Monday, January 31, 2011

UTI MF to start financial literacy drive; partners HDFC Bank

UTI Mutual Fund is starting its second round of pan- India .investor education and financial inclusion initiative from February 2 to spread awareness about benefits of investing in mutual funds .

As part of the initiative, christened as Swatantra, two UTI knowledge caravans will travel across Kerala, Karnataka and Tamil Nadu, starting from Thiruvananthapuram, to spread awareness about financial planning, UTI MF CMO Jaideep Bhattacharya said.

For this, UTI MF has tied up with HDFC Bank, the largest distributor of mutual fund products, which would arrange the investor meets across rural areas in Southern India. "We aim to impart financial literacy to a larger subset of rural customers across the 250 rural and semi-rural branches of HDFC Bank," HDFC Bank Senior Executive VP (Third Party Products & Private Banking) Nitin Rao said.

During the journey of 56 days, investors meets would be held in various centres across 130 towns. The initiative is in partnership with the Ministry of Corporate Affairs.

"With the high prices of essential commodities it is very essential that investors get high return on their investments. We are customising the initiative as per the local language to spread awareness about the convenience of buying and selling MFs," Bhattacharya said.

UTI MF hopes the initiative would help expand the fund industry's reach and bring in new investors as HDFC Bank will ask its customers to invest in mutual funds. "If savings has to move to investments, it is necessary that financial literacy is imparted to people in regional language," he added.

In its first leg of investor education initiative beginning July 6, 2010, UTI MF had arranged for three specially-designed vans to move across the country over 100 days. During this journey, more than 1,300 investor meets will be conducted in 300 cities and 100 days with an estimated 15 lakh participants.

The investor education initiative would see UTI MF officers and advisors talking about financial literacy, that would help individuals take prudent investment decisions.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/uti-mf-to-start-financial-literacy-drive-partners-hdfc-bank/articleshow/7389520.cms

Fidelity India Children's Plan: Towards a set goal

Investing with a pre-determined goal in mind helps investors choose the right kind of investment avenues besides systematically saving over the given time-frame.

Fidelity India Children's Plan, is an open-ended mutual fund scheme which, through different asset allocation patterns, allows investors to invest towards a set goal. The plan has three different funds in which to invest in – Education Fund, Marriage Fund and Savings Fund.

Investments in the schemes are allowed only on behalf of a minor by parents and a few others.

Balanced style

The Education Fund has a mandate to invest up to 70 per cent of its portfolio in equity and the rest in debt instruments; the strategy being similar to a balanced fund. It would be interesting to take note of the kinds of returns equity-oriented balanced funds have managed in the past.

Some of the best performing funds such as HDFC Prudence, DSPBR Balanced and Birla Sun Life 95 have delivered compounded annual returns in the range of 18-27 per cent over a 10-year period. Over a five-year time-frame the returns hover around the 18-20 per cent levels. Equity-oriented balanced funds as a category, have delivered around 13 per cent compounded annual return over a five-year horizon.

Investments in balanced funds through the SIP (systematic investment plan) mode too would have delivered impressive returns, although a few percentage points less than the lump-sum returns mentioned above over a 10-year period.

Overall, while balanced funds have lagged market returns over short time-frames of, say, six months, their long-term track record has been impressive.

Asset-allocation

The second product – Marriage Fund has a mandate that allows it to invest 70 per cent in equity, 20 per cent in gold ETFs (exchange traded funds) and 10 per cent in debt instruments.

With gold being an important ingredient in Indian marriages, the fund seeks to provide a hedge against rising gold prices. In rupee terms, gold has delivered a compounded annual return of nearly 22 per cent over the last five years.

The Savings Fund has a mandate to invest its entire portfolio in debt. Switching between goals is allowed and investors can also consider moving the proceeds to the Savings Fund, once their return expectations are met.

A higher equity portion in the first two plans increases the risk profile, with the second also having to contend with volatility in gold prices, which can be considerable.

Long-term wealth

Equity-oriented balanced funds have turned out to be good options for investors to build long-term wealth even while protecting their portfolio from wild market swings.

Fidelity's Children's Plan may see stability in assets managed, as the fund has a relatively steep exit load (a possible deterrent to redemption) in the initial years in the case of its Education and Marriage funds.

Source: http://www.thehindubusinessline.com/features/investment-world/mutual-funds/article1137799.ece

Saturday, January 29, 2011

Tata MF Announces Change in Key Personnel

Tata Mutual Fund has announced the appointment of Mr. Hitungshu Debnath as the Head Sales & Marketing of Tata Asset Management Ltd. with effect from 14 January 2011.

Mr. Hitungshu Debnath is aged 43 years and holds Certified Financial Planner, PG in Marketing Management and Baccalaureate in Optometry as his qualification. He has over 19 years of experience.

Source: http://www.adityabirlamoney.com/news/451665/10/22,24/Mutual-Funds-Reports/Tata-MF-Announces-Change-in-Key-Personnel

Religare MF Announces Change in Key Personnel

Religare Mutual Fund has announced that Mr. Krishna Venkat Cheemalpati has joined Religare Asset Management Company Ltd. as Fund Manager - Fixed Income with effect from 18 January 2011. Mr. Krishna Venkat Cheemalpati is aged 40 years and holds BE. (ECE), PGDBA, CFA (ICFAI Hyderabad) as his educational qualification. He has more than 13 years of experience in Fixed Income market. In his earlier assignment he was the Chief Investment Officer with Reliance General Insurance Company Ltd. (from October 2008 - 17 January 2011).

Pursuant to resignation of Mr. Abbas Ratnani - Fund Manager - Equity, schemes such as Religare Arbitrage Fund, Religare AGILE Fund and Religare AGILE Tax Fund will be managed by Mr. Vetri Subramaniam.

Mr. Anil Saxena has resigned from the Board of Directors of Religare Asset Management Company Ltd. with effect from 12 January 2011.

Source: http://www.adityabirlamoney.com/news/451691/10/22,24/Mutual-Funds-Reports/Religare-MF-Announces-Change-in-Key-Personnel

UK Sinha set to be next Sebi chairman

The Prime Minister’s Office (PMO) on Friday cleared the appointment of UK Sinha as the next chairman of India’s market regulator, Sebi, said sources. Sinha is currently the Chairman and Managing Director of Unit Trust of India (UTI) Asset Management Company . He also heads Amfi, the lobbying arm of the Indian mutual fund industry.

Sinha succeeds CB Bhave, whose three-year term ends on February 17, 2011. A former joint secretary, capital markets, in the finance ministry, Sinha was chosen by a committee in 2007 to head Sebi, but the government ultimately went for Bhave.

Sinha was in the Indian Administrative Services for three decades, but later quit to join UTI AMC. He has vast experience in dealing with financial sector issues, having handled the reverse merger of ICICI with ICICI Bank as joint secretary in the banking division of the finance ministry; restructuring of the erstwhile UTI; as also the drafting of the amendments to the Sebi Act and securities laws.

He is perceived as one who takes the middle path preferring to take people along.

Last year, the finance minister appointed Sinha to head a committee to recommend measures on all forms of foreign investment, including portfolio flows, venture capital and participatory notes.

The new Sebi chairman is expected to get a five-year term unlike his predecessor, thanks to changes in rules governing the appointment of the Sebi chief last year.

Last month, a committee headed by the cabinet secretary interviewed several candidates and finally shortlisted Sinha and Himadari Bhattacharya, Vice-President of Tata Capital and a former RBI official.

Source: http://economictimes.indiatimes.com/articleshow/7382222.cms?prtpage=1

Friday, January 28, 2011

Axis MF Unveils Axis MidCap Fund

Axis Mutual Fund has unveiled a new fund named as Axis MidCap Fund, an open ended equity scheme. During the New Fund Offer (NFO) period units will be offered at Rs 10 each and NAV based price during the continuous offer. The new issue will be open for subscription from 31 January and close on 14 February 2011.

Axis MidCap Fund seeks to achieve long term capital appreciation by investing predominantly in equity & equity related instruments of mid size companies. The focus of the fund would be to invest in relatively larger companies within this category.

It would allocate upto 80% to 100% of assets in equity & equity related instruments of midcap companies of which 75% to 100% allocation would be in larger midcap companies, upto 25% allocation would be in smaller midcap companies. It would allocate upto 20% of assets in equity and equity related instruments of non midcap companies and upto 20% of assets in debt and money market instruments.

