CDs issuance falls; MFs prefer to hold cash

Issuances of certificates of deposit (CDs) fell today as mutual fund houses — the major investors in such papers — avoided fresh buying and preferred to hold cash, dealers said.

Today, Punjab National Bank placed Rs 1,000 crore of one-year CDs at 7.60 per cent. According to dealers, some mutual funds were holding cash since a long time and were eager to invest the excess funds in CDs due to the recent rise in rates.
Hindustan Construction Co placed Rs 10 crore of three-month commercial papers at 10.35 per cent. Usha Martin issued Rs 25 crore of 89-day non-convertible debentures having a daily put/call option at 250 basis points above Mumbai Interbank Offered Rate. A private mutual fund invested in this paper.
Today, the overnight Mibor was at 4.26 per cent compared with 4.29 per cent on Saturday.
On Friday, L&T Infrastructure placed Rs 50 crore of three-month commercial papers at 9.50 per cent. State Bank of Mysore placed Rs 200 crore of June maturity CDs at 6.95 per cent.
Oriental Bank of Commerce’s December maturity CDs were dealt at 7.55 per cent today. Today, December maturity papers were dealt at 7.55-7.75 per cent unchanged from Friday.

Source: http://www.business-standard.com/india/news/cds-issuance-falls-mfs-prefer-to-hold-cash/18/01/345988/

Investors wary of equity, MF tax saving schemes

Many people start thinking about tax planning only after the New Year. With barely three months to go for the last date of completing the process, they would weigh their options and their tax implications . However, according to financial advisors, some people seem to be wary of equity linked tax saving scheme (ELSS) or tax saving schemes from the mutual fund houses.
The reasons are many. One, the latest Satyam fiasco has shaken their confidence in the stock market. Two, the ensuing financial turmoil in the global arena and also in India is also making them nervous. Lastly, the performance of these schemes is also nothing to write about. (See table: to 5 tax planning schemes). You can't blame poor investors if they want to let go off tax saving schemes this year. "I have been investing in tax saving mutual fund schemes for the last three years. All these schemes have given me negative returns. Considering the current status of the market, I don't want to invest in them this year," says an employee in a courier company.
But is it a wise move? "It is a natural psychological reaction . People wanted to get into the market when it was at 18,000 or 20,000, but when it is actually hovering around 9,000 to 10,000 they don't want to invest ," says Sajag Sanghvi, a certified financial planner. "But avoiding ELSS because of the bad performance of a year or two could be a huge mistake. If you have invested in ELSS as part of your asset allocation plan to take exposure to equity, you should continue with it," he adds.
"Investors shouldn't let short-term trends cloud their judgement. They should understand that among investment options under section 80 C, apart from ELSS all other instruments offer only fixed rate of returns," says a tax consultant. "They can get only 8-9 % from schemes like national savings certificate, public provident fund, 5-year fixed deposits. But they stand a chance to earn better returns of, say, 12-15 % from tax saving schemes. This is provided they have the stomach for risk and are prepared to wait for three to five years," he adds.
True, you should invest in stocks only because you are ready to take the risk and wait for at least three years.

Source: http://economictimes.indiatimes.com/Personal_Finance/Mutual_Funds/Investors_wary_of_equity_MF_tax_saving_schemes/articleshow/3971093.cms

MFs shy away from equity-linked offers

The unexpected Satyam scam has further dampened the market sentiments. It has led to a dip in both the leading bourses. The bearish sentiment likely to deter the Mutual Fund (MF) houses from filing applications with the Sebi for offering equity-linked new fund offerings (NFOs) for the retail investors.
According to Sebi, out of 35 fund houses, only two have filed applications for offering equity-linked NFOs in the last one month.
The ICICI Prudential Mutual Fund has filed two applications with the regulator to offer ICICI Prudential Recovery Fund, an open ended equity fund, and ICICI Prudential Target Return Fund, an open ended diversified fund. Similarly, Tata Mutual Fund has filed an application for Tata Value Opportunities Fund, an open ended equity scheme.

A senior analyst from a broking firm said that the domestic market was effected due to the US financial tsunami leading to the global market meltdown. The BSE Sensex dipped by 52% or 10,639 points and NSE Nifty slide by 52% or 3,179 points in the calendar year 2008. The market has shown some recovery in the month of December, 2008 as Sensex gained 9% or 809 points and Nifty jumped by 10% or 276 points. However, Satyam scam was responsible for the nervousness in January as both the leading bourses are currently having south-bound journey.
In line with the equity market players, the MF industry is uncertain about the market movement. Commenting on the few applications for introducing equity-linked NFOs, a fund manager from a domestic fund house said that the overall bearish market due to the global meltdown and now the scam will influence the retail investors not to invest in the equity-linked NFOs. They will prefer to hold all their investment decisions for a while, the fund manager said.
It may be mentioned here that the meltdown in the equity market has majorly resulted in the reduction of Asset Under Management (AUM) of the MF industry. According to Amfi, the AUM has dipped by Rs 1.27 lakh crore to Rs 4.21 lakh crore as on December 31, 2008 in the calendar year 2008.

