The Best-Performing Investments of 2010

And the winner is: silver.

With a 66% return for investors this year in India, silver has outperformed most asset classes in 2010.

But that doesn't mean you should rush to buy silver coins in the New Year. If anything, the recent steep gains should be cause for skepticism about the potential for further profits.

"Maybe the story is already over, we don't know," says Narendra Kondajji, director of Procyon Financial Planners Pvt. Ltd. in Bangalore.

Besides, Mr. Kondajji says that like other precious metals silver can be hard to sell on short notice, so risk-averse investors should limit their exposure to commodities. "For a common investor, the major option to create wealth is investing in equities," says Mr. Kondajji.

Here's a look at how some popular investments fared in 2010:

Stock Indexes: 16% to 17%

If you had invested in an index of India's leading stocks at the beginning of the year, you would have earned a return of 16% or 17%.

The UTI Master Index Fund, which invests in the 30 stocks that comprise the Bombay Stock Exchange's Sensitive Index or Sensex, was up 16% through Wednesday.

If you had bought the Benchmark Nifty BeES, an exchange-traded fund which tracks the returns of the S&P CNX Nifty Index, you would have earned 16.6%.

Stock Mutual Funds: 14.4%

Most individual investors prefer to buy one of those funds in which money managers attempt to beat the Sensex of Nifty or some other index. How have these done?

The average mutual fund which invests in stocks of large Indian companies was up 14.4% through Monday, according to data from research firm Morningstar India Pvt. Ltd. Of course, this means that some mutual funds did very well, while others did poorly.

One of the best-performing funds in Morningstar's large cap stock fund category was the HDFC Equity fund, which gained 27% in 2010. One of the worst-performing in the year was the Reliance Equity fund, which lost 1.3%.

A spokesman for the fund's money manager, Reliance Capital Asset Management Ltd., declined comment.

Balanced Mutual Funds: 6% to 12%

These are mutual funds which invest in both stocks and bonds. These funds are meant for risk-averse investors because bond prices don't swing as sharply as stock prices. On the other hand, lower risk means that these funds provide lower returns than pure stock funds.

A typical balanced fund which invests around two thirds of its money in stocks and one third in bonds, gained 12% this year, according to Morningstar. Meanwhile, funds which invest only up to 25% in stocks and the rest in bonds were up on average 6%. These funds are often called "Monthly Income Plans."

Bond Mutual Funds: 4% to 5%

Mutual funds which invest in short-term bonds gained an average of 4.5% this year. Medium-term bond funds, which often have the word "income" in their name, gained 5.1%.

Bond funds are used by investors as a substitute for bank fixed deposits, partly because returns on them are not subject to income tax whereas interest on fixed deposits is taxable. However, these funds are more volatile than fixed deposits.

Bank Fixed Deposits: 6.5% to 7%

At the beginning of 2010, one-year fixed deposits typically paid 6.5%. As interest rates have gone up lately, returns in 2011 will be higher. A one-year fixed deposit from ICICI Bank currently pays 7.75%, while the same from Bank of Baroda pays 8%.

Gold: 20%

A gold bar of 99.9% purity gained 23% through Tuesday, according to the Bombay Bullion Association. However, this return doesn't reflect the cost of buying, storing and selling the gold bar.

To avoid the hassle of safe-keeping etc., investors have lately been buying gold ETFs. These trade on a stock exchange like a stock, and are held in an electronic account in the investor's name. The ETF-provider buys physical gold proportionate to your investment and keeps it in a bank vault.

Benchmark's Gold BeEs ETF gained 19.6% for the year through Tuesday.

Prithviraj Kothari, president of the Bombay Bullion Association, expects gold prices to remain strong in 2011, but adds that an increase in interest rates in the U.S. could affect the demand for gold.

Silver: 66%

Silver prices in India rose 66% this year on the back of huge demand from global investors looking to make quick money on commodities. Prices have risen despite oversupply and poor industrial demand.

Barclays Capital expects that given the excess supply of silver, prices could be curbed in 2011. So, this might not be the best time to load up on it.

Mr. Kondajji, the financial planner, notes that for individual investors in India, this is a hard asset to buy because it's not available in an ETF format. He advises clients to "not go beyond 10%" for their overall allocation to commodities, including gold and silver.

Real estate: 5% to 30%

It's tough to measure the performance of real estate because prices vary by cities and neighborhoods.

Still, here's an estimate of how residential real estate prices have moved this year in three major Indian cities.

The smallest returns came in Bangalore, where apartment prices gained 5% to 10%, according to Gulam Zia, national director for research and advisory services at Knight Frank India Pvt. Ltd., a real estate consulting firm.

In Delhi, Mr. Zia estimates that prices went up between 10% and 20% but for some luxury apartments they gained as much as 25%.

Mumbai was the best-performer, with gains of 20% to 30% this year. However, Mr. Zia adds that toward the end of the year sales volumes of new apartments dropped and he expects prices to drop as much as 10% to 20% in the first few months of 2011.

"Buyers in Mumbai should wait for the next quarter or two," says Mr. Zia. He expects some decline in Delhi prices as well.

Given the large amounts of money required to buy real estate, and the lack of liquidity, only the very rich should consider dabbling in this for investment.

Source: http://online.wsj.com/article/SB10001424052748703909904576052793218751106.html?mod=googlenews_wsj

Expect 10-12% returns in 2011

Focus will shift to midcaps/smallcaps and firms with lower leverage, believe analysts.

Premium valuations, global uncertainty and higher inflation will lead to moderate returns of 10-12 per cent in 2011 for the broader markets, say money managers.

Unlike the 80-plus per cent returns in 2009 and 17 per cent in 2010, investors will need, for the year ahead, to temper their expectations from the broader markets and focus more on mid-caps and small-caps, available at attractive valuations. Expensive valuations and uncertainty could lead to significant volatility, with the Sensex likely to swing between 16,000 and 23,000.

• Outlook for the markets in 2011

Sensex to trade in range 16K-23K

First half could be more volatile

Broader markets expensively valued, focus to shift to mid and small caps

Expect modest returns of about 10%

• Events to watch out for

Euro zone issues, Chinese tightening

US economic recovery

Surging crude oil prices, higher interest rates, inflation leading to possible earnings downgrades

Budget, government finances

• Investing strategy

Invest in companies offering revenues and earnings visibility, and trading at lower valuations

Stick to companies not dependent on external borrowing and having manageable debt

Stock specific approach will pay better dividends

Debt instruments a better bet than holding cash

• Sectors to buy

Mid-cap IT companies

Banking, Infrastructure

Capital Goods

Textiles

• What to avoid

Telecom

Real Estate

FMCG

• Top picks

Indian Hotels

Coal India

BHEL

L&T

Power Grid

ICICI Bank

Tulip Telecom

Renuka Sugar

Euro, inflation key concerns
Several factors, domestic and global, could lead to volatility. “Increasingly, global events will influence Indian equity markets. The problematic euro zone economies, uncertainty over the US economic recovery and an expected slowing in the Chinese economy are the biggest worries,” says Trideeb Pathak, senior director, equities, IDFC Mutual Fund. Experts cite North Korea as another flash point investors need to watch. Local concerns due to rising commodity prices, inflation and an expected rise in interest rates could lead to a jump in input cost and erode operating and net margins, especially of capital-intensive and interest rate-sensitive sectors.

