JM Auto Sector Funds announces changes in fundamental attributes

JM Financials Mutual Fund has approved the change in fundamental attributes of the scheme and its conversion from an Open ended sector scheme to an open ended equity scheme vided their resolution dated 7 April 2009 and 15 April 2009 respectively. The change in fundamental attributes include change in name, investment objective, investment strategy, benchmark index, asset allocation and other related matters of JM Auto Sector Fund. Accordingly the following changes are proposed in JM Auto Sector Fund with effect from 23 May 2009.
Details about the changes:
1. Change of name of the scheme to: JM Mid Cap Fund
2.Change of investment objective of the scheme: The investment objective of the scheme will be to generate long term capital growth at a controlled level of risk b predominantly investing in Mid Cap companies. Consequent to the above changes in the investment objective of the scheme, the scheme will undergo a change from an open ended sector scheme to an open ended equity scheme.
3. Change of asset allocation pattern of the scheme: Under normal circumstances the asset allocation of the scheme would invest upto 65%-100% in equity and equity related instruments with high risk profile and invest upto 35% in money market instruments / debt securities.
4. Investment Strategy: JM Mid Cap fund, as the name suggests will be a purely mid cap fund. It is an open ended growth scheme which focuses on investing in the midcap segment of the market with a disciplined investment approach. Being a growth oriented scheme, the scheme seeks to invest a substantial portion of its portfolio in equity and equity related instruments. Under normal circumstances, around 65% of the corpus shall be deployed in such securities and the balance in debt/money market instruments. However, whenever the valuations of securities rise in a sharp manner, the scheme will take advantage of trading opportunities presented and in such a scenario, the scheme will have a high turnover rate. The scheme will endeavor to use a mix of top down and a bottom up approach.
The strategy will be to identify stocks that can demonstrate strong growth over 3 year's horizon on the back of scalable business. The scheme seeks to achieve long-term growth of capital at controlled level of risk by primarily investing in midcap stocks. The midcap segment comprises mostly of companies that have been able to sustain themselves in the initial phases of growth. Since may companies out of this segment would show higher growth in future and move towards the large variety of business to choose from. Further, this segment is relatively under researched and hence offers an excellent opportunity for bottom-up focus thus enabling the spotting of winners ahead of the market.
5. Benchmark: The benchmark of the scheme would be – CNX Mid Cap Index
6. Fund Manager: The scheme would be managed by Mr. Sanjay Chhabaria

Investing in 'Grandfather instruments'

Generation, following the footsteps of their elders? There may be a few in a hundred, who would do so.
This holds good for financial planning too, and even going about choosing the type of financial instruments.
Youngsters normally prefer to invest in equities with greed to earn higher returns, as against investors belonging to the older generation, who look for stable and regular returns from investment instruments.
Young greedy investors, who had been fascinated by the dazzling skyward rally of the equity markets in early 2008, have witnessed their portfolio value virtually halving.
With their portfolio worth reducing, investors have been forced to look for avenues outside D-Street. “Which avenue to choose in this scenario?” is the question perplexing the investors, hit by the global meltdown and volatility of the markets.
Have we ever tried to consider and review investing into instruments used by our grandparents and people of the older generation? Most of us might have never thought of investing into instruments like Post Office Money back scheme, National Saving Certificate and the like.
We normally hear about them from our grandfathers, and senior citizens, particularly in the context of retirement planning. Lets thus call such instruments, as `grandfather` instruments, within the realm of our discussion on considering them as a prospective investment option, and try to review them as under : -
Public Provident Fund (PPF) scheme was introduced by the government in 1968. This `grandfather` instrument, can be opened by any individual assessee, while a guardian can open the account on behalf of minor.
A PPF account can be opened by any individual assessee. (Guardian can open the account on behalf of minor). Along with the exempt (Income Tax) interest of 8% per annum, calculated on the minimum balance from the fifth day till the end of the month, the investment tool also can be used for tax planning purpose, u/s 80C of the I.T. Act.
One can build a decent corpus by investing the principal amount over a period of 15 years. The minimum lock-in period is 7 years. On expiry of the 15 year duration, the PPF account can be prolonged for duration of 5 years at a time.
During the period, the minimum amount one can invest is Rs 500 and then in multiples of Rs 5. The maximum amount in a financial year can be Rs 70,000, in lump sum or installments.
PPF can also help you acquire a loan of up to a maximum 25% of the balance from the third financial year to the sixth financial year. However, the loan option is not available once you start withdrawing, that is sixth year after opening of account.
Post Office Monthly Income Scheme (MIS) is mostly opted by Voluntary Retirement Scheme (VRS) takers and retired people looking for fixed monthly income.
While PPF limits the account to one person, here, one can open multiple MIS accounts and each account can be converted into a joint account and vice versa.
MIS requires a minimum investment of Rs 1,500 or in multiples thereof. The upper limit for a single account is Rs 450,000 while that for a joint one is Rs 900,000. Alongside one can also claim a bonus of 5% on maturity. (Revised on Dec. 8, 2007)
However, unlike the case in PPF where interest is tax free, the interest income of 8% in this case is taxable. It is however not subjected to TDS (tax deducted at source) deduction. Also, the balance is exempt from tax. Alongside, one can claim a bonus of 5% on maturity of the instrument which is 6 years. (Earlier, it was 10%; the same has been revised to 5% with effect from Dec.8, 2007.)
National Savings Certificates (NSCs), are certificates issued by government of India that can be availed in the denominations of Rs 500, Rs 1,000, Rs 5,000 and Rs 10,000 at all post offices across India. This ‘grandfather’ instrument carries an interest of 8% which is compounded half yearly and has a maturity period of 6 years.
Though the interest of 8% is subjected to tax, a full amount of Rs 100,000 can be deployed towards tax planning exercise, eligible for deduction u/s 80C of the I.T. Act.
Kisan Vikas Patra (KVP) works in a similar way to NSCs and can be availed in same denominations across post offices in India.
They attach an annual interest rate of 8.25% and maturity period of 8 years and 7 month. They have been propagated as a safe route for investors who wish to double their investment. That is if one procures KVP certificate of Rs 100, one will earn up to Rs 200 on maturity.
While these instruments may be low on their returns aspect as compared to equities and mutual funds, they beyond all doubts, are backed by government, and hence are comparatively safer.
So `grandfather` instruments like these would prove to be safer and prudent to park your funds into, and improve the worth of your portfolio, particularly when the stock markets are highly volatile, as is the case in the current scenario.
Moreover, by investing in these instruments, you can follow the footsteps of your parents or grandparents and also build your retirement corpus.