The scheme offers two options viz. growth and dividend option.

The minimum application amount is Rs 5000 and in multiples of Rs 1 thereafter.

The fund seeks to collect a minimum subscription (minimum target) amount of Rs 1 crore under the scheme during the NFO period.

An exit load of 1% is payable if units are redeemed / switched-out within 1 year from the date of allotment.

Benchmark Index for the scheme will be BSE Midcap index and will be managed by Mr. Pankaj Murarka.

Source: http://www.adityabirlamoney.com/news/451336/10/22,24/Mutual-Funds-Reports/Axis-MF-Unveils-Axis-MidCap-Fund

Fund heads fairly bullish on Indian equity: Survey

Pharma and IT seen as premium parking space.

Although the Indian capital market seems fairly valued, many mutual fund managers believe the Sensex has potential to climb to the 22,000-24,000 band by the yearend, according to a survey by ICICI Securities Ltd.

Pharma and IT are the two most-preferred sectors for investment whereas cement, oil and gas, media, construction and aviation are at the bottom of the fund managers' picking order, the survey showed.

The survey covered 11 major mutual funds, which remain unnamed, for an overall view of the market in 2011.

None of the fund managers surveyed believed the market to be either ‘grossly undervalued' or ‘grossly overvalued'. But while a minority (9 per cent) felt it was ‘slightly undervalued', a majority (55 per cent) felt it was ‘fairly valued' and the remaining termed it ‘slightly overvalued'.

But in the near term (three months), 18 per cent of the fund managers were bullish, another 18 per cent were bearish, and 64 per cent were neutral. But none was very bullish or very bearish.

But the mood among them was optimistic over a longer horizon. While a majority (64 per cent) felt the Sensex would hit 22,000-24,000 by the yearend, 27 per cent said it would be 18,000-22,000, and 9 per cent settled for 20,000. But none of them felt it may sink below 16,000.

Risk factors

On the risk factors for the Indian equity markets, high crude prices emerged as the biggest worry (73 per cent), followed by the European Union crisis at 27 per cent and slow US recovery (9 per cent).

While the fund managers agreed that the Indian markets would continue to command ‘valuation premium' over other emerging markets, a majority (73 per cent) felt that premium may decline while 27 per cent felt it would endure.

Regarding the corporate earnings growth expected for FY 2011-12, an overwhelming 82 per cent settled for 15-20 per cent growth, 9 per cent pegged it at 10-15 per cent and an equal number at 20 per cent. However, for FY 2012-13 the numbers were a little different.

While 55 per cent believed the corporate earnings growth could be 15-20 per cent, 27 per cent put it at 10-15 per cent and the rest at less than 10 per cent.



Source: http://www.thehindubusinessline.com/2011/01/28/stories/2011012850511500.htm

Thursday, January 27, 2011

Domestic funds' asset slips more than foreign MFs

Overseas funds' higher exposure to equity boosts AUMs.

Indian mutual fund houses have seen a higher drop in their AUMs this fiscal to date, than the foreign fund houses have, according to data available on the SEBI Web site.

As of December-end 2010, Indian mutual fund houses' average assets under management (AUM) fell by 10.4 per cent while that of foreign fund houses fell by 2.6 per cent. The industry average AUM, which stood at Rs. 6.74 lakh crore, for the same period saw a drop of 9.6 per cent.

Foreign fund houses account for about 11 per cent of the average AUM of the industry, and domestic fund houses 89 per cent. The proportion in terms of number of folios is also the same.

The foreign fund houses' average AUM totalled Rs 72,494.54 crore and that of the Indian fund houses Rs 60,1905.88 crore, both as at December end, 2010.

Of the 43 fund houses, 11 are foreign fund houses.

One reason for the difference in AUM fall between the two categories of fund houses is the liquidity tightness that this fiscal experienced. “Generally, foreign fund houses have more exposure to the equity side of the market than to the liquid side. This is why they saw a lesser drop in their AUMs as the equity markets performed better than the debt and money markets,” said Mr Surajit Misra, Executive Vice-President and National Head-Mutual Funds, Bajaj Capital.

The average AUM of Franklin Templeton - the largest foreign fund house in the country - increased by about 18 per cent for the period April-December, 2010. The AUM of the fund house rose to Rs 39,442.60 crore (as on December 31, 2010), from Rs 33,290.04 crore (March 31, 2010). Fidelity, the second largest foreign fund house, recorded a 15 per cent increase in AUM, which stood at Rs 7,683.91 crore (Rs 8,901.48 crore).

“During 2010, we consciously increased our focus on the fixed income side given the low retail participation in that segment.

As part of this strategy and our conviction about corporate debt, we had pushed two funds that included a new launch focused on accruals,” said Mr Harshendu Bindal, President, Franklin Templeton Investments (India).

Top-5 fund houses

Of the top five Indian fund houses in the country, UTI and ICICI Prudential mutual funds have fallen by 19 per cent each during this fiscal. While Birla Sun Life and Reliance Mutual Fund fell by 7.4 per cent, HDFC MF fell by just one per cent during the same period.

The year 2010 saw Shinsei mutual fund completely exiting the mutual fund business in India and selling it to Daiwa. The joint venture between Sundaram MF and BNP Paribas came to an end, with Sundaram continuing on its own and BNP Paribas taking over Fortis Mutual Fund.

AIG Global Investment Group Mutual Fund, owing to its efforts to cut costs and repay debt, has reportedly sold its Indian mutual fund business to Pinebridge Investments (an erstwhile AIG subsidiary).

Despite the struggling mutual fund industry in India, interest and the potential in the India growth story will keep foreign fund houses wanting to enter the industry. “However, many of these players will need to have a long term outlook given that margins are likely to be under pressure,” said Mr Bindal.


Source: http://www.thehindubusinessline.com/2011/01/26/stories/2011012650661400.htm

Sundaram’s Venkatesan Sees ‘Short-Term’ Headwinds for India

Jaya Rao Venkatesan, a fund manager at Sundaram Mutual Fund, which manages about $3.2 billion in assets, comments on India’s monetary policy and stock markets. He spoke by phone today.

India’s central bank increased the benchmark interest rate to a two-year high and signaled further gains in borrowing costs after raising its inflation forecast. Governor Duvvuri Subbarao lifted the repurchase rate to 6.5 percent from 6.25 percent, according to a statement from the Reserve Bank of India in Mumbai today. The decision was forecast by 21 of 22 economists in a Bloomberg News survey. One expected a half-point advance.

The Bombay Stock Exchange’s Sensitive Index, or Sensex, gained 0.2 percent to 19,189.25 at 12:21 p.m. in Mumbai.

On the rates decision:

“There was a lurking fear that rates could rise more. The increase is in line with expectations and to that extent the policy is positive for the markets.”

On the monetary policy:

“The central bank is trying to anchor inflation expectations but at the same time doesn’t want to disturb the growth dynamics. So, as of now, they are able to keep the fine balance between growth and inflation.”

On the outlook for stocks:

“I don’t think there is big positive or negative fallout from the policy for the markets.

“We continue to see short-term headwinds in terms of inflation, but the medium-term outlook for India remains unchanged.

“A rise in crude oil prices beyond $100 per barrel could severely impact the growth of the Indian economy.”

Venkatesan said the policy decision won’t change his investment strategy and he continues to favor consumption, healthcare and software stocks.

Source: http://www.bloomberg.com/news/print/2011-01-25/sundaram-s-venkatesan-sees-short-term-headwinds-for-india.html

In this season of charity, do it through mutual funds

When it comes to a discussion on investing in mutual funds (MFs), it is natural that we think about ourselves and our family. What if you are given a choice to think of others who deserve to enjoy their life in this world as much as you do? Can asset management companies (AMCs) help us with this?
Sample this: At least Rs16,000 crore have been raised through the World Food Programme (WFP) 2010, a part of the United Nations system, that fights hunger worldwide. This money has come from many countries—governments, private institutions, trusts and individual donors like you and me. The Indian government and its agencies have contributed close to Rs2,750 crore and we are currently ranked 30 in the overall donor standings. If I were to relate both these numbers to the Indian MF industry, it may seem like this—15 AMCs adding up their total asset size will still not match the total funds raised by WFP 2010; the Indian contribution alone will beat 16 AMCs in the league table of average assets under management.