Expect earnings’ downgrades
Analysts say there is a high probability of earnings’ downgrades. It could happen later next year, as the actual impact of inflation and interest rates starts kicking in. The recent rise in crude oil and metal prices could also have a ripple effect on companies and consumers, leading to pressure on demand. Estimated earnings of the Sensex for 2011-12, now Rs 1,240-1,250 per share, could come down. And, valuations which look reasonable could turn expensive.

Dilip Bhat, joint managing director of broking firm Prabhudas Lilladher believes measures taken to deal with the global (liquidity concerns due to Europe) and domestic issues (higher commodity prices) could easily clip off some points from India’s economic growth and temper earnings growth, leaving these vulnerable to downgrades.

Hotels, mid-cap IT, infra preferred
The year was good for commodities, information technology, banking and auto, among other sectors. However, this year, money managers prefer some of the beaten-down sectors and those which exhibit good visibility. Also, sectors that generally participate in the second leg of the economic recovery, such as those in the services space, including hotels and tourism, and mid-cap IT companies, could prove good bets.

Infrastructure is another sector that analysts recommend, as most companies here are trading at 10-12 times next year’s earnings, despite strong visibility. Also, analysts expect a pick-up in new orders due to the rush to achieve the targets set for the XI Five-Year Plan, ending March 2012.

On the back of a pick-up in the industrial capex and government spending, the capital goods sector should do well in the year ahead. As the economy grows and the credit growth remains firm, banking, especially the private banks, are also expected to do well. Many also believe the textiles’ space (trading at eight times the estimated earnings for 2010-11) this year could be a better option to invest, as things are turning in favour of the companies, especially those with the domestic presence.

What to avoid
Telecom is among the leading contenders, due to regulatory uncertainty and heightened competition. Others such as real estate are in the list, given a rapid rise in real estate prices, interest rates and leveraged balance sheets. Fast moving consumer goods, which did well in the current rally, could deliver lower returns with the rises in input cost, and higher valuations, at 25 times the 2011-12 estimated earnings.

What should you do?
As the broader markets are expensive and expected to remain volatile, most money managers advise that you stick to high-quality stocks and avoid portfolio leveraging.

Analysts say a stock-specific approach will work in 2011, but investors should not simply chase returns at the cost of quality, which could be tested in the year 2011. The memories of several scams, which broke in the year 2010, are still fresh. With investigations on, investors need to do more due diligence before investing.

If the global uncertainties materialise, they could pose renewed concerns for our markets and lead to a steep correction. In the light of those risks, investors should look at companies which not only offer growth but also trade at reasonable valuations. “I would try to keep the price earnings ratio of the portfolio down to the extent possible,” says Manish Sonthalia, vice president and fund manager, Motilal Oswal AMC.

Money managers such as Trideeb Pathak of IDFC add that it’d be better to stick with companies which do not require much capex immediately and ones not dependent on external borrowings, as interest costs and the impact of global events could skew the picture.

Source: http://www.business-standard.com/india/news/expect-10-12-returns-in-2011/420139/

KYC must for MF investors from Jan 1

Mutual fund (MF) investors, irrespective of the amount they invest, will have to complete the Know Your Customer (KYC) requirements for all purchases, switches and new systematic investment plan registrations from January 1.

Investors have to submit the KYC form, which is available with fund houses, along with necessary documents at the nearest investor services centre. They have to provide a photocopy of the PAN card , proof of address document and a passport size photograph. Earlier, only resident individual investors making investments above Rs 50,000 were required to complete the KYC formalities.

Fund houses have made arrangements with CDSL Ventures for KYC compliance. On submission of KYC application along with the prescribed documents, a KYC acknowledgement letter will be issued. Investors have to provide the letter for carrying out transactions in MF schemes.

The category of investors who need to comply with the KYC norms also include power of attorney (PoA) holders (for investments done through a PoA), each of the applicants in case of investments in joint names and guardian for investments made on behalf of minors.

Non-individual investors (such as corporates, Hindu undivided families [HUFs], partnerships and trusts) that already have an MF Identification Number (MIN—not valid anymore) and have not provided PAN at the time of obtaining MIN should also complete the KYC formalities mentioned above.

Investors who have already completed KYC formalities should submit a copy of the acknowledgement along with a list of folio numbers. After verification, the status will be updated in records and investors would be able to transact as usual. Applications by investors without valid KYC acknowledgement letter are liable to be rejected from January 1, fund houses said.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/kyc-must-for-mf-investors-from-jan-1/articleshow/7188955.cms

Large-cap funds' bets on small companies backfire

UTI Leadership , Reliance Equity, Bharti Axa Equity and Sundaram Select Focus funds led the under-performance of more than half the large-cap equity schemes in 2010 as fund managers stacked up small companies in their portfolio to outperform, a strategy that backfired and strengthened the case for investing in index funds.

Nearly 37 of the 61 funds run by Reliance Mutual Fund, UTI Asset Management and Sundaram Mutual Fund returned lesser than their benchmark indices as mid-cap and small-cap companies lost value faster towards the end of the year on the back of a series of scandals. The returns of these underperforming funds ranged from -0.8%% to 15.8% in 2010, when the Sensex rose 15.6% and the S&P CNX Nifty gained 16.09%, data from Value Research, a mutual fund tracking company, shows.

"Fund managers wanted to have a diversified portfolio with mid-cap stocks to give the return kicker," said A Balasubramaniam, CEO, Birla Sun Life Mutual Fund. "In most cases, however, the strategy of seeking alpha by investing in mid-cap stocks misfired. 2010 was a year of rapid market movements; such volatility required faster alignment to broader markets. Most fund managers failed to keep their portfolio in line with the markets," he said. Alpha refers to the risk-adjusted return on investments.

The underperformance has dealt the 6.65 lakh-crore mutual fund industry, which has been facing tough times ever since the 2008 meltdown, another blow. Due to the poor performance of equity schemes, Indian investors who keep more than half their savings in bank deposits, may increase their investments in fixed-income securities as interest rates climb.

Poor performance of some of the index constituents such as Reliance Industries and metals company Sterlite Industires also added to the woes of these schemes.

The dwindling optimism about Indian markets' prospects due to soaring commodity prices and the possibility of higher interest rates may make it difficult for funds to provide market-beating returns in the new year, too. "2011 may also not be a great year for equity mutual funds," said Dhruva Raj Chatterji, senior research analyst, Morningstar India, a fund research firm. "Equity funds are likely to generate just about 10% from the current market levels. Equity funds outperformed in 2009 only because of the lower performance base created in 2008. The course ahead will be difficult for fund managers. Risk-averse investors should start looking at balanced funds."