Source: http://in.biz.yahoo.com/090112/203/6zas1.html

Make your MF portfolio a long term plan

Over the last few days, there has been a growing consensus on the fact that asset classes are set for a free fall. While equity has been showing intermittent strengths at lower levels, it has been more on account of trading support than investment buying with long-term investors preferring cash or debt. In fact, in the last few months, the fund flow from the high net worth individual community to debt has been on the rise and besides bank deposits, income funds and gold have been the preferred bets.
In such a scenario, investors have to rely on a de-risking model to build a portfolio and reliance on a single instrument or option may not provide the comfort. Investors who prefer mutual funds can look at a combination of products to minimise risk. While the percentage of allocation for each scheme differs based on individual risk-taking ability and tenure of the investment, these options can be considered by a larger segment as portfolio components.
Here are some of those options:
Debt allocation :
This has been the preferred option in recent times due to the economic environment. While fixed deposit is a product with assured returns, mutual funds (MFs) don't offer the comfort of assured returns. However, MFs have a wide range of products ranging from income funds, liquid funds to ultra short-term bond funds for investors looking for a debt option. As they are more tax-efficient and also offer the flexibility of partial withdrawal, these products can be your option besides fixed deposits.
Allocate around 50 per cent of your corpus towards these in the current market environment, while your short-term fund needs should be completely in debt.
Balance with risk :
An ideal MF portfolio should reflect the risk-taking abilities of the investor and should have a mix of debt, equity, gold and other options that come up from time to time. For instance, the real estate portfolio management service (PMS) or equity PMS are some options that have been launched by mutual fund companies in recent times. As a result, investors should be aware of the changing market needs and should also have the liquidity to take advantage of such opportunities. For instance, while everyone expects the equity markets to test new or October lows in 2009, a smart investor would brace himself for such an event by building his liquid portfolio.
The management of risk is a key component of an ideal portfolio and that could be achieved through a single product or a combination of products, the latter is a better option though. For instance, balanced funds do take care of risk management but to a limited extent and would be an option for small sums. A senior citizen can allocate his corpus between fixed return products and balanced funds for his postretirement fund needs in the early stages of his retirement life. For him, such a combination can fulfil the needs of balancing with a couple of products. It may not be the case for a young investor who has different fund needs with different tenures.
Finally, portfolio creation is a long-term exercise and with respect to equity portfolio, the task extends over a longer period of time. In the case of equity, the approach has to be long-term and has to be a continuous process. For MF investors, there are plenty of products for such an exercise in the form of systematic investment plans (SIPs) and systematic transfer plans (STPs), and such investments can be through a combination of products across sectors.

Source:http://economictimes.indiatimes.com/Features/Financial_Times/Make_your_MF_portfolio_a_long_term_plan/articleshow/3962507.cms

Canara Robeco Mutual Fund Decide To Restrict Sale Of Unit

As the asset under management (AUM) of the Canara Robeco Income Fund crossed Rs 350 crore, Canara Robeco Mutual Fund has decided to restrict the sale of units. The fund has acquired more than Rs. 350 crore of AUM (corpus of nearly Rs 363.56 crore at end of 31 December 2008). So in order to protect the interest of the continuing investors, the Trustees have decided to limit the maximum amount of application to Rs. 1 crore and above. But, the fund will continue to accept application amount for less than Rs 1 crore. So, as and when the AUM fall below Rs 350 crore, the fund shall re-open the sale of units for application of Rs 1 crore and above.
Canara Robeco Income Fund is an income fund aims to generate income and capital generation through a low risk strategy by investing in debt securities as well as money market instruments. As on 7 January 2009, the NAV of the fund stood at Rs 18.0

SBI MF cuts exposure to IT, auto, oil & gas

SBI Mutual Fund has pared exposure to Information Technology, Automotive and Oil & Gas sectors while increased to Cement & Construction, Banking & Financial Services and Metals & Mining sectors. Bajaj Auto Finance, HPCL and Rural Electrification were top buys while Atul, Reliance Petroleum and Indiabulls Real Estate were top sells.
A study of the equity portfolios managed by the SBI Mutual Fund as on December 31, shows that in the Information Technology sector, it has sold shares of Infosys Technologies, Satyam Computer and TCS.
Selling was also seen in automotive space, wherein it offloaded Maruti Suzuki, Apollo Tyres and Tata Motors.

