MF trading's now a lot easier & cheaper

With the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) offering a platform for buying and selling mutual funds, investors across the length and breadth of the country would now be able to buy and sell units of MFs registered with bourses for this facility, without having to locate a distributor.

Existing mutual fund investors who intend to buy more units will also benefit as this system will allow them to keep track of all investments under a single statement. Moreover, buying and selling will become more efficient and transparent , particularly if investors choose to transact through a demat account.

How does the new system fare on a cost-benefit analysis?
For those who purchase MF units directly through the AMCs’ websites, opting this route will result in an increase in cost, as they will have to shell out the brokerage as well as demat fees. “Entry load has been eliminated in mutual funds. Someone using the online brokerage portal, though, will be charged by the trading company. While the average brokerage in such transactions could be around 0.5%, the DP could levy an account opening charge of around Rs 250-300 , in addition to an annual maintenance charge of around Rs 400,” says Anil Rego of financial planning firm Right Horizons. The brokerage and demat transaction fee could vary as per the broking firm, depository and the DP, respectively . This apart, while trading equity MFs through exchanges, you will have to shell out securities transaction tax (STT) as well.

Though cost seems to be a factor for those who do not have a demat account, the impact will be minimal for those who already are demat account holders. “If an investor decides to open a demat account only for investing in MF units, then his/her cost could increase. However, this will not be the case for those who use their existing demat account for trading in equity shares,” points out Vineet Arora , head of product and distribution, ICICI Direct.

TRADE SMART
A FOUR-STEP GUIDE TO PURCHASE OF MUTUAL FUNDS THROUGH STOCK EXCHANGES
STEP: 1 GETTING STARTED
OPEN A DEMAT account with a depository participant, who operates as an agent of the two depositories in the country — National Securities Depository (NSDL) and Central Depository Services (CDSL). You would also need to open a trading account with an eligible stock broker (who is registered with the association of mutual funds — AMFI). The know-your-customer (KYC) procedure will be conducted by the depository participant while opening the demat account.
STEP: 2 TRADING
FOR BUYING/redeeming MF units, like in case of stocks, you will have to send the instruction to your broker, who will, in turn, place the order on the terminal on your behalf, after collecting the money and brokerage from you. During redemption, however, the proceeds are directly credited to your account by the mutual fund.
STEP: 3 SETTLEMENT
WHILE PURCHASING units, the transactions are settled on a T+1 basis. Redemptions are done on a T+3 basis for equity MFs and T+1 for debt MFs. Transactions, however, cannot be initiated after trading hours, as NSE terminals shut at 3 pm, says UTI AMC chief marketing officer Jaideep Bhattacharya. Under the existing system, you can go to your distributor or the mutual fund after 3 pm, but it’s the next business day’s NAV that will be taken into account.
STEP: 4 KEEPING TRACK
IN TERMS of convenience, the advantages are similar to investing online through the AMC’s website — reducing the clutter of paperwork and speedy execution. However, here, the holding report, which is submitted by the DP (and not the AMC, unlike the existing format) will provide a snapshot of the stocks as well as the MF units that you own, presenting a more holistic picture of your total investments.

WHAT’S GOOD
MF schemes can be purchased anywhere in India Depository statement gives you holistic picture of your MF investments Lesser paperwork Speedy execution

WHAT’S NOT
Costlier for those who are not already demat accountholders Settlement cycles are same as existing Transactions only during exchange trading hours Not all MF schemes available at present

Source: http://economictimes.indiatimes.com/articleshow/5308887.cms?flstry=1

MF Watch: IDFC Premier Equity Fund

IDFC Premier Equity Fund: An Open Ended Equity Fund

Fund Manager: Kenneth Andrade

The scheme aims at capital appreciation by investing in diversified small and medium size businesses with good long term potential available at cheap valuation.

Portfolio Analysis: IDFC premier fund seeks to invest in mid sized companies with growth potential over a longer term. The fund thus holds a diversified basket of mid and small cap stocks off which some qualify for growth stocks. Notably, its compact portfolio of little over 30 stocks seems well diversified and its buy and hold strategy, augurs well for the investor.

The scheme has significant exposure in consumer non-durables with over 26 per cent exposure followed by transportation and logistics sector stocks. Notably, the highest exposure into this (consumer non-durables) space has been for more than a year.