Foreign fund flows may also be lower than the record $29 billion this year as investors begin to buy equities in the US and other developed markets, where the prospects are looking up. Fixed-income returns have jumped more than 50% with the yield on the 10-year US treasury jumping to more than 3.5% from less than 2.5%.

Mid-cap and small-cap companies that provide higher returns fell off investors' radar in the last quarter after the Securities & Exchange Board of India revealed price rigging in companies such as Murli Industries and the Central Bureau of Investigation arrested some bank executives for taking bribes to sanction loans.

Among funds that have outperformed are Religare PSU Equity Fund, with over 11% return versus the benchmark return of -1.42%, Reliance Equity Opportunities at 29%, Magnum Emerging Business at 30% against the benchmark's 15%, and DSPBR Microcap Fund, which clocked 43% returns versus the 15% gain of the BSE Smallcap index.

Source: http://economictimes.indiatimes.com/markets/stocks/market-news/large-cap-funds-bets-on-small-cos-backfire/articleshow/7181937.cms

The seasoned five

They may or may not merit your investments, but they have established their own identity in the labyrinth of over 1,000 MF schemes. We take you through five such schemes.

Track record is an expensive commodity in the Rs. 7 trillion Indian mutual fund (MF) industry. And when an equity fund has accumulated it over the past 10 years, it usually makes for a good investment. About 26 years after the first equity fund was launched in 1986—aside from Unit Trust of India’s US-64, which technically wasn’t an MF scheme—we now have a sizeable number of equity schemes that are more than 10 years old. Of 400 equity funds in the MF industry, 82 schemes have completed 10 years. While most of these schemes have lost their relevance in the face of newer and nimble peers launched by their own fund houses, a few names are still spoken of with reverence. They may or may not merit your investments, but they have established their own identity in the labyrinth of over 1,000 MF schemes. We take you through five such schemes.

HDFC Top 200

Launched in November 1996, HDFC Top 200 (HT200) is the largest equity fund in the MF industry with assets of Rs. 9,424.8 crore. But this gentle giant hasn’t compromised its performance and is as nimble as the next fund. With a 10-year return of 31%, HT200 has done well in both the rising as well as falling markets. In 2008, when equity markets fell on the back of global credit crisis, HT200 fell by 45.35% against an average category loss of 51% and 56% by its own benchmark, BSE 200 index. Prashant Jain, its fund manager, has consistently managed this fund since its inception; a rare feat in the industry that has seen several fund managers come and go.

According to the scheme’s mandate, the common holding between its own holdings and that of its benchmark index should be at least 6%. For instance, if Infosys Technologies Ltd constitutes 5% of BSE 200 and 7% of the fund, the common holding is 5%. It’s a mandate that doesn’t hug the benchmark index, but also restricts the risks a typical equity fund can take. Jain tells us that he usually keeps the common holding at a minimum of 60% of the scheme’s total corpus. “Since it doesn’t go too far from the index, it is meant for low risk investors,” adds Jain.

Jain also avoids sitting on cash as he firmly believes that investors give money to fund managers to invest in equity markets and not to sit on cash. It had only between 3% and 5% of its corpus in cash between October 2008 and February 2009 when equity markets hit rock-bottom. Jain likes banking, consumer non-durables and software sectors; in each of these he has increased his exposure throughout 2010. HT200 is a part of Mint50—Mint’s chosen set of 50 schemes that we recommend for fresh investments.

UTI Mastershare

The oldest diversified fund in the industry after US-64, UTI Mastershare was launched in October 1986, when unit-holders used to get its physical certificates, like the old time physical share certificates. But Mastershare is more famous for its annual dividends that the fund has diligently paid, during the Diwali festival. It’s an illusion though; dividends come out of the pockets of investors and your fund’s net asset value (NAV) reduces by a similar margin.

However, that has not deterred much of its 680,000 loyal unitholders who still hold their physical unit certificates. “Even if the fund doesn’t pay dividends, an investor can still withdraw a portion of his investments and use it as dividend. But usually, investors don’t withdraw regularly to substitute for dividends,” says fund manager Swati Kulkarni. She says that though dividends are not guaranteed, they endeavour to pay regular dividends.

Mastershare is a large-cap-oriented fund that invests about 80% of its corpus in large-sized companies. The rest goes to mid-cap companies. In the early days, Mastershare invested in scrips across market capitalization. After the fund house got restructured in 2003, the scheme became focused. Additionally, too many fund managers came and quit. Between 2000 and 2006, four managers were at the helm of this scheme. When Kulkarni took over in December 2006, she trimmed the number of stocks to a more manageable level (presently about 49 scrips against about 80 scrips before) and cut down its exposure to mid-cap companies (about 20% presently against 28% average between 2005 and 2007). According to the fund’s November portfolio, it has 15.6% exposure in mid-cap companies and almost nil in small-sized companies. Its subsequent investments in capital goods space also helped the fund beat the markets in 2007, after Kulkarni took over.

Mastershare’s performance has mostly been subdued. Its 10-year returns stands at 17.83%. However the fund has picked up after Kulkarni has taken charge; in two of the past three years, it outperformed the category average. The fund took a momentary hit in 2009 because Kulkarni misread election results; equity markets shot up by 85% between 9 March 2009 (Sensex level of 8,160) and 5 June 2009 (Sensex level of 15,104). Like many schemes, Mastershare was caught sitting on too much cash (20.48% as of April-end 2009). Once the markets settled on an upswing, the scheme increased its exposure to the banking and information technology (software) sectors, which boded well. The scheme is not built for chart-busting returns, but Kulkarni aims for consistency.

Franklin India Bluechip

After suffering a painful dip in 2007 when it underperformed equity markets as well as a sizeable number of equity funds, Franklin India Bluechip Fund (FIBF) is back. At a corpus size of Rs. 3,326.7 crore, FIBF is one the largest schemes in the large-cap space. What separates FIBF from the rest of the market is its aim to stay true to its label. A large-cap scheme by nature, the fund refuses to stray away from its mandate. According to data available from Value Research, a mutual fund tracking firm, FIBF has consistently invested over 75% in large-cap companies and the rest in large to very large-sized mid-cap companies.

The other thing that FIBF avoids doing is hold cash. Between September 2008, when markets crashed, and March 2009, when it hit a low, FIBF had only 7% of its corpus in cash. Says fund manager Anand Radhakrishnan, senior vice-president and portfolio manager-equity, Franklin Templeton (India) Asset Management Co. Pvt. Ltd: “We don’t try to time the market through cash calls and typically are fully invested as we believe investors coming into equity funds are looking for equity exposure and not for an asset allocation product.”

Since November 2008, the fund’s corpus has grown to Rs. 3,326.76 crore, up from Rs. 1,435.55 crore, a jump of Rs. 1,891.21 crore or 52% compounded annualized. The fund is well diversified; its top 10 holdings consistently account for about 48-50% of its total portfolio. Like most other schemes, FIBF’s top three sectoral allocation includes banking with 19.20% of its total portfolio, chiefly through ICICI Bank Ltd and Kotak Mahindra Bank Ltd; the fund booked profits in HDFC Bank Ltd throughout 2010. It also made money through its investments in Infosys Technologies Ltd, Cummins India Ltd and Crompton Greaves Ltd.