In the Oil & Gas pack, it has cut some exposure to Reliance Industries, ONGC, BPCL and Aban Offshore. However, it has purchased HPCL.
The fund house has increased exposure to Cement & Construction, Banking & Financial Services and Metals & Mining sectors.
In the Cement & Construction space, it has bought shares of Jaiprakash Associates, HCC, Nagarjuna Construction and GMR Infrastructure while sold IVRCL Infra.

The fund house also increased stake in Banking & Financial Services segment. It purchased shares of SBI, ICICI Bank and IDFC. However, it sold HDFC and Kotak Mahindra Bank.
SBI Mutual Fund has raised its investment in Metals & Mining pack, as it bought Tata Steel, Welspun Gujarat and GMDC. However, it sold Sterlite Industries and Hindalco Industries, and exited JSW Steel.

Fact of the matter

A mutual fund scheme`s fact sheet is like a monthly report card. It provides information to investors about where and how their funds have been deployed.

A mutual fund scheme's fact sheet is like a monthly report card. It provides information to investors about where and how their funds have been deployed. It also showcases the performance of the scheme and the quality of investments. Sometimes, the monthly reports are also accompanied by the fund manager's views and comments.
There is no standardised format for a fact sheet. The Association of Mutual Funds of India has suggested that all fund houses have a uniform format, but as there is no guideline from Sebi, fact sheets across the fund houses tend to be different.
However, the important details of equity and debt funds in the fact sheet are almost the same for fund houses. Here are the vital points that an investor can check in a fact sheet:

Stock allocation: It lists the individual stocks in which the fund has invested its corpus, as also their proportion. Equity funds plough in money in a large number of stocks, but investors must consider the top holdings (eight to 10 stocks) of the fund's scheme. This will help them determine the extent of diversification by the fund.
Sector allocation: This is important as equity diversified funds invest across sectors to derive the benefit of diversification. The funds that consistently allocate a substantial proportion of their assets to a single sector are more likely to be affected by factors such as a slump in that particular sector. Diversifying across various sectors helps offset the negative effects of a downside in a couple of sectors.
Cash levels: In the past few years, mutual funds have increasingly been using cash as a strategic tool to combat volatility. Check your fund's cash level as it can hint at the market conditions your fund manager is expecting in the near future. For instance, if the cash level is high, it probably means that the fund manager is expecting market uncertainty.
Expense ratios and loads: Check the expense ratio along with the entry or exit loads associated with the scheme. The fund's net asset value is computed after factoring in these expenses. The higher the expenses charged by the fund, the lower are the returns received by the investors. In case of debt funds, the indicators that one should look for are different from those that are common to equity-oriented funds. The factors important for debt funds include the quality of investments, maturity and rating profile.
Average maturity: As the performance of a debt fund is inversely related to interest rates, the average maturity of the fund's debt holdings is of utmost importance. If the average maturity is consistently high (over a period of time), it implies that the manager expects the interest rates to fall in the future, and vice versa.
Rating profile: Debt funds invest in securities with different credit ratings (e.g. AAA, AA+). Such ratings determine the risk profile of a debt fund. The funds that invest the majority of their corpus in low-rated debt instruments are prone to high credit risk, which can affect their performance considerably. There are other facts in the fact sheet that are common to both equity and debt funds such as the investment objective, performance of the fund, applicable dividends, performance of the fund versus that of the benchmark, and the past performance compared with funds within the peer set.

Tata Infrastructure Tax Saving Fund

Scheme Feature-
Tata Infrastructure Tax Saving Fund is a close - ended Equity Linked Savings Scheme offering Tax benefits to eligible assessees under Section 80 C of the Income Tax Act, 1961. The Scheme seeks to provide medium to long term capital gain by investing predominantly in equity / equity related instruments of the companies in infrastructure and infrastructure related sectors along with the income tax benefit to its unitholders.
The duration of the scheme is 10 years from the date of allotment and has a minimum lock in period of 3 years.
NFO Opening Date-17th December 2008
NFO Closing Date- 16th March 2009
Entry Load- For amount < Rs. 2 Cr, exit load charged will be 2.25%
For amount >= Rs. 2 Cr, exit load charged will be nil.
Exit Load- There is a 3 year Lock-in Period.
Minimum Amout- Rs.500/- and in multiples of Rs.500/-
Benchmark Index- BSE Sensex
Fund Manager- Venugopal M. and Mahendra Jajoo