What prompted me to write this column is essentially three things. One, this is a season of giving (and marathons)—riding on many resolutions that one has taken for the new year. Two, the recent addition to the big list of givingRs8,846 crore for charitable causes by Azim Premji, Wipro Ltd’s founder. We have also come across many other donations, including a sizeable one from Bill Gates, whose Bill and Melinda Gates Foundation has an asset trust endowment of $36.4 billion (around Rs1.64 trillion). And, finally, you and I may not be as well known to the world as the names in this paragraph, but that in no way dilutes the values we hold and the difference our combined contributions can make to the world we live in. Welcome to the world of charity funds.

What is a charity fund?
A charity fund, also widely known as donor-advised MF, allows you and me to make a charitable contribution. If the law wants to give further encouragement, it will create a tax exemption to these contributions. (In India, we have section 80G of the Income-tax Act that exempts as much as 100% of the donations you make to certain registered charities, subject to an individual upper limit of 10% of your adjusted gross total income. For deeper understanding, talk to your tax consultant.) The contributions we make can be invested into the market, based on the asset allocation we decide. We can chose between a high equity-biased asset allocation to a high fixed-income-biased asset allocation depending on how you want your money to sweat it out in the market and fund your noble cause.

Choose the cause: Now that you have put your money to work, the next logical step is to decide the purpose you want to support. Many charities are registered with the fund and we can search for detailed information of what they do and then decide to support them. For those people who give larger sums, these funds also extend customized solutions for giving. In India, a ready-made repository of such charities is available on the GiveIndia website.
So if some AMC does make up its mind to create a charity fund, there could be a ready-to-use pool of charities that are already KYC (know your charity) compliant, thanks to GiveIndia. All your grants, the ultimate use of your money and the status of your giving account can be tracked online.

Simple, clear and transparent
This finds relevance in our country in more ways than one. Today, all the giving that we do is actually giving out of our capital—a one-time payment that instantly gets consumed by a noble and charitable cause. We aren’t creating a capital account, the returns of which can fund such causes. AMCs can manage our capital to create more value and increase the corpus by riding on market returns, thereby helping more such causes. By doing so, the industry can attract many more investors, a noble cause can get served and for all you know, charity funds can emerge as a large category altogether. We, the investors, would have created a sustainable annuity fund for charitable causes with the help of AMCs.

Let me introduce you to three such funds that have been widely regarded for doing this in the US. The first such fund is Fidelity Charitable Gift Fund. Since its inception in 1991, the power of over 56,000 donors has matched about a third of the Gates’ foundation endowment. Yes, people like you and me have that combine power. There is also an active interest taken by financial advisers to guide their clients on chipping in money into the gift fund. The size of this single fund is almost as big as the fifth largest AMC in India.The second is Vanguard Charitable Endowment Program and the third Schwab Charitable. The former was set up in 1997, and the latter in 1999. If I add the grants that both these funds have been able to provide, the combined power of the common man has equalled that of Premji.
Give and make a difference to the world we live in.

Source: http://www.livemint.com/Articles/PrintArticle.aspx?artid=A1C4EC06-27E3-11E0-ADA3-000B5DABF636

Kotak 50 declares dividend

Kotak Mutual Fund has announced a dividend of 20% (Rs. 2.00 per unit on Face Value of Rs.10), under the dividend option of Kotak 50. The record date for the dividend as been fixed as January 27, 2011.

All investors registered under the dividend option of Kotak 50 as on January 27, 2011 will receive this dividend. The NAV of the scheme under the dividend option as on January 24, 2011 was Rs 32.554.

Kotak 50,is an open ended equity scheme. The investment objective of the scheme is to generate capital appreciation from a portfolio of predominantly equity and equity related securities. The portfolio will generally comprise of equity and equity related instruments of around 50 companies which may go up to 59 companies but will not exceed 59 at any point in time.

Source: http://www.moneycontrol.com/news/mf-news/kotak-50-declares-dividend_515871.html

Pramerica Mutual Fund Unveils Short Term Income Fund

Pramerica Mutual Fund has unveiled a new fund named as Pramerica Short Term Income Fund, an open ended income scheme. This scheme is a short-term investment option that provides the flexibility to counter a dynamic environment by actively managing its portfolio in line with the evolving interest rate scenario. The scheme will follow an active duration management strategy. The face value of the new issue will be Rs. 1000 per unit. The new issue will be open for subscription from 27 January and will close on 3 February 2011.

Pramerica Short Term Income Fund would invest 65% to 100% of assets in debt and money market instruments with residual maturity upto 3 years with low to medium risk profile. It would further allocate upto 35% of assets in debt and money market instruments with residual maturity not exceeding 5 years and 3 years with low to medium risk profile.

The investment objective of the scheme is to generate regular returns with moderate level of risk by investing primarily into a portfolio of debt securities and money market instruments of short term maturity.

The scheme shall offer two options - growth and dividend option.

The minimum application amount is Rs. 5000 and in multiples of Rs. 1 thereafter.

The fund seeks to collect a minimum subscription (minimum target) amount of Rs. 1 crore under the scheme during the NFO period.

Entry load charge will be nil for the scheme, while the exit load charge will be 0.25% for redemption / switch-out before 3 months from the date of allotment and Nil for redemptions / switches on or after 3 months from the date of allotment.

Benchmark Index will be CRISIL Short Term Bond Fund Index.

The scheme will be managed by Mahendra Jajoo.

Source: http://www.indiainfoline.com/Markets/News/Pramerica-Mutual-Fund-Unveils-Short-Term-Income-Fund/3507185913

SBI Magnum Equity Fund declares dividend

SBI Mutual Fund has announced a dividend of 35% (Rs. 3.50 per unit on Face Value of Rs.10), under the dividend option of SBI Magnum Equity Fund. The record date for the dividend as been fixed as January 28, 2011.

All investors registered under the dividend option of SBI Magnum Equity Fund as on January 28, 2011 will receive this dividend. The NAV of the scheme under the dividend option as on January 21, 2011 was Rs 32.540.

SBI Magnum Equity Fund is an open-ended growth scheme. The investment objective of the scheme is to provide the investor long term capital appreciation by investing in high growth companies along with the liquidity of an open-ended scheme through investments primarily in equities and the balance in debt and money market Instruments.

Source: http://www.moneycontrol.com/news/mf-news/sbi-magnum-equity-fund-declares-dividend-_515728.html

Monday, January 24, 2011

Holding mutual funds in a demat account

Investors can now hold their mutual fund units in dematerialised form. Investor who own a demat account can use it to hold mutual fund units. It is however not mandatory to convert units into demat form. Investors can also use the electronic platforms of stock exchanges to transact in their mutual fund units through the brokers of the stock exchange.

For this, investors have to use a standard form specified by the depository (CDSL or NSDL) called the conversion request form ( CRF )) or destatementisation request form (DRF). This form is available with the depository participant (DP). The completed form, along with the statement of account (SoA) which shows the unit holdings of the investor, has to be submitted to the DP. The DP will verify and forward it to the registrar and transfer agent, who in turn will confirm the details of units held in the SoA. Units will be credited to the demat account after this confirmation.

1. ISIN: Each mutual fund is assigned an ISIN ( International Security Identification Number )). It can be obtained from NSDL or CSDL and has to be included in the CRF/DRF.

2. Details: The details of each scheme with respect to scheme name, ISIN and number of units held should be correctly mentioned in the CRF/DRF and should tally with the SoA being attached.

3. Holding Pattern
The holding pattern of the mutual fund folios and that of the demat account should be the same, and in the same order.

4. Free & Lock-in Units
Mutual fund units such as those of tax-saving schemes may be subject to lock-in. Different forms have to be used for free and locked-in units of the same scheme even if held under the same folio.

Points to note
Signatures: The CRF/DRF has to be signed by all the unit holders of the folio, irrespective of the mode of operation of the folio.

Transacting with the mutual fund: Once units are dematerialised, investors cannot transact in them directly with the mutual fund or investor service centres. Transactions are routed through the stock exchange platform or through the DP.

Re-materialsation of units: Investors can also make an application for re-materialisation of the dematerialised units and only then transact with the mutual fund.

Source: http://economictimes.indiatimes.com/articleshow/7346604.cms?prtpage=1

Saturday, January 8, 2011

Back on 24th Jan 2011

Due to some reason we will not be able to post till 24th Jan 2011.