“India remains underserved in terms of financial services, but the strong growth in personal incomes has led to increased demand. Given the low penetration of banking and financial services in India, we believe companies in this sector have good growth potential,” says Radhakrishnan. Large outperformance of banks in 2010 and present valuations—which Radhakrishnan feels are “still reasonable”—do not seem to dither him.

Reliance Vision

A star performer for a good part of the past decade, Reliance Vision Fund (RVF) is one of Reliance Capital Asset Management Ltd’s largest diversified equity funds. Though RVF is a large-cap-oriented fund, it doesn’t hesitate in taking exposure to small and medium-sized companies. In 2010, it has invested approximately 30% of its corpus in small- and medium-sized companies. In 2007, this figure was 38%. “We invest in mid-cap companies with a time horizon of at least two to three years,” says fund manager Ashwani Kumar who has managed this fund since June 2003.

Kumar likes to hold a tight portfolio and hence it’s not hard to spot a bit of sectoral concentration in RVF. With a corpus size of Rs. 3,543.2 crore, the scheme consistently holds about 33-35 stocks in its portfolio. RVF is opportunistic and doesn’t hesitate in frequent churning. It follows in growth style of fund management and holds around 10% on an average in cash. Some of the scheme’s biggest stories in recent times have come from investments in Siemens Ltd, ICICI Bank Ltd and State Bank of India.

Despite being oriented towards growth style, the fund also goes for value picks such as oil refining and marketing companies. The scheme aims to invest in companies within the BSE 100 index to the extent of 80% of its portfolio. For the rest it looks outside BSE 100, such as Coal India Ltd, which recently concluded India’s biggest initial public offering. “Despite venturing BSE 100, we do not diminish the portfolio quality,” says Kumar.

However, after years of outperforming the market, RVF’s recent performance has been subdued. It has managed to return a mere 13.08% so far this year (as on 24 December) against 15% by the category average. Its performance was almost just as much as its benchmark index BSE 100 which returned 12.88% so far. In 2009, around March and April, it got a bit late in deploying cash back in the markets; by the time it reduced its cash levels between May 2009 and August 2009, markets already appreciated.

Templeton India Growth Fund

With a corpus of Rs. 822 crore, this is the smallest of the five schemes we’ve picked. But Templeton India Growth Fund (TIGF) is one of the best and oldest equity funds that practice the “value” philosophy of investing. As against “growth” style of investing that hunts for fast-paced stocks whose share prices continue to rise even in overheated markets, a value stock’s share price grows only after certain events previously anticipated for the company occurs. These stocks typically trade below their true value, and against growth stocks, do not experience above-average growth. Hence, value stocks are typically not chased by a majority of buyers in the stock market; one of the main reasons why a well-managed value fund, such as TIGF, outperforms its peers during falling markets. In 2008 when the multi-cap equity funds on average lost 54%, TIGF lost 51%. Way back in 2000 and 2001 when the category lost 24% and 23%, respectively, TIGF lost just 3% and 7%, respectively, in those years.

“Majority of the investors might blindly shun beaten down or an ignored stock as they don’t expect growth from them and this exacerbates the decline. Investors, who are invested in beaten-down stocks of companies with good medium- to long-term potential, tend to do relatively well than those who had invested in growth stocks, when the markets turn, as they are under owned in the first place,” says Chetan Sehgal, chief investment officer-India, Templeton Emerging Markets Group, Franklin Templeton Asset Management (India) Pvt. Ltd. He’s quick to add, though, that value philosophy doesn’t just mean picking up stocks that are fallen. “They have to be fundamentally valuable; that distinction is crucial”, he says.

That doesn’t mean TIGF is a sitting duck in rising markets. Backed by beaten-down scrips such as Tata Chemicals Ltd, Bharti Airtel Ltd, Reliance Industries Ltd and others, which it accumulated in 2008, TIGF gave 104.7% returns in 2009 once markets started to rise, against the category average of 84.9%. While the Templeton group manages value-oriented schemes, the Franklin group manages growth-oriented schemes. Both groups have a distinct set of fund managers and analysts. The fund house claims that neither knows what the other does—the main reason, as it claims, why their schemes consistently manage to stick to their individual philosophies.

Source: http://www.livemint.com/2010/12/28212102/The-seasoned-five.html

Mutual funds see exodusof top talent

Two weeks ago, Nilesh Shah, deputy managing director and chief investment officer (CIO) of India’s third largest fund house ICICI Prudential Asset Management Co. Ltd, resigned to seek “other opportunities”. Shah, 42, is one of the three leaders the Rs.7 trillion mutual fund (MF) industry has lost in recent months.

In September, Ved Prakash Chaturvedi, 50, a 20-year industry veteran, stepped down as chief executive officer (CEO) of Tata Asset Management Ltd. A month earlier, Madhusudan Kela, head of equities at Reliance Capital Asset Management Ltd, the country’s largest fund house, moved out of the firm.

Kela, 41, continues to be with Reliance-Anil Dhirubhai Ambani Group, but is no longer involved in the MF business. Chaturvedi is planning his own venture while Shah will decide on his future career path after taking a short break.

For the best part of the last decade, Chaturvedi, Shah and Kela have been among the faces of Indian MF industry. Between them, they were overseeing nearly one-third of the industry’s assets under management.

The number of experienced fund managers leaving the asset management industry has been on the rise. In the past two years, at least 65 fund managers, including CIOs and CEOs, have ventured out of the industry into other financial services, according to MF tracker valueresearchonline.com.

In 2010, at least 35 fund managers left the industry where tighter regulations have increased the pressure on the fund managers and shrinking margins have reduced rewards.

“The dream job of a high-flying fund manager is not the same any more,” said one senior fund manager who recently left the industry and didn’t want to be identified.

Unlike privately managed funds, MFs are governed by elaborate regulations and disclosure requirements, including declaration of a daily net asset value (NAV). This makes a fund manager’s work open for scrutiny by not only superiors, but also by peers, regulators, media and common investors.

“The pressure on fund managers is tremendous. Teams are small and responsibilities are wide. Managing public money keeping in mind day-to-day NAVs is not easy,” said an official from a large private sector fund house, who also spoke on condition of anonymity.

Despite five new fund houses—Pramerica Asset Management Pvt. Ltd, Motilal Oswal Asset Management Co. Ltd, Peerless Funds Management Co. Ltd, IDBI Asset Management Co. Ltd and L&T Finance Investment Management Ltd—commencing business this year, the overall number of fund managers and CIOs remained stagnant at around 260-270, according to data provided by valueresearchonline.com.

Arjun Parthasarathy of IDFC Asset Management, Ashish Nigam of Religare Asset Management Co. Ltd and K. Ramkumar of Sundaram Asset Management Co. Ltd are some of the senior fixed-income managers who left the industry that has seen many regulatory changes since August 2009.

