rs 25,000 crore from Rs 4,000 crore in November.
According to a senior official in a private sector bank, “Banks would rather prefer to park their excess liquidity in short-term investments rather than reduce lending rates when the demand for credit itself is going down.”
Source: http://www.telegraphindia.com/1081210/jsp/business/story_10231853.jsp