Reliance Mutual Fund launches infrastructure fund

Reliance Anil Dhirubhai Ambani group-controlled Reliance Mutual Fund, on Wednesday annnounced the launch of its Reliance Infrastructure Fund.
The infrastructure fund, an open-ended fund, will invest predominantly in companies engaged in infrastructure and infrastructure-related sectors in the country, Reliance Capital Asset Management CEO, Sundeep Sikka, told reportershere.
The primary investment objective of the fund will be to generate long-term capital appreciation. It will invest in equity and equity-related instruments of companies engaged in infrastructure and infrastructure-related sectors like transport, banks and financial institutions, energy, power and oil, metals and minerals, telecom and urban infrastructure amongst others.
"Infrastructure is a key priority for India and we hope a spurt of infrastructure spending in the economy on the back of a stable Government and ease of project financing," Sikka said.
The right time is now to invest in infrastructure and infrastructure-related firms, a sector which is likely to get a boost from the new Government, he said.
"The valuations look more attractive and the environment stable with the new Government settling in. This makes it the right time to launch an infastructure fund more than ever," Sikka said.
The new fund offers two plans-Retail and Institutional. Each plan has a growth and dividend plan option.
The fund will invest at least 65 per cent of its assets in engineering, cement and power stocks as well as banks, whereas the rest will be invested in debt and money markets.
"We expect investors in large numbers to participate in the ever-growing sector with long-term capital appreciation," Sikka said.
Reliance MF saw no meaningful redemptions in the last one year and is very optimistic on global flows into India.
The fund-house is currently avoiding sectors that can be hurt by a Rupee rise. It was currently overweight on the textile and pharmaceutical sectors and underweight on the information technology sector.
The fund-house is keen to buy shares of PSUs when their disinvestment takes place and if valuations are good, a Reliance Mutual Fund official said on condition of anonymity.
Reliance Mutual Fund is managing a corpus of over Rs 88,388 crore for over 71-lakh investors as on April 2009.

Reliance Infra NFO Presentation

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FAQs on RIF-Final

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Rel Infra Fund- Product Note Final

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MF industry raises exposure in banking, realty sectors

Indian mutual fund (MF) industry has started investing in the equity market slowly in contrast to its practice of sitting on pile of cash since the beginning of this year. However, with interest rate coming down coupled with valuations being attractive, several fund houses have increased their exposure in the banking and realty sector in April compared to March 2009.
The realty sector saw inflow of Rs 308.16 crore in April compared to 98.76 crore in March, an increase of 209.4 crore, a report by the Bonanza MF Research says. The realty index in the BSE gained 29% in April compared to 13% in March.
“There has been good amount of inflows in the realty and banking sector in April. As interest rates are coming down and valuations of the both realty and banking stocks were very attractive, so several fund houses have parked their money in these sectors,” Gopal Agarwal, head, equity at Mirae AMC said.
Banking sector climbed by Rs 2,633.36 crore from Rs 12,285.86 crore in March to reach Rs 14,919.22 crore in April in terms of inflows.
Bankex, banking index of BSE increased to 23% in April compared to 11% in March.
“If we look at the price of realty and few banking stocks, they have almost doubled up in the last few months. Apart from that, I also believe realty sector was always in demand. Things have started looking brighter and once the Budget is out, we might witness more inflow in the both the interest rate-sensitive sectors,” added Agarwal.
Some market players say several big fund houses have invested in equity schemes in April. “Lot of fund managers tried to book profit and to catch up the situation. Many fund houses were sitting on huge cash, so once they thought, it was the right time to invest in the market, they started pouring money in the banking and realty schemes,” said Dhirendra Kumar, CEO of Valueresearch.
In March, total cash available with Reliance MF stood at 5,431.17 crore or 28.08% in open-ended equity scheme, which came down to Rs 5,902.26 or 26.89% in April. While Birla Sun Life MF was at Rs 788.13 crore or 18.18% in March, it fell to Rs 599.83 crore or 12.5% in April.

Source: http://www.financialexpress.com/news/MF-industry-raises-exposure-in-banking-realty-sectors/465161/

Tracking errors continue to hurt index funds

Since March 9, the Bombay Stock Exchange Sensitive Index, or Sensex, has risen 70 per cent (till Friday). However, index funds continue to have tracking errors.