The Securities and Exchange Board of India (Sebi) has introduced changes in MF regulations, including the abolition of entry loads (the commissions that an investor has to pay while purchasing MF units), marking debt instruments to their market value and tightening rules for approval and launch of new fund offers.

Many asset management firms are facing falling profits and some of them even ran into losses in the quarter ended September.

“Industry is still seeing negative inflows at the net level. Forget the variable (compensation), even increments (in pay) are unlikely to happen,” an official from a large private sector fund said on condition of anonymity.

Attrition not only hurts the firms but also investor interest. Top fund managers in developed markets such as Bill Miller of Legg Mason Capital Management Value Trust and Anthony Bolton of Fidelity International have spent nearly their entire career managing a single fund with a single fund house. Miller’s fund beat the market for 15 consecutive years beginning 1991. Bolton managed Fidelity Special Situations Fund for 28 years between 1979 and 2007.

While the pressure is rising, the rewards are shrinking, forcing managers to look for greener pastures, say head hunters.

“Fund managers are looking for opportunities elsewhere as the MF industry has been affected by numerous regulatory changes. As the fee income for the fund houses comes down, their margins are squeezed. While smaller funds are most affected, even the larger fund houses are facing trouble,” said Kris Laxmikanth, CEO, Head Hunters India Pvt. Ltd.

This directly affects the pay cheque of fund managers, Laxmikanth said.

MFs are not making meaningful money any more and fund managers are high-cost resources. Typically, a fund manager’s variable pay, linked to the performance of the fund, is thrice the amount of the fixed pay.

“A senior fund manager typically earns around Rs.40 lakh in fixed pay and Rs.1.2 crore in variable. So, in a good year, the pay could be Rs.1.6 crore. But these salaries have vanished as the industry itself has not done well,” Laxmikanth said.

“Regulatory tightening has certainly made these people a little pessimistic about the growth of the business,” said Dhirendra Kumar, CEO, Value Research, a Delhi-based MF tracker. “But cost may not be a major issue behind this attrition.”

The sheer amount of opportunities and growth prospects that other financial services offer are increasingly becoming too good to resist for fund managers.

For instance, investment banks are always on the lookout for talented executives and fund managers with expertise in analysing companies and valuing them are often easy targets. Ramkumar of Sundaram AMC is one of the fund managers who has become an investment banker.

Other opportunities for MF managers include family offices that manage the investments of wealthy families and hedge funds where regulatory obligations are minimal and financial rewards are lucrative.

Chaturvedi said his decision to leave Tata Asset Management was a personal decision and did not have anything to do with the status of the industry. “It happens to a lot of people after serving in an industry for 15-20 years and there are various compulsions,” he said.

Kumar of Value Research also said personal reasons could be part of the reason for fund managers leaving the industry.

“The rules have changed and people who were very relevant to the industry earlier may not be as relevant for growth in today’s environment. So, while some people are moving out on their own, some must have been pushed out.”

Source: http://www.livemint.com/2010/12/28004353/Mutual-funds-see-exodusof-top.html?atype=tp

We constantly strive to stay ahead of the curve

Kenneth Andrade was recently voted among the top 3 equity fund managers and his flagship fund - IDFC Premier Equity Fund was also voted among the top 3 equity funds in the recently concluded Wealth Forum AMC Awards 2010. Kenneth gives us his perspective on markets, his views on key sectors and on how he manages to outperform benchmarks and many peers in a highly competitive market.

WF: The Indian market is now underperforming developed markets - quite the reverse of the de-coupling theory that we all keep talking about ! What has led to this situation?

Kenneth: I think it is related to both the external environment and the internal environment. The internal dynamics have been affected on a couple of fronts - one, regulators of virtually every industry have opined how the industry should not cartelize their products in line with the demand. Second are corporate governance issues with various personnel of companies involved; the law has stepped in and this has caused a bit of uncertainty. All the same, the problem is not systemic and I would not expect it to have a very long term effect.

Externally we are close to the year end. Fund activity worldwide is pretty muted at this time. Also, this year India received a disproportionate amount of money amongst all emerging markets. So I would imagine that the liquidity flows will take a small break, at least for the year ending. I don't believe we will see the same thing happen in 2011.

WF: In terms of domestic growth data, some analysts are worried about the choppiness in the data and the robustness of the growth. Is there anything in the data points that are coming out which leads you to worry about the earnings for next year?

Kenneth: The domestic economy should be seen in three parts. One is the export sector where the robustness of the business comes from the advantage of cost. There is nothing very disturbing in that part of the economy, though international capex spends are going to be a significant driver on how this business evolves.

Then there is the investment economy that was the darling of the capital markets until o 2007. The 2007 peak had multiple companies investing into that entire segment and to a very large extent created reasonable amount of capacity and in some businesses, like cement, it created an overcapacity. That part of the economy is still grappling with lack of demand. Projections indicate that in 2011 and 2012 there will be a return to the investment cycle. However, the choppiness in those numbers is posing as an area of concern for the capital markets, which has garnered a significant amount of assets and had taken on significant debt.

The third leg is the consumer economy, where an incremental amount of disposable income is effectively driving the demand of that market. This part of the economy continues to grow very well.

Thus, within two of the three areas, the outlook seems reasonably robust. Admittedly, a lot of it is being supported by the government. The area for concern is the investment economy which needs significant amount of money to be injected for India to continue to grow at 8% - 9%. There is lumpiness in that part of the market. I would imagine that 2011 and 2012 are very critical for the economy as a whole and this part of the entire environment has to come back.

WF: The muted order flows in infrastructure disappointed many. With 100 thousand rupee crores raised from 3G and more, what do you think has held back the Government and therefore what is the confidence level that come January and 2011 the outlook will be more positive?

Kenneth: The Government budgetary allocations were focused on three main expenditure sectors - infrastructure being the largest, the next was defense and lastly the social environment which includes NREGA and the food subsidy. The infrastructure spend did not really happen. Social spend had a lot of money effectively transitioning into the wider population. The Government emphasis appears to be bringing more people into the earnings cycle, even it means subsidising the entire regime. Hence consumption continues unabated, not only in India but also in China. China has a 30% wage inflation rate with no Government intervention. It means that the entire emerging market basket, of which India and China are the largest, have moved towards the domestic consumer environment rather than focusing too much on exports. That's where the money is going.

At the other extreme, 2011 and 2012 will be critical for India in terms of getting investment infrastructure on the ground, because that will create an environment conducive to manufacturing which, will in turn, create a the right logistics for increase in employment. That will sustain the 8 or 9% growth. We will have to wait and watch.

WF: From your perspective, would infrastructure rate as a buy now in the midst of this bad news and uncertainity or would you stay on the sidelines for more clarity to emerge?