Friday, January 7, 2011

HDFC Mutual, Franklin accused of using client funds to promote brand

The latest round of promotions by HDFC Mutual Fund and Franklin Templeton Asset Management has prompted speculation among competitors and financial advisors that these companies may be using investors’ funds to boost their brand .

The multi-crore campaigns by these funds, though are not illegal, have raised ethical issues when the regulator has been working to cut costs for investors, including banning of entry loads. All mutual fund schemes’ advertisements go through the Securities & Exchange Board of India (Sebi) before going public.

Billboards and signs at traffic lights across Mumbai and Delhi that have sprung up display the companies prominently instead of individual funds which normally is the case. One such advertisement reads — ‘choose a healthy investment-HDFC Mutual Fund SIP’. The other — ‘Invest in Franklin Templeton Mutual Fund’. At the bottom of the boards, one of their funds’ name is written in a small font, the corpus from which possibly the cost of promotion is met.

“Fund houses could be paying for such advertisements from fund accounts,” said Dhirendra Kumar, chief executive at MF tracker Value Research.

“Older schemes have residual funds collected from entry and exit loads which need not be routed back to the NAV of respective funds. Fund houses use residual money to promote the fund under which the money is collected. In this case, I feel, residual money has gone into promoting fund houses,” he said.

“The campaign is not to promote the fund house,” said a HDFC Mutual Fund spokesperson. “It is carried out to promote investments in our four schemes through SIP. We aim to reach out to investors with a message of adapting a disciplined approach to equity investment through SIP as a preferred option.”

Franklin Templeton and Sebi did not respond to queries seeking their views. Asset management companies (AMCs) are struggling with slumping subscriptions to their equity schemes, after the regulator banned entry loads on funds which it believed was unjustified. Ever since, mutual funds have been working ways to promote schemes and draw investors.

This probably may be one of the ways to attract investor attention. While HDFC MF has named its ‘Capital Builder Fund’, ‘Growth Fund’ and ‘Core and Satellite Fund’ on the billboard, Franklin Templeton has highlighted its ‘India opportunities fund’, among others.

“From what it seems, both fund houses are on the right side of the law, but they have not carried out their ad campaigns in the right spirit,’’ said Ashutosh Wakhare , head trainer at Moneybee Institute, which trains investment advisors. “Fund houses should promote themselves using their own money.”

This is not the first time that mutual fund advertisements have come under an ethical debate. In 2008, after receiving complaints from some investor organisations, Sebi had asked AMCs to reduce the speed at which the ‘investment disclaimer’ is read out in television advertisements.

Source: http://economictimes.indiatimes.com/personal-finance/hdfc-mutual-franklin-accused-of-using-client-funds-to-promote-brand/articleshow/7233403.cms

Indian Bank to enter life insurance, restart MF biz

Public sector Indian Bank plans to venture into life insurance. It is looking at floating a consortium with domestic and foreign partners, for which it has already initiated talks. Besides, it would also appoint a consultant to advise it on re-entry into the mutual fund industry.

Speaking to Business Standard, Chairman and Managing Director T M Bhasin said Indian Bank was a bancassurance partner for HDFC Life Insurance and the agreement would mature in March. Last year, the bank earned a commission of Rs 26 crore through the tie-up and was targetting Rs 40 crore this year.

“We are now planning to float a new life insurance company on our own,” he said.

It may be noted that Bhasin was involved in Canara HSBC Oriental Bank of Commerce Life Insurance co, a joint venture (JV) between two of the largest public sector banks — Canara Bank and Oriental Bank of Commerce — and HSBC Insurance (Asia Pacific) Holdings. Bhasin represented Oriental Bank.

He said the bank had invited an expression of interest (EoI) from consultancy services to advise it on its proposed investment, which would either be a JV or based on equity participation.

The new company would take another six months to materialise and would be through a consortium, wherein Indian Bank and the domestic partner would have the majority stake and the foreign partner would hold 26 per cent, he said.

“We have got a few offers from both domestic and foreign firms. They are offering us equity at concessional rates. By charging on a monthly, per branch basis, we would use our branch networks effectively,” he said.

The 104-year Chennai-based Bank has more than 1,800 branches and over 19,000 staff. It has a customer base of around 200 crore. As on date, total business amounts to Rs 1.70 lakh crore.

“This foray will further strengthen our brand and the equity will also get appreciated in the long-term”.

The bank would also hire consultancy services for its proposed foray into mutual funds on a JV basis. It was planning to rope in a suitable partner for the same, said Bhasin.

Indian Bank is one of the pioneers in the mutual fund industry. It set up its mutual fund business in 1989, which became of the top performing mutual funds in the nineties. But in 2001, the bank transferred its schemes to Tata Mutual Fund.

Source: http://www.business-standard.com/india/news/indian-bank-to-enter-life-insurance-restart-mf-biz/420863/

Wednesday, January 5, 2011

Mutual funds’ AUM drops 5% in October-December quarter

The average assets under management of the mutual fund industry declined by a hefty 5% during the October-December quarter , with country’s largest fund house Reliance MF’s assets shrinking by over Rs 5,000 crore.

The industry’s AUM fell by Rs 37,904 crore, or 5.31%, in October-December period. The combined average AUM of 40 fund houses stood at Rs 6,75,376.97 crore at the end of December, according to industry body Amfi.

At the end of December 2010, the AUM of Reliance Mutual Fund stood at Rs 1,02,066.21 crore, a decline of Rs 5,682.32 crore or 5.27% from the assets managed in September-end.

HDFC MF also saw its asset base shrink by Rs 5,222 crore, or 5.61%, to Rs 87,883.09 crore. ICICI Prudential MF’s assets declined by Rs 3,886 crore, or 5.57%, to Rs 65,841 crore. Among the other fund houses, UTI MF’s assets fell by 3.29% to Rs 65,387 crore and LIC MF’s by 5% to Rs 18,695 crore.

However, a few fund houses, like Axis MF, Benchmark MF, Fidelity MF, Mirae Asset MF and Pramerica MF, among others, saw their assets rise in the range of 4-75% during this period.

Mirae Asset Global Investments (India) chief executive Arindam Ghosh said, “We have introduced different product mix during the December quarter. This has led to an increase in inflows into several schemes. We mostly have equity funds.”

Source: http://economictimes.indiatimes.com/markets/stocks/market-news/mutual-funds-aum-drops-5-in-october-december-quarter/articleshow/7220422.cms

Tata MF announces dividend under Tata Equity P/E Fund (Dividend Trigger Option A-5%)

Tata Mutual Fund has announced 10 January 2011 as the record date for declaration of dividend under Tata Equity P/E Fund (Dividend Trigger Option A-5%) on the face value of Rs. 10 per unit.

The fund house has decided to distribute Rs. 1.75 per unit as dividend on the record date. The scheme recorded NAV of Rs. 40.6090 per unit as on 3 January 2011.

Tata Equity P/E Fund (Dividend Trigger Option A-5%) is an open ended equity fund. The investment objective is to provide reasonable & regular income alongwith possible capital appreciation to its unitholders.

Source: http://www.indiainfoline.com/Markets/News/Tata-MF-announces-dividend-under-Tata-Equity-PE-Fund-Dividend-Trigger-Option-A-5-percent-/3469840759

Sundaram PSU Opprtunities Fund declares maiden dividend

Sundaram Mutual Fund has declared a maiden dividend of 10% (Rs 1.0 per unit on a face value of Rs 10) under the dividend option of Sundaram PSU Opprtunities Fund. The record date for dividend has been fixed as January 07, 2011.

All investors registered under the dividend option of Sundaram PSU Opprtunities Fund as on January 07, 2011will receive the dividend. The NAV of the scheme as on January 03, 2011 is Rs 11.855 per unit.

Sundaram PSU Opprtunities Fund is an open ended equity scheme. The primary investment objective of the scheme is to generate consistent long term returns by investing predominantly in equity / equity related instruments of public sector companies.

Source: http://www.moneycontrol.com/news/mf-news/sundaram-psu-opprtunities-fund-declares-maiden-dividend_510209.html

Tuesday, January 4, 2011

Where to invest in 2011

Another year has just commenced. Dilip Maitra recommends some fundamental principles of investing in a year which is likely to see a stronger economic performance.