Index funds are supposed to mirror the underlying index. That is, they have the same stocks as the Sensex or the Nifty, and in the same proportion.
Tracking error occurs when the scheme’s returns are less/more than that of the underlying index. Internationally, a tracking error of up to 0.5 per cent is acceptable. In India, this could be slightly higher at 1 per cent, said fund managers. Most funds continue to have a tracking error of more than 0.5 per cent. Many have errors of over 1 per cent. And some even exceed 2 per cent and 3 per cent.
For instance, ICICI Prudential SPIcE’s and HDFC Index Sensex have returned 66.47 per cent and 66.56 per cent, respectively, which means tracking errors of 3.43 per cent and 2.74 per cent, respectively, between March 9 and May 22, according to data from Value Research, a mutual fund research agency.
Some funds that have managed to stay within the 1 per cent limit are Tata Index Sensex A (0.9 per cent), UTI Master Index 0.96 per cent and Franklin India Index NSE Nifty (0.28 per cent).
Swati Kulkarni, fund manager in UTI Asset Management Company, said, “We have a small cash holding with us in the index fund. It has a small deviation from the benchmark index. Even our expense ratio is very low, that is, our AMC fees is 0.75 per cent.”
Industry experts said there were mainly three reasons for tracking errors. “High cash levels, change in the composition of the index and mismatch between the daily change in the weight of stocks and the scheme’s weights lead to tracking errors,” said Rajan Mehta, director, Benchmark Mutual Fund. Market experts say higher expenses also bring down the returns.
However, fund managers claimed there was little interest in these schemes. Milind Barve, CEO, HDFC Asset Management said, “In India, institutional money does not come into index funds because they prefer active management.”

Source: http://www.business-standard.com/india/news/tracking-errors-continue-to-hurt-index-funds/359260/

Shinsei to start India fund operation in 3 months

Japan's Shinsei Bank is set to start mutual fund operations in India within three months, becoming the latest global firm to target the country's promising asset management market, a senior official said on Tuesday.
"Within three months we should have the products out in the market," Piyush Surana, chief executive of Shinsei Asset Management (India), told Reuters in an interview.
It will start with an equity, a liquid and a bond fund, part of a plan to launch at least six funds in the first 12 months of operation. The firm hopes to break-even in the three to five years, he said.
Rakesh Jhunjhunwala, named India's Warren Buffet by Forbes, has a 15 percent stake in the asset management firm.
Shinsei joins JPMorgan, South Korea's Mirae Asset, Pioneer Global Investments, the fund arm of Italian bank UniCredit, and France's Axa who have launch funds in India over the last two years.

Source: http://in.reuters.com/article/domesticNews/idINBMA00298720090526

SBI Magnum Taxgain Scheme 1993 dividend for 2009 has been announced by SBI MF

SBI Magnum Taxgain Scheme 1993 dividend for 2009 has been announced by SBI MF. With over 17 lakh investors and a stable track-record of over 15-years SBI Magnum TaxGain ELSS Scheme 1993 has proved to be one of the most consistent performer amongst the tax saving schemes category in the Indian Mutual Fund Industry.

Dividend for 2009

Magnum TaxGain ELSS Scheme : 28%
Magnum Tax Gain ELSS has generated excellent returns over past 15 years and continues to provide retail investors a profitable avenue with constant stream of fat dividends. The SBI TaxGain Equity Linked Savings Scheme is also one of the largest equity scheme in India with corpus of over 3,262 Crores.

SBI Mutual Fund is India’s largest bank sponsored mutual fund and has an enviable track record in judicious investments and consistent wealth creation.
After an long delay(and nil dividend in the previous financial year) it had become almost imperative for the fund manager/investment managers at SBI MF to declared a dividend no matter how small the dividend amount be. The scheme’s rivals like HDFC TaxSaver and HDFC Long Term Advantage Fund had already declared decent and timely dividend income in the past. Irony of dividends in falling markets is that, it lowers already low NAV.Dividend Income Bigger than Annual Bonus/Increment:
In fact, for many Salaried Investors of this scheme, due to economic downturn the Dividend Income received from SBI Magnum Taxgain has ironically outstripped their annual bonus/incentive and annual increment incomes in their current profession.
The record date for dividend is 29-May-2009. Post declaration of the dividend the NAV of the scheme will fall to the extent of the dividend payout.

Short-term debt funds are the new FMPs

On January 19, 2009, the Securities & Exchange Board of India killed the fixed maturity plans (FMP) when fund houses were barred from declaring indicative yields on the schemes, which had to be listed on the stock exchanges.
Unwilling to lock in their money without knowing returns, investors stayed away. Due to this, these plans received less than Rs 400 crore since then to April 30, 2009.
"The share of assets held by FMPs is coming down. Their assets under management (AUM) were Rs 1.4 lakh crore in September 2008 and are now just Rs 60,000 crore," said Krishnan Sitaraman, director-fund services and fixed income research at Crisil.However, the Indian mutual fund industry's AUM has only grown in the period, to Rs 5,51,300 crore as of April 30, 2009.
This tells us that fund houses haven't lost all the FMP money. They are making efforts to see that FMP investors invest the maturity amount in other products -- particularly short-term income funds.
Over the past one year, short-term income funds have generated an average return of around 11%, while the highest one-year return is around 15-16%. This is far ahead of the 5% returns that liquid funds have been offering for the same period.
A higher commission mutual fund distributors get on short-term income funds as compared with liquid funds is another incentive. Sitaraman said fresh money getting into FMPs is minimal.
"Once redeemed, the FMP money is being diverted to short-term and ultra-short-term debt funds. I am not seeing any money going out of the industry, though it may be going to different asset management companies (AMCs). Money is moving from smaller AMCs to larger AMCs with well-performing schemes."
The higher returns from short-term funds do not come with a high risk, either.
"The portfolio quality is good. Most of the new exposure is to certificate of deposits issued by banks and commercial paper issued by manufacturing companies," said a debt fund manager with a leading Indian mutual fund who requested anonymity.
Sitaraman said the P1+ (highest grade for less than one year instrument) and AAA+ account for two-thirds of the industry assets. Exposure to bank certificate of deposits (CDs), especially those issued by nationalised banks, is the highest and "has increased to 50%," he added.
Exposure to risky sectors has been pared: "In September 2008 the exposure to realty sector was less than 5%. Now it is next to nothing."
However, despite the good returns, fundmen are not optimistic on short-term plans."Short-term income funds are the next bubble to burst," one fund manager told DNA Money. "The interest rates are going to move up soon."
Interest rates and bond prices share an inverse relationship. As interest rates rise, fund managers sell their old bonds and buy the new, higher-yielding bonds. This drives down the prices of the old bonds, thus pulling down overall returns of the funds.
The fund manager further explained: "The only buyers of 2-5 year corporate paper in the market are mutual funds. So, when the interest rates move up and fund houses are willing to offload corporate papers, there would be no takers for them, thus hurting the short-term income fund returns."
Other fund managers too suggest looking at short-term income funds with caution. "People looking to invest for the next 4-5 months can invest in short-term income funds. But one must pare down return expectations," said Ritesh Jain, head-fixed income, at Canara Robeco Mutual Fund.