Kenneth: We think that valuations are coming to a price point which is becoming attractive. To us infrastructure is more about consolidation than growth. Therefore, if I had to an infrastructure product together, I would look to lead with companies with a monopoly - basically utilities - which is where the best money is. Rather than playing asset growth, reduction in liabilities would deliver stock performance. If corporate interest rates drop from today's 10% to 6 ½ % in the next three years, there will be a transfer of wealth from bond holders to equity holders. So that is the first ladder. The second leg is consolidation in an interest rate environment where you have easy money. In an environment of overcapacity and stressed assets, consolidation would come from a company with low debt on its book and is a market share leader in its field. The third leg, when the environment of growth comes in, will be the icing on the cake. We plan to build our infrastructure based on these principles in the next 2 to 4 years.

WF: The banking sector has gone from being a favourite to a perceived liability with many saying that the fundamentals have deteriorated in the last couple of months. There has been a significant sell-out of banks in recent weeks. What do you make out of the banking space and what is your stance on the same?

Kenneth: Yes banking was a favourite due to low valuations, high ROE differences and great capital efficiency - probably one of the most capital efficient banks across the world. But the challenges that banks face are high interest rates, slow increase in credit growth and slow down of deposit growth rates. While the larger banks are significantly ahead of the curve in terms of reach and getting cheap mobilization of money, the smaller banks have struggled but they will also effectively catch up. The sector is going through a cyclical downturn. One needs to factor in the fact that none of these banks are trading at a significant premium to their peer growth. Banking has 26% of the market capitalization and is attracting a significant, if not a disproportionate share of the liquidity - and will continue to do so. So I would not write it off. We are fairly neutral on this sector and have never been underweight.

WF: Recent developments have also seen a turn in sentiment towards mid and small caps with huge sell offs in the recent weeks. Do you think they represent attractive value or would you be cautious because of the current situation?

Kenneth: While the corporate governance issue will always remain, one has seen some of the best businesses come from this place. Also, there are enough ambitious entrepreneurs who do things differently and move things right. Our focus is to capture the growth cycle forward rather than capturing valuations. In our domestic driven consumer economy there are enough such growth opportunities available.

With mid caps, the last rally occurred in 2007, predominantly in the small commodity and the small capital goods space. None of them came back, but the mid cap index came back. So you basically shifted investment from one segment of the market to another which has driven the indices back up. So I think this is the way to gain exposure to the smaller end of the market.

Our focus has always been to capture the growth of an entrepreneur who starts off as number nine in the industry and ends up being in number one or two or three.

WF: Moving on to a slightly broader market issue, some technical analysts have been predicting the end of the bull market. What is your own prognosis for 2011 for the markets?

Kenneth: 2011 won't be anywhere close to 2010. You should get an absolute return - but the biggest risk is that we might actually get into an overvaluation zone.

As far as the economy is concerned, with the aid of political will, return to spending will be beneficial. We need to leave a lasting impression with assets on the ground rather than spends on the ground.

WF: Your flagship fund - the IDFC Premier Equity Fund - has caught the eye of many advisors. What are some of the factors that you believe have helped differentiate it and deliver in an extremely competitive equity funds market space? How are you currently positioning this fund?

Kenneth: We stuck to our philosophy of trying to be ahead of the curve and continue sifting through data to find opportunities which would be in line with what we believe would lead the market in the next rally. This means aligning with companies or entrepreneurs from the bottom of the pack that are cost leaders or thought leaders and who drive their business pretty high. Thus, we have aligned ourselves with some of the smartest businesses. And that's how we actually executed that product. We intend to stick with that investment approach. The challenge remains in the timing of the cycle - getting in too early is not good either.

Thematically we are still significantly consumer-oriented. Over the last month or so we are looking at consolidators in infrastructure space or the investment economy space. But it is still fairly early and were we to add infrastructure, it would be a small part of the portfolio. Overall, infrastructure would be 15% of the portfolio. Consumer driven stocks are around 55% of the portfolio. The balance is financials and export oriented companies.

Funds bet big on small and mid-cap schemes

The strong performance of schemes investing in mid- and small-cap shares between January and October has encouraged more mutual funds to seek regulatory approval to launch such products.

Fund houses anticipate that the superior returns from mid- and small-cap schemes compared to large-cap ones in the recent past may attract more money into such products, especially after the 20-25 % correction in these stocks.

Religare Mutual Fund , IDFC Mutual Fund and Axis Mutual Fund have filed offer documents with the Securities and Exchange Board of India (Sebi) to launch ‘mid- & small-cap fund’ , ‘small-cap equity fund’ and ‘ mid-cap fund’ , respectively. Motilal Oswal Asset Management has approached Sebi to launch a midcap ETF.

According to sources in distributor circles, Pramerica Mutual Fund and Peerless MF are also planning to apply for ‘low-cap’ funds over the next few weeks.

“Investment in mid-cap shares yields higher returns over a longer timeframe. If you take a 10-year period, mid-cap indices outperform key benchmarks by about 4-6 %,” said Nitin Rakesh, CEO & managing director, Motilal Oswal Asset Management Company .

Mid- and small-cap funds have returned 20% over the past one year. The BSE mid-cap and small-cap indices have returned about 15% in the period. Large-cap funds have fetched 16% returns in the period. But for the correction in November, returns from these schemes would have been higher as they fetched 75-100 % between January and October .

Fund managers consider the recent decline in mid- and small-cap stocks in the past two months as an opportunity to buy them cheaper .

“When compared to large-cap peers, there are several mid- and small-cap stocks that have relatively more upside to grow in value,” said the chief investment officer of a private mutual fund, adding, “In terms of earnings growth, several mid- and small-cap companies have beaten their larger peers.”

Fund managers rely on mid- and small-cap stocks to help their diversified equity schemes perform better than peers and the benchmark indices. This is because small- and mid-cap stocks are not as widely tracked as their largecap peers, enabling fund managers to buy them cheap. On the flip side, small and midcap stocks fall deeper and faster when broader markets are in a downtrend.

“Small and mid-cap stocks have fallen sharply over the past two months; this, in a way, could mean that small and mid-cap stocks could rally when broader markets break out the current range,” said Bharat Shah, head of institutional sales, Ventura Securities. “Now is the time for investors to buy mid and small-cap stocks. Investors in mid- & small-cap mutual funds will also benefit from a probable rise in overall markets,” Mr Shah added.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/funds-bet-big-on-small-and-mid-cap-schemes/articleshow/7160460.cms

Stock markets are expected to yield 15-20 per cent over the next 2 years

CEO, L&T Mutual Fund Sanjay Sinha feels that Dr Bimal Jalan Committee has not found favour with the larger audience and that some way has to be found out. In conversation with Ritu Kant Ojha of The Indian Express, Sinha says that reasonable investment in the yield fund for the medium to long term horizon may make sense because the yield once they start coming down, hold promise of not only reasonable return but carry the scope of capital appreciation also. ‘Due to the tight liquidity situation, the short term rate are also at attractive levels and therefore locking your investments into FMPs may make a good investment choice’ he says. Excerpts

Last 2 years have been tough for Mutual Fund industry. Still we are seing more and more new entrants into the AMC business. What is the reason? What makes it so lucrative?