Source: http://in.reuters.com/article/personalFinance/idINIndia-39013520090413?mlt_click=IFR+Asia_21_Stories+2-8_sec1-priCon-m5-NONE_News&sp=true

Investment Mantras for Women

There are some myths about women when it comes to investment. Some of them are…
Women are not as active as men when it comes to investing money; they generally keep themselves away from taking investment decisions; they are well known for spending money or keeping it idle rather than investing it for earning more; even, non-working women are mostly dependant on their spouses for meeting their day to day expenses…
Though, to some extend its true that women are dependant on their spouses for finance, they should also think about their future. Problems don’t come giving prior notice. What if they face the situations of being divorced or widow?
In such cases the main problem for a woman is the regular flow of income to take care of their needs, provided they are not buck-earners. However, in the current scenario of layoffs, lack of job security and slowdown, even earning women can also face these problems.
As per the latest International Labor Organization (ILO) report, the deepening economic and job crisis across the globe is expected to increase the number of unemployed women by up to 22 million in the year 2009.
The global employment trends (GET) report by ILO indicated that, of the 3 billion people employed around the world in 2008, 1.2 billion were women (40.4%). It said that, in 2009, the global unemployment rate for women could reach 7.4%, compared to 7% for men.
Women should start thinking and understanding the importance of money and its investment aspect to avoid critical situations at any stage of their lives. They need to develop skills to plan for their financial needs.
Generally, women tend to keep cash idle rather than investing it. They tend to think that this `idle cash` can be easily used for contingencies and to spend on their personal care like beauty parlors and jewellery etc.
However, as an exception, few women do invest into risk-averse avenues such as bank deposits and post offices` schemes. They generally avoid risky options such as equities, as they think that it takes a rocket science to understand equity markets` trends, patterns and volatile nature.
Instead of worrying about the `complexity` of equity markets, they should equip themselves with the basic knowledge about investing to make fruitful investments.
Financial independence is a very crucial thing for women in today’s world. Women from different age groups should start investing from the early stages of their lives to secure the future and for better lifestyle.
Below are the various investment options for women from different age groups.
Age group 20 - 30 years
You can call this stage as `Young Unmarried Stage`. Women from this age group can plan their future very well as there are various investment options available suiting their needs at this stage. Investing in equities is perhaps the best option for the women at this stage.
Equities are well known for growth and good returns, provided the markets are doing well. The dividend income from equities can also help them to earn regular income. They can follow intraday trading and buy today sell tomorrow (BTST) strategies. Other investment options for this group are derivatives, F&O and equity linked mutual funds.
Age group 30 - 40 years
This stage is called `Young Married With Children Stage`. In this stage women have to think about their children also. To secure the future of their children they should opt for the investments options which suit them. There are different categories of mutual funds and insurance policies like educational plans. Women between this age group should go for such plans.
Age group 40 – 50 years
This is `Married with Older Children Stage`. As children become old, parents have to keep funds ready for their higher education and marriage. This is a very crucial stage for any parent as their children’s career depends on their education and parents have to arrange funds for their education.
Accordingly women should opt for the investment options like insurance plans for the marriage and education purposes.
Age group 50 – 60+ years
This stage is called `Retirement Stage`. At this stage, women can invest into less risky and safer investment options such as PPF, NSC, Post Office Saving Schemes and debt instruments for the steady flow of income at the later stages of lives.
A word of advice
Before making any investment, women need to do the cost benefit analysis of their investment options. They should analyze the risk associated with it, its liquidity and safety aspects. They just need to understand the basics of investing and opt for the right kind of avenues which will suit them. If they follow the basics, no doubt, a woman can also be as good investor as a man!