Source: http://www.dnaindia.com/report.asp?newsid=1258963

Indian bond yield rise on higher borrowing fears

* Government to sell 265 bln rupees of debt this week
* Bond auction results to provide near-term cues- traders (Updates to close)
By Neha D'silva
MUMBAI, May 25 (Reuters) - Indian federal bond yields rose to five-week highs on Monday on worries the government will increase planned market borrowings in its final budget, although investors saw some value at the peak for yields.
The 10-year benchmark bond yield ended at 6.56 percent, off a high of 6.58 percent which was its highest since mid-April but still up 8 basis points from Friday's close. Yields have risen 21 basis points over the past three sessions.
"The market will wait and watch for further direction and the next bond auction will be watched closely for where the yield demand is coming in," said K. Ramkumar, head of fixed income at Sundaram BNP Paribas Mutual Fund.
Volumes were an average 64.75 billion rupees ($1.4 billion) on the central bank's trading platform, with the 2019 bond being most actively traded.
This week, the government is due to sell 45 billion rupees of state development loans on Tuesday, 70 billion rupees of treasury bills on Wednesday, and 150 billion rupees of bonds on Thursday.
A local television channel quoted finance ministry sources saying the government is working on a stimulus package of 0.5-1 percent of gross domestic product, which dealers say could exert further pressure on the government's market borrowing programme.
In its interim budget, the government said it would borrow a record gross 3.62 trillion rupees in 2009/10 and the new government is expected to announce a revised borrowing plan in its final budget, due by late June or early July. ($1 = 47.30 Indian Rupees)

Source: http://in.reuters.com/article/domesticNews/idINBOM48585020090525

‘The tail risk for markets has been removed’

CNBC-TV18, managing editor Udayan Mukherjee speaks with market experts Ridham Desai, Madhu Kela and Ramesh Damani on the impact of the elections

In a special show hosted by CNBC-TV18, managing editor Udayan Mukherjee was joined by market experts Ridham Desai, Madhu Kela and Ramesh Damani to discuss the impact of the elections. The event was held in association with Mint.According to Madhu Kela, head of equity investment at Reliance Mutual Fund, there are a lot of expectations from the Union budget.“The mismatch will be in a manner in which the government will act. I don’t think there is any doubt in anyone’s mind whether they will govern better than what has happened in the last five years, because they have come with a clear thumping majority,” he saidHowever, Ridham Desai, managing director of Morgan Stanley Securities Pvt. Ltd, did not entirely agree with this view. He does not believe that the markets expect too much from reforms.“Over the last five years, growth has been driven by capital flows. The events of last Saturday (16 May) has changed the outlook for capital flows. We now think that the country could receive $40-50 billion of inflows in the next 12 months. We have to change our growth outlook. The markets have to respond. Now, if the government executes on reforms, I think they’re another leg up”.Ramesh Damani, a member of the Bombay Stock Exchange, on the other hand, said: “The market believes that, Left or no Left, reforms will happen in the country.”When asked what are the expectations here on from the markets, Desai said that “the tail risk has been removed”—the tail risk being the Sensex falling to 6,000 levels.A lot of things will have to go wrong for the index to go to even 8,000 levels, said Desai, who expects the Sensex to touch 19,500 levels this year if the government announces a market-pleasing budget.Damani, on the other hand, said, “history suggests that we’re still in a bear market.” He is of the opinion that this kind of an economic crisis cannot be resolved within a year.Kela disagreed with Damani. “You can also construct a situation that India is still in a bull market and that what we have seen is really a vicious correction of the overall bull market. This will really depend on how aggressively the government really responds to the proposed changes that the world is looking for.”

Source: http://www.livemint.com/2009/05/25235649/8216The-tail-risk-for-marke.html