Another year has just commenced. Dilip Maitra recommends some fundamental principles of investing in a year which is likely to see a stronger economic performance.

Indians are lucky, our banks offer one of the highest interests in the world. And there are many other options to earn a good return on investments. The year 2010 was fairly good in terms of return to investors as major stock indices like BSE Sensex and NSE Nifty both were up 17 per cent at the end of the year. Though interest rates were low most of the year, they started rising towards the last quarter. Investors in gold of course minted money as the price of the yellow metal jumped 15 per cent during the year. Even the property prices increased slowly but steadily.

Will 2011 be as good or better for the investors? Where should we invest our money and how much? While we do not have precise answers for everything, through this article we shall present various investment options for the common man.

We know that life is full of uncertainties and no one can predict how the stock markets will behave, interest rates will move and rate of inflation will climb. But amidst the uncertainty, we must plan for an investments strategy that is likely to be effective in providing a reasonable return on our money and, more importantly, protect us from losing money.

Different needs

Before we begin, it is important to understand a very basic fact: In the world of investments, there is no “one size fits all”. Investors have different goals, needs, risk appetite and time horizons. Ideal investment strategy should be worked out in line with the investor’s risk profile and time horizon. In every investment, options discussed below risk and time span for investment will vary from person to person.

Once you are clear about your risk-taking ability, it is time to choose from various available options. Someone, who wants to play absolutely safe, for example, should stick to fixed deposits in banks or keep money in post offices. If the time horizon is long, investing in endowment life insurance policies can also be considered as another safe option. Mutual funds can be considered for relatively higher return by those who are ready to take slightly more risk. Buying equity shares of companies and properties can give very high returns but they also carry the highest amount of risk.

To balance between risk and return, one can also think of a mixture of the above three. A prudent asset allocation strategy will help you decide how much money should be invested where. A low risk option, for example, can be an allocation of funds in 50:25:25 proportions for bank deposits, mutual funds and shares.

Don’t be passive

Another very important need is to remain active. Unfortunately, most people in the salaried class/ fixed income earners are passive investors. Our salary gets deposited in the bank each month, we withdraw money or issue cheques for expenses and whatever is left in the savings account earns a paltry interest of 3.5 per cent. Very few realise the fact that by leaving money in savings account we are actually getting a negative return (losing money) because inflation is always higher than savings interest.

As the current rate of inflation is around 8 per cent, to make sure that the return is positive (or we do not lose money) the minimum return must be higher than the rate of inflation.

Playing safe

For those who do not want any risk, the best option is to go for fixed return schemes or term deposits in reputed banks or invest in various instruments offered by post offices.

Thanks to the tight money policy followed by the Reserve Bank of India in recent months, all banks have significantly raised interest rates. For a two to three years fixed deposit, it is now possible to earn 8.55 per cent interest (0.50 per cent more for senior citizens), giving a cumulative yield of around 9 per cent, from government-owned banks. Fixed deposits in some private banks, non-banking financial institutions and private companies will earn higher returns — it can even go up to 12.50 per cent for a 3 year period (yield 14.90 per cent), but the risk is also greater.

At present, post office deposits are less attractive as schemes like NSC, PPF, monthly income schemes now earn interest at around 8 per cent or less. Of course, the Senior Citizen Savings Scheme earns 9 per cent for a five-year deposit, but it is available to people above 60 years of age.

Another interesting fixed income instrument is the Long Term Infrastructure Bond introduced in the current financial year by some of the infrastructure financing companies.

Under this scheme, one can buy infrastructure bonds for 10 years to earn interest at 8.25 per cent. Investment in this bond is locked in for 5 years, with buyback at the end of 5th, 6th, 7th, 8th, and 9th year. These bonds are listed and traded on stock exchanges and can be sold and purchased like shares. The more interesting feature is that on an investment of Rs 20,000 an investor can save tax up to Rs 6,000 under the section 80CCF of the IT Act, giving an effective yield of 11.01 per cent at the highest tax slab.

Remember that term deposits will levy penalty in case of premature withdrawal. If you are forced to keep large sums of money in savings account for unplanned emergency withdrawals, there is a better option. Many banks now offer automatic transfer (called sweeping) of surplus fund (above a specified amount) from savings to fixed deposits. In case of withdrawals above the available amount, fixed deposits are broken to the extent needed and money gets swept back to savings. Such schemes provide the flexibility of savings account but earn higher interest. In 2011, fixed deposit will be a good bet as the interest rates are expected to rule high in the first four to five months of the year.

Silver out-shined gold

Indians are obsessed about gold and our country is the largest purchaser of gold in the world. Why? We Indians buy gold jewellery not only for gifting or wearing, but also for investment. Most gold jewellery buyers think that acquiring the yellow metal is one of the safest investment options because the gold prices always go up.

But in 2010, silver, the poor cousin of gold, performed much better as an investment option than gold. At the current price of around Rs 47,000 a kg, silver price is 74 per cent higher than Rs 27,000 in the beginning of 2010. On the contrary, at the current price of 19,500 per ten gram, gold has appreciated around 15 per cent on a 12 months horizon.

Silver prices have reached the record peak mainly because of a worldwide shortage of the metal in comparison to its demand.

Though gold has appreciated slower than silver, it is still a good bet to invest in gold. As two of the world’s strongest currencies - the US dollar and Euro Zones Euro have remained relatively unstable in the last six months or so, many large investors are buying gold as a safe investment option and hedge against currency depreciation. Bullion experts believe that gold and silver prices will continue to remain bullish in the long term though there could be corrections in the short term.

But investment in gold and silver should ideally be in the form of coins and bars. Most Indians buy gold in the form of jewellery whose price includes between 10 to 15 per cent of the value as making charge, wastage, etc. When the same jewellery is sold, one is paid only for the gold, minus the making charges and impurities. Moreover, in the short term, one can also lose money in gold or silver if the prices -which depend on market forces, decline. On the other hand, a fixed income instrument over a period of three to five years can get a decent guaranteed return.

The growth story

If you do not mind taking some risk in life and want to get rich quickly, then investing in equity shares of companies is the option. The year 2010 was a revival year for stocks in the country after a bad 2008 and 2009 when the global financial crisis battered prices down for most shares. In 2010, the BSE Sensex, one of the two most important indicators of stock prices, gained 16 per cent to 20,390 at the end of the year from 17,558 in the beginning. Another important indicator, NSE Nifty also gained 17 per cent to 6,012 from 5,232.

There were several factors pushing the stock prices up. Finding India an attractive investment destination, global investors, known as foreign institutional investors (FIIs), pumped in a massive $28.60 billion in 2010 (till December 23, 2010) or Rs 1,29,857 crore in Indian stocks, 64 per cent more that $17.45 in 2009. FIIs had good company with the large domestic financial players like Life Insurance Corporation, public and private banks and high networth individuals. Another indicator of the boom in the stock market is that Indian companies, public and private, raised a record Rs 71,114 crore from 70 public issue of shares in 2010. The earlier best was Rs 45,000 crore in 2007.

Will the honeymoon continue? Most market experts think that share markets in 2011 will continue to do well if there are no major disturbances in the developed countries.

Investors poured in money because they were won over on Indian growth story despite the minor hiccups of some scams. India is the second fastest growing economy in the world (after China) with an expected GDP growth of around 9 per cent to make.

All other major indicators also tell positive stories: Industrial production is growing at a healthy rate of 10 per cent, exports up 27 per cent, capital formation jumped nearly 25 per cent, our savings rate is high at around 35 per cent and employment outlook is better than the previous year. In short, the Indian economy will support rising stock markets if there are no unusual developments.

But stocks are risky

Despite all these positive factors will dream run continue? No one knows. As share prices go up and down, and many a times for reasons totally unrelated to a company, investing in stocks is the riskiest. Sometime you can make a windfall gain and sometime you may lose the entire money. While both is possible, if you must invest in stocks follow the following basic rules;

Do not speculate: If earning a good return is the objective, invest for long term - three to five years. Do not speculate based on so called “Buy Tips”. More often than not the tips are engineered to serve a purpose of interest parties.

Do not try to time the market: Many say that it is wrong to buy stocks in a rising market and sell in a falling market. The question is how long will the bull or bear phase run? The wild and prolonged fluctuations in stock indices over a long period have proved that it is difficult to time ‘buy’ or ‘sell’ decisions. Since you can not predict the market, you can’t time it.