However, some stocks in this segment namely, Gokul Refoils, Raj Oil Mills and Globus Spirits appear unlikely to outperform in the foreseeable future.

There is high exposure to auto ancillaries and finance stocks and the aggregate of the top 4 sectors is 53 per cent of the portfolio value upto October 2009.

Over the last three years, the funds has outperformed its peers as well as the benchmark indices by generating over 25 per cent returns as compared to just 7.5 per cent returned by its Benchmark, BSE 500.

As the fund invests in companies that are emerging, it is automatically exposed to higher risks.

Investment Strategy Analysis: On the basis of its past performance it ranks amongst the better performing schemes as compared to its peers.

Risk Profile:

Standard Deviation: 10.03%

Beta: 0.90

Sharpe Ratio: NA

Outlook: Investors with high risk appetite can consider investing into this fund at declines.

Caveats: Higher risk in as the fund invests emerging businesses. Also the fund is known to periodically curtails inflows to ensure that it remains at a manageable size.

Source: http://www.bloombergutv.com/stock-market/mutual-funds-news/39342/mf-watch--idfc-premier-equity-fund.html

10-yr bond yield at highest since Nov 2008

India's benchmark 10-year bond yield breached 7.50 percent on Monday and rose to its highest level in 13 months as higher U.S. yields and scheduled debt sales this week weighed on sentiment.
At 9:05 a.m. (0335 GMT), the 10-year benchmark bond yield was at 7.54 percent, its highest since Nov. 18, 2008. It had closed at 7.48 percent on Friday.

Source: http://economictimes.indiatimes.com/10-yr-bond-yield-at-highest-since-Nov-2008/articleshow/5309861.cms

Rules of MF investment haven't changed

As most mutual fund investors would be aware of by now, it is now possible to invest in mutual funds through a stock broker. Actually, that’s not true quite yet, but the system has been put in place on NSE. Currently, it has been made functional only with UTI’s and Birla Sun Life’s funds, but more fund companies are expected to join rapidly.

Also, the broker through whom you are investing in funds must have people who have the required certification before they can do this business. Still, one can expect these things to get sorted out sooner rather than later. One reason why the exchange-based MF investments system has taken off so rapidly is that Sebi is pushing hard for it, perhaps because the fund industry has proven to be either incapable or unwilling to create a unified digital platform by itself.

Anyhow, investors will now find that they have a new channel through which they can invest in funds. However, investors should be clear about what the new sales channel is and what it isn’t. This is a new route through which to buy funds. It makes fund investing easier for investors in smaller cities. It also makes investing easier for those who already have a depository account and have had their KYC done.

From an industry perspective, it lowers costs and thus makes it economic for the investor’s costs to be lower. It also makes a new market addressable at a lower cost.

But let’s talk about what the new channel isn’t. It isn’t one through which investors should expect to receive investment advice. I’m sorry to say this but the culture of stock investing in India is one which would be lethal to sensible mutual fund investing. The world of a stock broker is one in which most clients hold investments for a few days and ‘long-term’ is perhaps a month or two. A friend of mine has already had a call from his broker’s office who has enthusiastically described the methodology that they will follow when the business takes off: They will analyse mutual funds’ declared portfolios to see which stocks are likely to go up and then they will ask clients to take ‘tactical positions’(his words) in the funds where they like the portfolio. This is a completely counter-productive way of investing in funds but one which, I guess, would come naturally to someone whose primary skill is supposed to be stock selection.

Effectively, this broker has figured out that basically, funds are a new type of trading instrument where he’ll get about 0.5% from the AMC rather than the pittance he gets as brokerage currently. Of course, this particular one didn’t even seem to be aware of the concept of exit loads, but I think it’s clear under the new system, at least some stock brokers are more likely to be part of the problem rather than part of any solution. The principles of equity fund investing remain the same — invest gradually, invest for the long run in funds with a good track record and invest mostly in diversified funds. Just because they are being sold through a stock exchange’s system doesn’t mean that mutual funds have suddenly become suitable for active buying or selling, even if newspapers say funds can now be traded on the stock exchange.

Source: http://economictimes.indiatimes.com/Rules-of-MF-investment-havent-changed/articleshow/5308893.cms