The ban on the entry load may have an impact in the medium and it is already showing in the growth of the industry in last 1 year. Mutual Funds as an investmetn product are one of the most cost effective vehicle for long term financial planning. This inherent virtue is slowly donning to a large universe of investors and we have therefore seen the number of SIPs growing from 30 lakhs in 2008 to 50 lakhs in 2010. This is a structural transformation and is expected to put the industry on a stronger foundation and is therefore likely to retain as well as attract the attention of those players who have a long term vision for the industry. But the challenge of distribution in the new environment has to be tackeled and the soluction will evolve over the next few months.

Source: http://www.indianexpress.com/news/stock-markets-are-expected-to-yield-1520-per-cent-over-the-next-2-years/729580/0

Financial literacy is the key to financial freedom

In an interview with Pooja Chopra Goel of Myiris.com, Hemant Beniwal, Director, Ark Financial Planners says, ``The onus of a successful financial advisory system lies in the hands of the people.

Can you tell us about `Ark Financial Planners` and its mission & services? What services do you offer?

Ark Financial Planners is a fee based financial planning firm which is serving Indian clients across the globe. Our more than 50% clients are NRIs. Our priority is to help clients achieve their goals. Not only fulfillment of their goals is our responsibility, but we also make sure that this entire process of managing wealth is independent, comprehensive and competent.

We ensure that our clients get an understanding of the investments and use resources in such a way that they get the most from their life stressing over financial matters. We focus upon comprehensive financial planning only as we believes that financial planning is the only way through which people can achieve their financial goals.

But recently we received lot of queries about single element planning so we have extended our services to - basic financial plan, retirement planning, investment planning, estate planning, mutual fund portfolio reviews and consulting. At Ark, we ensure that whole process is very interactive & learning so that client feels involved.

Can someone get hourly financial planning and tax advice to get a big picture? How do I know if the cost of financial planning is worth it for me?

Hourly financial planning consultancy is a very new concept in India. We live in a country where people think advice is a free gift and the price is always built in the product. We have recently added the only consultation (fee only) in our services and we are getting very positive response. Investors are sharing their concerns and find it a very satisfactory experience. Many investors who are using this service actually want a comprehensive financial planning service.

Cost of financial planning is definitely worth it; although it is a very big & subjective question. We are not dealing in tangible products so the client can`t see the outcome now. The plans that we makes are a road map for 40-50 years & don`t provide any instant gratifications. For making people understand its worth, we always tell them the likely outcome & show sample plans so that they can decide whether they want to get involved in this process or not.

But a big problem in Indian context is that the term `financial planning` & `financial planner` has been misused to sell financial products. Till now the planning part is completely overlooked and that has added to confusion. Clients must be willing to pay the fees for impartial advice, just the way they pay doctors for diagnosis. The onus of a successful financial advisory system lies in the hands of the people.

What information should one bring along to get maximum value for time spent with the planner?

Financial planning is all about achievement of one`s financial goals. So before a person reaches a planner he should ask himself: What are my financial and life goals? Where am I standing today in relation to my goals? How will I reach my goals from where I stand today? The best way I think is that he should write these questions and the answers on paper. He should also carry the supportive documents. I think this can become the foundation of client - planner relationship.

How would you suggest a common investor ensure that their accounts are protected and not invested in dubious instruments?

Mis-selling is making new peaks every year and for common investors it`s very tough to identify what is right or what is wrong. With the agents, even manufacturers are trying to milk naive investors. Best way is one should have a written financial plan .This helps in two ways. First is that your focus moves away from - ``What is new in the market?`` to ``Will this product be helpful to achieve my goals?`` Secondly, it will eliminate the risk of mis-selling as the advisor is giving recommendations in writing.

How many fund houses do you deal with? In which fund house do you have the maximum AUM (in terms of percentage)? Tell us your favorite all-time MF schemes and fund managers.

We don`t think this way. We deal with almost all mutual funds and financial products. But suggestion for product is according to the client`s need. In mutual funds, we have some good fund houses with consistent fund management but as such there is no favorite kind of thing. We have designed our internal fund selection criteria and once it matches to client`s objective we suggest a particular fund. For example, at times we say no to even Reliance Growth Fund - undoubtedly best performing fund till date, if it doesn`t fit in our scheme selection criteria.

Has the no-load regime affected your business?

Yes it has; but in positive way. This was a path breaking decision by the SEBI. It was very much required. Clients now know they have to pay for the advice but how much, is still a general question. Earlier in India fees for advice was an unheard word for clients. Once a person knows he has to pay, he starts looking for advisor who can guide him in a right way.

What three books related to personal finance would you recommend every person read and why?

I have read 100 plus books on personal finance & investments but there is no single book which I can recommend as `Nirvana`. And the problem is you hardly will find a good Indian book on this subject. Still if I have to recommend 3 books first will be - ``The Cash Flow Quadrant`` by Robert Kiyosaki. This book tells about difference between assets & liabilities and also tells how to manage your cash flow which is very important for any person to achieve his financial goals. This is a must read for everyone and will change the perception about money. Second will be - ``The Rule of Wealth`` by Richard Templar. This book talks about very simple but important concepts about money. Finally, here comes the investment bible - ``The Intelligent Investor`` by Benjamin Graham. Even Warren Buffett recommends this book by quoting, ``By far the best book on investing ever written``.

What is your take on current market situation? What are the key factors that will drive the stock markets in 2011? What is your advice to retail investors now?

We work on asset allocation model & hardly concentrate on day to day market ups and downs. Even we ask our clients to keep their eyes on goals rather than markets. Timing market or checking its direction is futile exercise which is not actually worth anyone`s time & energy. India is a growing economy and its equity markets can easily deliver 2-3 times of actual inflation figures in next 20 years. Equity gives returns in long term but will investor will be able to get it? Investor`s financial behavior will answer this question.

Is there anything else you would like to share with our readers?

We wish to say that financial literacy is very important as we miss this in our education system. We dream for a day when investor will be financial educated before he reaches his financial advisor. Financial literacy is the key to financial freedom. Being financially aware means client will understand his questions and will definitely understand the solutions. It is really painful to see when a client is mis-sold for penny benefits. And best way to avoid mis-selling is to get armored with financial literacy. We also run a blog: The Financial Literates (www.tflindia.in). We want to give our society back what we have earned from it. This is a web place where we write about concepts, trends, guidance in the field of personal finance.

Source: http://www.myiris.com/newsCentre/storyShow.php?fileR=20101225120305173&dir=2010/12/25&secID=livenews

Investor friendly: Nilesh Shah - ICICI AMC

“If you want to understand the investor pulse, travel by Mumbai’s evening local trains.” That’s a statement that Nilesh Shah, the deputy managing director at ICICI Prudential Mutual Fund, often makes.

But Shah is the kind of man that walks the talk — or in this case rides it: Many recall him actually travelling by a local train when he headed fixed-income funds at Franklin Templeton to hear people’s take on the markets.

Shah is just as involved in issues that impact the MF industry as a whole. During the liquidity squeeze of October 2008, following the collapse of US financial services giant Lehman Brothers, the degree and pace at which investors withdrew money from financial instruments was so staggering, it shoved the domestic MF industry to verge of a collapse.