Do a lot of home work: On the face of it, making money in stocks looks easy. But for a serious player it involves a lot of research and applying common sense. One not only needs to study the company but also the industry it belongs to, check the future trends in market and technology, the government’s policies and the overall status of the economy. If, for example, the banking sector looks exciting for the next five years one can buy shares of the most profitable banks in the industry even if its pricing looks high.

Go for growth: Pick up stocks of companies that have good growth potential due to its own strengths and also because the industry it belongs will do well. Infosys, Wipro, TCS in software, HLL in FMCG, Reliance in oil refining and petrochemicals, Maruti in cars are some of the good examples of growth stocks. If they are too expensive, go for small and medium size companies with good growth potential.

De-risking strategy: Even after you have done an extensive research, finished all your calculations, factored in all possible scenarios before investing in stocks, everything can come to naught all of a sudden for reasons totally unpredictable and unexplainable. So the most important golden rule: do not put all your eggs in one basket. Diversify and well diversify your portfolio among industries and companies. If one wants to play somewhat safe in stock investing one should fix a limit for ‘profit’ and ‘stop loss’. This means that one should sell shares once their value has appreciated to a self-determined level or sell them if they have depreciated up to point. Such acts will limit the downside risk and upside gain.

Mutual funds

Mutual Funds (MF) collect money from large number of investors buying units of a scheme and invest the fund according to the pre-stated plan. Since the asset management company of a MF has a team of experts to decide where and when to invest, it is right to assume that a MF is a safer option than an individual investing directly. There are different types of funds roughly classified as gilt fund, debt fund, balanced fund and equity fund. While the first two are safer options but provide low return. Balanced funds invest both in debt and equity shares while equity funds focuses only on equity shares of listed companies.

Over the years Indian mutual fund has matured with many fund houses and investment options. Though there is a wide choice, selecting a fund for investment will again depend on your risk appetite. A thorough research, with time series data, on the performance of the fund is a must to get an idea how a scheme has done in relation to the overall market and competition. Though past performance cannot guarantee a good return in the future, research is always better than blind play.

MFs also often come up with new schemes and investors are made to believe that buying into a new fund at par of Rs 10 is cheaper than an existing scheme. But this is a fallacy as the price of a unit in a scheme is based on the net asset value (NAV) which is simply representative of the assets backed by each unit of the mutual fund.

Source: http://www.deccanherald.com/content/125685/where-invest-2011.html

Monday, January 3, 2011

Indian stock markets likely to remain buoyant in 2011

The robust economic growth and record inflows from foreign institutional investors were responsible for the rally in Indian stock markets during the calendar year 2010. The Bombay Stock Exchange benchmark index ‘Sensex' gained 3044.28 points to end the year at 20509.09. Though the index moved up by 17.4 per cent during 2010, it is felt that this is far below expectations that one could have anticipated.

However, in terms of absolute performance it compares quite favourably with Brazil, Russia, India, China (BRIC) nations. With the exception of Russia, which went up by 23 per cent, Indian markets outperformed Brazil which was up by 1 per cent and China which was down by 14 per cent. China witnessed lot of speculative money chasing Chinese stocks started exiting when the country began monetary tightening. The first such occasion was in the early part of 2010. In the last two months, China had raised its rates twice.

Best performing indices

The behaviour of Indian markets was primarily driven by domestic consumption-based opportunities. Therefore, the best performing indices were automobile, which was up 33 per cent and fast moving consumer goods (FMCG) which was up 27 per cent. Healthcare, banking and information technology were other three notable sectoral performers.

“We are entering 2011 with lot of scepticism in our hearts. The pessimism on the local front is coming from politics and the global front is from economics. If we look at historical precedents — in May 2004 when the United Progressive Alliance (UPA) came to power and in May 2006 when commodity prices crashed — scepticism has normally been the formation for a rally in the markets,” said Sanjay Sinha, Chief Executive Officer, L&T Mutual Fund.

There is a consensus estimate that the earnings in financial year 2012 will grow between 18 per cent and 22 per cent. However, a major event or a radical shift in commodity prices or exchange rate can derail this growth expectation. Therefore, according to Mr. Sinha, as long as earnings growth is not at risk and the sentiment is pessimistic one can expect more structural rally to build in the Indian markets.

Currently the market is trading broadly in fair range of valuations. “At Sensex level of about 20000, the market is discounting financial year 2012 consensus estimates by about 16 times,” said Harsha Upadhyaya, Fund Manager, UTI Asset Management Company.

These valuations can be sustained if the earnings estimates going forward do not disappoint.

It is likely that the market will move up in line with corporate earnings growth (estimated at 18-20 per cent annually over the next two years) in the medium- to long-term. However, Mr. Upadhyaya said the short-term market movements were driven more by liquidity and sentiment, and “hence difficult to predict.”

While domestic inflation and hardening of interest rates and uncertain global economic backdrop are key downside risks to the market, the upside may come from re-rating of Indian equities due to sharp increase in foreign flows as India continues to be one of the high growth regions in the world.

Stock-specific approach

At current market levels, “we do not see any significant pockets or sectors of undervaluation.

“We may need to be more stock-specific in our approach as we step into 2011. As we see inflation as one of the likely risks going forward, we believe that the sectors insulated from inflation-related negatives may out-perform the broader market.”

Mid- and small-cap segments of the market usually move in spurts. The valuation gap relative to the large-cap segment was huge at the start of up-move and hence witnessed sharp rally in mid and small-cap stocks that outpaced large-cap stocks by a wide margin for about a year between mid-2009 and mid-2010.

After this rally, the valuation differential between the two segments has narrowed significantly and the absolute valuations of mid- and small-cap segments have also risen. The markets have already witnessed mid- and small-cap segments underperforming relatively against the large-cap segment by 10-15 per cent in the past six months or so. “From hereon, we believe one needs to be stock-specific even in mid- and small-cap segments as in the broader market,” Mr. Upadhyaya added.

In terms of sectors, consumer durables, pharmaceuticals, industrials, energy and financials are likely to do well, Mirae Asset Global Investment Group stated in a report on Market Outlook 2011. The FII stated that it continued to prefer consumption where trends remain healthy, led by rising incomes, favourable demographics and an easier financing environment.

It sees a shift beyond consumer staples to automobile, media, cable distribution, retailing, healthcare and airlines — all beneficiaries of higher income levels. Increasing rural consumption on the back of higher crop realisations, rising wages and wealth effects through higher land and gold prices, will provide a multi-year theme.

The introduction of a Direct Tax Code will provide further relief to the salaried class and boost consumption. It also prefers pharmaceuticals over consumer staples as the market for Western medicines still has low penetration rates, the domestic industry is estimated to be expanding in the high double-digits per annum, and a huge patent expiry of drugs in the developed markets remains an added demand trigger.

“We continue to like financials high RoEs (return on equity), low NPAs (non-performing assets) as a good proxy on the strong domestic economy, and IT as a beneficiary of strong offshoring trends by global companies to cut costs.” Industrials could be the dark horse of 2011 if the government gets its act together on infrastructure spending and the private sector embarks on capacity expansion after 18 months of strong demand.

“Though in the near-term, it may remain weak on European sovereign debt concerns, we believe any significant correction would be a good opportunity to increase exposure to a long-term growth story like India where demographics, entrepreneurship, free press and development-focussed governance will likely produce a golden period of returns for equity investors in the coming decades,” Mirae Asset Global Investment Group advised investors. However, it alerted that a significant rise in oil prices, a reversal of global liquidity and no up-tick in the investment cycle were the biggest risks to the India story.

Key factors

The key factors behind strong performance in 2010 were strong resilience of the domestic economy during the global financial meltdown, India's demographic dividend, strong consumer demand, less reliance on exports, benign oil prices and strong global liquidity.

Mirae Asset Global Investment Group expects Indian markets to remain strong in 2011 on robust corporate earnings, improving ROE and expectations of strong global liquidity.

A significant upturn in the investment cycle would be the key driver for continuous strong performance.

Source: http://www.thehindu.com/business/markets/article1025316.ece?homepage=true

Saturday, January 1, 2011

Equity mkt to be more volatile in 2011 than 2010: ICICI Pru

S Naren of ICICI Prudential, in an exclusive interview with CNBC-TV18’s Latha Venkatesh spoke about his reading of the market in the new year and what the road ahead was for the Indian investors seeking to invest in the Indian market.

