SIP rise helps MFs brake pace of equity folio loss

The domestic fund industry has been able to apply brakes on the pace with which it was losing its equity folios.

So far, in the second half of the current financial year, fund houses have lost a little over 200,000 folios. This is less than what the industry had lost in every single month during the first half.

The industry had witnessed a loss of close to 1.7 million folios in the equity segment during April-September, close to 300,000 every month. According to the Securities and Exchange Board of India, as on February 2011, industry’s equity folios were 39.2 million, against 39.4 million at the end of the first half of 2010-11.

“A large number of systematic investment plans (SIPs) brought this reversal. However, it is too early to say if it is an evolving trend,” says H N Sinor, chief executive officer of the Association of Mutual Funds in India. On an average, there is a monthly addition of 100,000 SIPs every month, adds Srinivas Jain, chief marketing officer of SBI MF. Agrees Karan Datta, national sales head at Axis MF: “Redemption levels have come down a bit, besides higher SIP growth.” Though it’s an encouraging trend for the industry, which has been hit hard and especially on the equity side of the business, market observers can’t say if it would be a sustained trend. For the year so far, equity schemes are still facing a net outflow of Rs 13,281 crore against a net inflow of Rs 2,611 crore during the previous year’s corresponding period.

Except the first month of the second half, inflows in the equity segment has seen a consistent improvement. In fact, February was marked by a record net inflow in equity schemes since the entry load ban came into effect in August, 2009. More, last month was the third in a row that industry saw money flowing into equity schemes. The sales of equity-related schemes in February, including equity-linked saving schemes, were marginally up at Rs 6,038 crore against Rs 5,969 crore in September.

However, compared with the same month last year, sales of equity-related schemes are up 10 per cent against Rs 5,486 crore in February 2010.

Currently, the industry has a little over 40 competitors, with equity asset under management of around Rs 1.9 lakh crore. The number of overall folios in the categories, including income funds, equity and exchange-traded funds, is 4.71 crore.

Source: http://www.businessstandard.com/india/news/sip-rise-helps-mfs-brake-paceequity-folio-loss/429267/

Invest 5-10% of your portfolio

After launching a Nifty-50 remix fund, Motilal Oswal Mutual Fund’s recent offering — MOSt Shares Nasdaq 100 — continues with its policy of launching exchange-traded funds (ETFs).

The move seems timely because the US markets have performed better than the Indian markets in recent times. Since the beginning of the year, the Nasdaq 100 has returned 14.45 per cent, whereas the Sensex only 1.74 per cent. The scheme plans to invest 95-100 per cent in the shares of Nasdaq 100 companies.

Also, ETFs are cheaper than equity-diversified funds, in terms of expense ratio. The total expense ratio of MOSt Shares Nasdaq 100 will be one per cent, as against an average of two per cent for other equity-diversified funds.

It is the first ETF in India which will invest in shares listed on the NASDAQ 100, and the second index tracking ETFs after Benchmark AMC’s Hang Seng Bees.

While these are the good news, there are some restrictions as well. The fund does not have a systematic investment plan (SIP) option yet. Although the fund will invest in equities, it will be taxed as debt fund. It implies that there will a long-term tax on capital gains at 10 per cent with indexation benefits and 20 per cent, otherwise. In the short-term, capital gains will be added to income and taxed, according to the tax slab.

The fund house has said investors in the new fund offering (NFO) period — between March 16 and 23 — would get double indexation benefits such as a fixed maturity plan. The scheme will be listed at the Bombay Stock Exchange and the National Stock Exchange on April 4.

For investors, who want to take advantage of the turnaround in the US markets, this fund is a good opportunity. The international flavour, that is, being able to invest in scrips such as Microsoft, Google, Amazon, Yahoo and eBay, is definitely an added attraction.

But don’t go overboard. Financial planner Radhika Gupta says, “While there are very good companies listed on the Nasdaq, they mostly belong to the information technology segment. This leads to overexposure in a particular sector.”

Alhough the US stock market has turned around this year, it has not performed exceptionally well in the last few years.

Investors in the Indian markets would have earned higher returns from the Sensex. In the last two and five years, the Sensex has returned 41.13 per cent and 10.48 per cent annually. In comparison, the Nasdaq-100 has returned 35.65 per cent and 5.7 per cent in the same periods.

Rajesh Tanna, AVP-MF at Bonanza Portfolio, says, “This product is mainly targeted towards high net-worth individuals. Retail investors do not really understand how the product works.” Ideally, if you are well-invested in Indian stocks, either through direct exposure or mutual funds, you can look at this fund.

This is a good portfolio diversifier. Invest only part – say, 5-10 per cent of portfolio – in this product.

Source: http://www.business-standard.com/india/news/invest-5-10your-portfolio/429273/

Product Crack| Mirae asset India-China consumption fund

Mirae Asset India–China Consumption Fund (MICF) is an equity diversified mutual fund scheme that aims to invest at least 65% of its corpus in Indian equities and the rest in Chinese equities. MICF will invest in consumer-oriented sectors, such as fast-moving consumer goods, banking, media and telecom. While fund manager Gopal Agrawal will manage the India portion of this scheme, Basavraj Shetty is the designated fund manager of the international portion of the portfolio, with assistance from Mirae’s Hong Kong office.

What works

A growing middle-class population and their rising income are two factors that will give a boost to the middle-class consumption and companies engaged in this sector. Mirae estimates that India’s middle-class spending will rise by 18% and China’s will increase by 15% over the next five years. Rising population of India and China is expected to boost demand for products manufactured by companies in the consumption space. For instance, the fund house expects Asia’s middle class population (excluding Japan) to grow at a compounded rate of 11% over the next five years. As per the five year plan released by the Chinese government, the minimum wage is expected to increase by 50% during the period from 2010 levels.

What doesn’t

China’s growth projections can paint an attractive picture, but with a country that is devoid of democracy and is tightly controlled by its government, it’s a bit tricky to navigate their projections. Further, though investing in foreign equity shares offers diversification, there isn’t much merit in looking overseas when the Indian equity market offers multiple options with scores of listed companies and equity mutual fund schemes that come with a decent track record. Mirae’s existing scheme that invests in China (Mirae Asset-China Advantage Fund) returned 10.42% in the past year. In other words, it navigated the recent volatility in Chinese equities reasonably well. However, in 2010, the fund underperformed equity diversified schemes that focused solely on India.

Mint Money take

Consumption is an attractive theme that most fund managers in India seem to have lapped on. However, ignoring India-specific funds—some of them with a good track record—and going abroad is completely your choice. If you must invest, an ideal time horizon would be not more than three years. Also, take minimal exposure if you must. A better alternative is to stick to a India-specific diversified fund.

Source: http://www.livemint.com/2011/03/21213836/Product-Crack-Mirae-asset-Ind.html