Shah then took the lead in convincing Reserve Bank of India to lend the industry a helping hand. For the first time on October 14 that year, RBI introduced a Rs 20,000-crore, 14-day credit window for fund houses. Shah's efforts at reasoning with the Securities & Exchange Board of India paid off, too.

Though not an effective stock picker, consistency and steady bets have been Shah’s mantra. This may not have resulted in high-yielding gains for his investors, but their losses too were contained. “I believe in protecting the downside for investors,” he says.

Usually soft-spoken, the 42-year-old fund manager is a much sought-after speaker. Though rarely annoyed at the volley of questions at these functions, on one occasion he asked a member of his audience to shut up. “People have come to hear me and not you,” he had said, snubbing the gentleman.

ICICI’s assets under management have risen to over Rs 70,000 crore in September, from around Rs 15,000 crore when Shah joined the fund house as a chief investment officer in June 2004. ICICI's Discovery, Dynamic and Infrastructure schemes under his watch have delivered higher-than-average returns in the past 3-5 years.

When Shah put in his papers last week, citing “personal reasons”, the industry was curious what he had planned next. His exit comes at a time when MFs are yet again grappling with the regulator on various issues.

Source: http://www.business-standard.com/taketwo/news/investor-friendly/419261/

Market expected to be stock driven in 2011: Lakshmi Iyer

Growth in the domestic equity market is expected to be more stock, rather than sector driven, said Lakshmi Iyer, Head- Fixed Income and Product, at Kotak Mahindra Mutual Fund talking about her expectations from markets in 2011.

The equity market may as such post a largely consistent growth trend, with reduced volatility-bouts, and lesser divergence in the sectoral growth. The returns may consequently reflect the nominal growth in the economy, she added.

The domestic debt market performance would remain a function of liquidity conditions and inflation outlook. The interest rates, which now are largely at pre-2008 crisis level, may remain unchanged initially and subsequently react to events globally as also domestic. Resultantly, Indian bond yields may move sideways for most of the year.

Citing about her favorite sectoral picks for 2011 she said, For various analytical reasons, we believe that Banks with high CASA, Pharma companies that have a wide FDA approval and diversified product portfolio, and Media with a deeper reach, may be the key sectors in the following year. Also, the FMCG and the IT sectors too could look positive in the following year.

Source:http://www.myiris.com/newsCentre/storyShow.php?fileR=20101223162527707&dir=2010/12/23&secID=livenews

L&T Mutual Fund ties up with Central Bank of India

L&T Investment Management Ltd. - Investment managers for L&T Mutual Fund one of the prestigious mutual funds in the country has formalized its tie-up with Central Bank of India, a leading public sector bank, to qualitatively enhance its reach in the category of mutual fund investors across the country.

On the Occasion, Mr. Sanjay Sinha, Chief Executive Officer, L&T Invest Management Ltd. said, “With this tie up, L&T Mutual Funds schemes will be available at all 3600 retail branch locations of Central Bank of India. This partnership will substantially strengthen our distribution network.”

About L&T Mutual Fund
L&T Mutual Fund is one of the premier asset management companies in the country that serves the investment needs of investors through a suite of mutual fund schemes. With proficient investment management practices and an equally competent fund management team, L&T Mutual Fund helps its investors reach their financial goals

L&T Mutual Fund is backed by one of the most trusted and valued brands L&T Finance Ltd., incorporated as Non Banking Finance Company in November 1994. L&T Finance Ltd. has earned the trust of thousands of investors by adapting well to the changing market dynamics and emerging as a profitable venture despite the turbulences in the financial market over the past few years.

L&T Mutual Fund is present in 55 cities through its network of dedicated 58 branches and is continuously increasing its footprints across the country.

About Central Bank of India
Central Bank of India can be truly described as an All India Bank, with its large network in 27 out of 28 States and presence in 4 out of 7 Union Territories in India. Central Bank of India holds a very prominent place among the Public Sector Banks on account of its network of 3600 branches and 195 extension counters at various centers throughout the length and breadth of the country.

Source: http://www.business-standard.com/india/news/lt-mutual-fund-ties-upcentral-bankindia/419320/

Bharti may exit Bharti-AXA Mutual Fund

Bharti-AXA Mutual Fund is most likely to sell its stake to Bank of India and the deal is to be finalised in the next one month. Earlier, public sector banks like Central Bank and Indian Overseas Bank were reported in the race to buy the stake in the mutual fund house.

According to the market participants, Bharti Enterprises which holds 25% stake in the venture is likely to exit from the mutual fund business. Sandeep Dasgupta, CEO of Bharti AXA investment manager said, “We are looking for a banking partner, but I can't comment whether it will completed within the next month, as there are several processes to go through.” He didn't comment on the share price at which Bharti will exit the business. “You will know it once the deal is done,” he said.

For the last two years, Bharti-AXA MF was looking for a partner to expand its asset management business, but talks were put on hold following financial meltdown of 2009. A senior official close to the development said, “valuations are still being worked-out as Bank of India is planning to buy more than 25% stake in the fund house.”

Source: http://www.indianexpress.com/news/bharti-may-exit-bhartiaxa-mutual-fund/728646/

Sundaram MF declares dividend for Select Thematic Funds Rural India Fund

Sundaram Mutual Fund has approved Dec.24, 2010 as the record date for declaration of dividend under dividend option of Sundaram Select Thematic Funds Rural India Fund.

The face value of per unit is Rs 10.

The quantum of dividend will be 30% (Rs 3 per unit) as on the record date.

The primary investment objective of the scheme is to generate consistent long term returns by investing predominantly in equity / equity related instruments of companies that are focusing on rural India.

Source: http://www.myiris.com/newsCentre/storyShow.php?fileR=20101222155045707&dir=2010/12/22&secID=livenews

10 stock picks of fund managers

Mutual Funds in November uploaded stocks like Indian Hotels and stocks in Construction & Engineering space. Tilkanagar Industries - the Indian made foreign liquor maker and a strong south bound player was second in the list in terms of number of shares added, according to report released by Religare Securities.

Mining stocks were in the crosshairs of the Fund managers on the back of big bang listing of Coal India. As many as 5 AMCs added Coal India. Electric Utilities also got top billing from fund houses. Power Grid was bought by 6 AMCs.

Top 10 most bought stocks by MF in November

Coal India (24 mn shares)

Tilaknagar Industries (2.89 mn shares)

TVS Motor Co (2.66 mn shares)

Power Grid Corporation of India (2.31 mn shares)

Texmaco Rail & Engineering (1.67 mn shares)

Chambal Fertilisers & Chemicals (1.15 mn shares)

Indian Hotels Co (0.93 mn shares)

Himadri Chemicals & Industries (0.85 mn shares)

Gammon Infra (0.82 mn shares)

JaiPrakash Associates (0.74 mn shares)

Top 5 sector exposures

Banks (11%)

Petroleum, Gas and petrochemical products (9%)

Engineering and Capital Goods (7%)

Auto & Auto Ancillaries (6%)

Steel and Ferrous Metal (6%)