Below is a verbatim transcript. Also watch the accompanying video for more.

Q: Overall what is the expectation in 2011? Would you say that the market will be able to notch up 15-16% next year like it did this year or does it distinctly look a tougher year?

A: Where we started of in 2010 and where we are starting of now in 2011 appears to be similar. Corporate India is in good shape. The banking system is in good shape. The overall mood is reasonably positive on the economic side. Where we are different now, I would say compared to one year back is that today we have a situation where there seems to be continuous short fall of liquidity on the debt market side.

When I look at equity markets I find everything is fine. I mean you have had huge selling by locals over the last one year. Obviously you are not going to see this kind of selling in the next year because whoever wanted to sell out has sold off. From hereon we actually think there should be net inflows from Indian investors.

But on the debt side what’s happening is that every month we are seeing CD rates continuously going up of banks on a one year basis. The deposit growth doesn’t seem to be going up at all and part of it is maybe because of government balance with the RBI.

Nevertheless, the debt market will hold the cue to equity markets and if interest rates keep going up the way they have been going up, there are fairly big headwinds on the equity side. Particularly, if there is even a percent rise from here, there is a fair amount of headwind on the equity side.

Q: So you don’t want to venture and say something in terms of a possible percentage gain even in the first half? Will gains be maintained or do you see downsides and if you do what kind of downsides?

A: What I am kind of certain about is that 2011 will be a more volatile equity market compared to 2010. The international reasons for volatility particularly from Europe remain and local reasons will be because of the kind of interest rates which prevailed in the Indian economy.

What I am quite sure of is volatility but as far as market returns go, its not very clear whether 2011 looks worse than 2010 or not because if you finally see in 2010, barring China and Brazil, most of the other markets have delivered very good returns. This was not expected in 2010 when people said the US will not do well on the market side.

But if you see the kind of rally we are seeing since September, it’s pretty significant in the US. We have had a situation where many global markets, most commodities and even gold has done well.

There doesn’t seem to be a situation at this point in time where people are saying that the US will tighten and therefore you will have a situation where all risky asset classes will underperform vis-à-vis other things. From that point of view I don’t think we are in a bad situation in anyway but having said that we are very clear that volatility will be high.

Q: In the equity markets where would you hide, would it be in IT which is less prone to the interest rate headwinds? Really what sector do you think could be the flag bearers in the first half?

A: Where we possibly have increased weightages would certainly be in commodities, especially in many metal stocks. We have held on to our weightages in most of the regulated utility stocks. There are stocks in oil and gas which are not going to get adversely affected by increases in oil price.

We have actually seen situations where many of the sectors there have opportunities. The problem lies in over debt sectors, where the interest costs can go up. That’s where we have to be much more stock specific. We have to look at what is the leverage of a company and what kind of increase in interest costs you are going to see in that company. Those are the places where we have been a bit more careful about.

Q: There is a theory that a lot of the existing mutual funds and investors as of 2010 were those who probably entered in the big wave of NFOs of 2007 and the heady stock markets of that time and they probably were waiting to get at least at par levels to get out. Do you think that out of this catharsis could emerge some kind of improved or increased participation of the small investor in mutual funds?

A: A dramatic improvement is certainly on the cards because I don’t think we are going to see net outflow as what we have seen this year. That itself would be a dramatic improvement in 2011. Slowly investors will come back again into the mutual fund market.

Mutual funds have been very good because if you see any of the big up months like September, we have seen huge redemptions and in any down month we have seen inflows. The three down months of the years were January, May and November and in all the three months we have seen inflows.

Investors have got it that equities are a volatile asset class which you have to invest on downturns and take out when there are spikes. They seem to have got it after 2008 very well. That’s why I believe that 2011 will be the year where investors are making money in mutual funds. Definitely, the combination of both debt schemes and equity schemes is going to see solid retail money into 2011.

Source: http://www.moneycontrol.com/news/mf-interview/equity-mkt-to-be-more-volatile2011-than-2010-icici-pru_509667.html

Mkts to remain on firm ground till Budget 2011: Experts

The markets rang out 2010 with solid gains in the last trading session of the year. Despite a slide early in the year on growing concerns about the Eurozone, most Asian equities came back strongly. The Indian market is poised for good gains in 2011 after rising 15% in 2010. With the government projecting the economy to grow at 9%, and record FII flows seen this year, India is set to outpace its peers and developing markets in 2011.

The Sensex closed the last session on a positive note closing above 20,500 while the Nifty settled at 6,134, about 220 points away from its all-time high that it hit in January 2008. Experts feel the Nifty is poised to take out 6350 in the first quarter of the new year and see a further upside of 8-10% from thereon for the next three to four months post scaling new highs.

According to Hemen Kapadia of chartpundit.com, 6185 is an important level for the market which will pave the way for it to scale new highs. "I have a feeling I think Monday is the time when the markets could just about peak for the time being, correct a bit and after that on the rebound when we take out 6185 I think then we are testing 6350 and if you take a view for the first quarter, I think if we take out 6350 which seems like a possibility at this point in time I wont be surprised if we would see a 8% to 10% upside in the next 3 to 4 months after that."

Amit Dalal, Executive Director of Tata Investment feels the markets are likely to remain in high expectation mood till the budget. He however sees large headwinds for the markets post the budget. "For the first two months we will have a better market than what we really think that it should based on concerns that we have on fundamentals. But the fundamentals will finally catch up with the market at some point and I am more concerned as the second and third quarter builds up into the system," Dalal said.

Below is a verbatim transcript of Hemen Kapadia and Amit Dalal's views on CNBC-TV18. Also watch the accompanying video.

Q: If the mood is upbeat till the budget, closing above which technical levels do you think it will pave the way for new highs?

Kapadia: We were in this range between 5700 on the downside around 6070 in terms of the Nifty spot. We are just getting out of that. Currently 6185 is important.

But I have a feeling, I think Monday is the time when the markets could just about peak for the time being, correct a bit and after that on the rebound when we take out 6185, I think then we are testing 6350 and if you take a view for the first quarter, I think if we take out 6350 which seems like a possibility at this point in time I wont be surprised if we would see a 8% to 10% upside in the next 3 to 4 months after that. Is that going to be sustainable? I don’t think so but that’s too far off as of now.

Q: What is the initial thought you have about the New Year ahead? Is it looking like or maybe a slightly shorter period or a more visible and predictable period of the first quarter. Will the first quarter be able to breakout of the headwinds that we see in terms of inflation, interest rates, political scams simply not seasoning and a certain lethargy in terms of reforms. Will all this keep the index pretty much ranged or do you think we have something else coming?

Dalal: I think the markets last year as you very rightly pointed out have given us a very good support and a great year for us to have built the base on. As far as the headwinds are concerned the concerns are quite large. I think those will perhaps become more to play out towards the end of the budget.

Till the budget I think the market will remain in high expectation mood. We are already closing this year or this week I should say with a far better market than what you would have thought two weeks ago. Technically I am told if you remain at these levels above 6060 you will see an upside in the market even further going forward.

So for the first two months we will have a better market than what we really think that it should, based on concerns that we have on fundamentals. But the fundamentals will finally catch up with the market at some point and I am more concerned as the second and third quarter builds up into the system.

Q: The fuel for this market came from the FIIs in the year that is just getting over – USD 29 billion or thereabouts an all time high. Chances are that there are going to be rival attractions in 2011. Already the last month showed some kind of tepidness and there are some who forecast that US equities itself would become very attractive and that would act as accountable. What are you expecting in terms of that getting replaced by domestic investors? We have had some mutual fund managers telling us that we could see practically a dramatically a different year in 2011 with respect to domestic investors because the core of SIP investors is growing as well those who invest in 2007 and got tired of waiting to reach even par levels have taken their profit or booked out of industry. Now there is a new core and more perhaps lasting set of investor who look at mutual funds as an essential part of their asset allocation? Whether domestic investors will be able to provide a shoulder to stock markets in the coming year?

Dalal: That particular argument in terms of whether we will be able to substitute FII interest in the market has been a case for concern for almost a decade for these markets. I do not think so. I think the FII flows still remain the backbone of the rallies and the backbone of making the market move either way up or minus.

Where the US market performance is concerned and allocation towards US market is concerned I think yes there will be more interest in the viewers market and perhaps in the western hemisphere than there was last year. But the kind of allocations we need are much smaller than what the huge allocations are made worldwide. I do not think that will disturb our flows.

Yes I believe that you will not be able to do IPOs of the magnitude that we did last year but with the same ease that we did last year, next year. But our flows will remain intact. It may not be USD 29 billion, it may be lower on an accumulative level but that will be sufficient for the marketplace.

Q: Do domestic investors come in at all? Are you getting a feeling that there is a certain maturity process that is underway and therefore you will not have these net outflow situation that is over and done with?

Dalal: I think those outflows are more of a systemic problem that has come into the mutual fund industry; it is more of a situation based on their own ability to market their schemes. It is not necessarily the investors view on market place. I think the investors view on market place and allocation to equity is becoming more and more professional in their thinking in a sense they do not want to take a stand on their own in the equity markets.

You see a large number of people saying I just want to give our money to good portfolio managers in mutual funds. So if you were to market it I think there are sufficient savings that can come into the system through these intermediaries be it mutual fund or portfolio managers.

Q: You were also quite positive on the entire IT space would you be preferring frontline heavy weights like Infosys and TCS or perhaps a midcap ones where there is more by way of a valuation headroom – your top picks?

Dalal: I can’t really disclose my top picks. But yes I think that largecaps have a great story to tell because they have this whole market in front of them which they are exploiting completely worldwide and they are doing a great job of growth so you really have the highest capacity utilisations now in these companies. You also have improving margins. When you come to the midcap if you are certain about a companies ability to retain people and not had attrition problem yes then there is a case to be made for evaluation and one should look at these companies.

Q: What kind of leads can you give within the banking space itself. Time was even we were used to giving much higher valuation to private sector banks and much lower to public sector banks – we saw that gap narrowing much in the year 2008 and for a better part of 2009 now will you start giving much more weightage to some of the public sector players especially those who have shown some inorganic moves like Axis, even ICICI. There is Bank of Rajasthan which went through a painful period of balance sheet consolidation and now on the path of growth so would it be a period of outperformance from the private sector banks?

Dalal: I completely agree with you. I think one should definitely look at that because the gap which has taken place on a price to book which has been reduced between the private sector and public sector has been substantial in the last 12 months and now the price to book ratios do not justify putting more money into the public sector.

One should go back to private sector. The NIMs are going to be under pressure for the banking sector on the whole and given that non fund base income is going to be very important. So that part of the business is best run by the private sector. So I would look at private sector banks.

Q: In the year gone by it is quite a sectoral divergence. You had banks, autos, IT, pharma doing well but on the flipside sector something like real estate, infrastructure stocks gave you negative returns- so now when we enter into the New Year and we have to make tactical changes to the portfolio which are the sectors you would think that the money would be flowing in and you would book out of?

Dalal: I am a little concerned on the auto sector mainly because the cost of money has gone up substantially. The EMIs have short up considerably if you were to buy a car now or even a CV so that is a major concern for demand on this particular sector. Where real estate and construction is concerned I remain concerned even now. I am not an economist but you can correct me or perhaps extrapolate on my thinking. M3 has come down and credit growth has gone up substantially.

To me that spells inventory levels having gone up in the system in some form or the other. The biggest inventory level going up is in real estate. Just tremendous unsold stock in the system so where that is concerned that particular sector itself spells considerable risk. Construction because the ability of the government to concentrate on development, to concentrate on what is needed in the country has gone down because of its own problems remains a concern. Therefore I would not put in money very easily or very quickly into this sector right now.

Q: In that case where would you want to put your money? Where do you think the alpha for growth is coming sectorally speaking?

Dalal: I would still remain with IT, pharma even NBFCs and certain private sector banks.

Q: It is confirmed news a proper announcement the came from ADAG group that they are changing their branding to drop the ADAG word but only keep the word Reliance. The markets are reading something into it. As a group would you get positive at all?

Dalal: If you take the businesses which are in the space for instance Reliance Infra, Reliance Power, Reliance Capital in terms of AMC business of its subsidiary. The Reliance communication all these three can do a lot more if they get the right kind of mix of capital and management from the Reliance Group. So if you were to make a scenario in front of your eyes that something like that could happen yes but of course we do not know if there is any confirmation to that.

Q: What would be your call on Reliance Industries? It has had a down year, the gas expectations in terms of volumes have not lived up and there were other issues in terms of margins as well. But would 2011 herald something different – would you be an early bird better on the stock because its telecom ambitions will also come into frusion before the year is out.

Dalal: I am positive on that particular company now. I think that they definitely went through their period of figuring out how they would like their capital to be utilised in the years to come. It is not something that you ignore for a very long period of time. Mr Ambani with due credit to him does have a history of very large and very successful execution. I think the next 2-3 years I am sure that he is going to spell out some strategy on how he wants to build up his base and it is time that one invest into that stock.

Q: What about midcaps? Will this be a space you will have the courage to bet on and will it be the relative outperformer at least in the first half?

Dalal: You have to be very careful when you invest in businesses and in companies because cost of money has gone up substantially and you can today put into a bank and FD – 9.5% for 12 months. Assuming that may not remain and it will come down.

You are still not going to have cost of money for borrowing less than 11-11.5% for the small guys. Therefore one has to be very careful when you select a company because you see marginal contraction, you will see earnings contraction in many-many companies in the next 12 months.


Source: http://www.moneycontrol.com/news/market-edge/mkts-to-remainfirm-ground-till-budget-2011-experts_509720.html

Just click away from joining most active Mutual Fund India google group

Google Groups
Subscribe to Mutual Fund india
Email:
Visit this group

Aggrasive Portfolio

  • Principal Emerging Bluechip fund (Stock picker Fund) 11%
  • Reliance Growth Fund (Stock Picker Fund) 11%
  • IDFC Premier Equity Fund (Stock picker Fund) (STP) 11%
  • HDFC Equity Fund (Mid cap Fund) 11%
  • Birla Sun Life Front Line Equity Fund (Large Cap Fund) 10%
  • HDFC TOP 200 Fund (Large Cap Fund) 8%
  • Sundram BNP Paribas Select Midcap Fund (Midcap Fund) 8%
  • Fidelity Special Situation Fund (Stock picker Fund) 8%
  • Principal MIP Fund (15% Equity oriented) 10%
  • IDFC Savings Advantage Fund (Liquid Fund) 6%
  • Kotak Flexi Fund (Liquid Fund) 6%

Moderate Portfolio

  • HDFC TOP 200 Fund (Large Cap Fund) 11%
  • Principal Large Cap Fund (Largecap Equity Fund) 10%
  • Reliance Vision Fund (Large Cap Fund) 10%
  • IDFC Imperial Equity Fund (Large Cap Fund) 10%
  • Reliance Regular Saving Fund (Stock Picker Fund) 10%
  • Birla Sun Life Front Line Equity Fund (Large Cap Fund) 9%
  • HDFC Prudence Fund (Balance Fund) 9%
  • ICICI Prudential Dynamic Plan (Dynamic Fund) 9%
  • Principal MIP Fund (15% Equity oriented) 10%
  • IDFC Savings Advantage Fund (Liquid Fund) 6%
  • Kotak Flexi Fund (Liquid Fund) 6%

Conservative Portfolio

  • ICICI Prudential Index Fund (Index Fund) 16%
  • HDFC Prudence Fund (Balance Fund) 16%
  • Reliance Regular Savings Fund - Balanced Option (Balance Fund) 16%
  • Principal Monthly Income Plan (MIP Fund) 16%
  • HDFC TOP 200 Fund (Large Cap Fund) 8%
  • Principal Large Cap Fund (Largecap Equity Fund) 8%
  • JM Arbitrage Advantage Fund (Arbitrage Fund) 16%
  • IDFC Savings Advantage Fund (Liquid Fund) 14%

Best SIP Fund For 10 Years

  • IDFC Premier Equity Fund (Stock Picker Fund)
  • Principal Emerging Bluechip Fund (Stock Picker Fund)
  • Sundram BNP Paribas Select Midcap Fund (Midcap Fund)
  • JM Emerging Leader Fund (Multicap Fund)
  • Reliance Regular Saving Scheme (Equity Stock Picker)
  • Biral Mid cap Fund (Mid cap Fund)
  • Fidility Special Situation Fund (Stock Picker)
  • DSP Gold Fund (Equity oriented Gold Sector Fund)