Source: http://in.reuters.com/article/personalFinance/idINIndia-39055220090415?mlt_click=IFR+Asia_21_Stories+2-8_sec1-priCon-m5-NONE_News&sp=true

India well placed to benefit from improving int'l mkt: Fidelity

Fidelity International said attractive share valuations indicate the bearish phase in global markets may be over and India is well placed to benefit from the improving global environment.
"My belief that the market is bottoming out is underlined by attractive valuations, market sentiment and by looking at current market conditions in relation to the historical bear and bull market cycles," Fidelity International President Investments Anthony Bolton told reporters.
About India Bolton said the country's economy was largely domestic consumption-led, which meant that it has been less affected by the deceleration in global growth.
"As an economy that has continued to grow in spite of unprecedented turmoil in the global economy, I think India is well placed to benefit from an improving global environment," he added.
Fidelity International has a presence in India through Fidelity Mutual Fund, which launched its first fund in 2005.
Talking about the company's growth over the last four years, Ashu Suyash, Managing Director and Country Head India, Fidelity International, said, "as one of the fastest growing among the new asset management companies, we are delighted with the progress we have made over a short span of time.

Source: http://economictimes.indiatimes.com/India-well-placed-to-benefit-from-improving-intl-mkt-Fidelity-/articleshow/4411365.cms

Reliance Mutual Fund Under Performs The Time Periods

Background:

Reliance Capital Limited is the sponsor of Reliance Capital Assets Management Ltd set up in June 1995. Reliance Capital Ltd. is a member of the Reliance Group and has been promoted by Reliance Industries Limited (RIL), one of India's largest private sector enterprises. The fund house manages assets worth Rs 80962.94 crore at end of March 2009.

Reliance Growth Fund (G) an open-ended equity scheme launched in September 1995. The investment objective of the scheme is to achieve long-term growth of capital through a research based investment approach. The minimum investment amount is Rs.5000 and in multiples of Re.1 thereafter. The unit NAV of the scheme was Rs 233.32 per unit as on 13 April 2009.

Portfolio: The total net assets of the scheme increased by Rs 152.02 crore to Rs 3239.85 crore in March 2009.

Reliance Growth Fund (G) took fresh exposure to two stocks in March 2009. The scheme purchased 8.98 lakh units (1.72%) of Financial Technologies (India), 7.32 lakh units (1.47%) of United Spirits in March 2009.The scheme completely exited from Cambridge Solutions by selling 56.00 lakh units (1.44%) in March 2009.

Sector-wise, the scheme took no fresh exposure to any sector in March 2009.Sector-wise, the scheme did not exit completely from any sector in March 2009.

The scheme had highest exposure to Lupin with 21.53 lakh units (4.58% of portfolio size) followed by Reliance Industries with 7.86 lakh units (3.70%), Divis Laboratories with 12.02 lakh units (3.54%) and Jindal Steel & Power with 9.27 lakh units (3.44%) among others in March 2009.It reduced its exposure to State Bank of India by selling 1.98 lakh units to 6.13 lakh units (by 0.68%), Divis Laboratories by selling 1.88 lakh units to 12.02 lakh units (by 0.37%), Jain Irrigation Systems to 21.87 lakh units (by 0.27%) and Bharti Airtel by selling 4025 units to 11.64 lakh units (by 0.16%) among others in March 2009.

Sector-wise, the scheme had highest exposure to Pharmaceuticals - Indian - Bulk Drugs at 8.12% (from 8.47% in February 2009), followed by Banks - Public Sector at 4.90% (5.54%), Computers - Software – Large at 4.19% (4.26%) and Telecommunications - Service Provider at 3.89% (3.94%) among others in March 2009.

Sector wise, the scheme had reduced exposure to Banks - Public Sector to 4.90% (by 0.64%), Pharmaceuticals - Indian - Bulk Drugs to 8.12% (by 0.35%), Plastics Products to 2.31 % (by 0.27%), and Sugar to 1.98% (by 0.08%) among others in March 2009.

Performance: The scheme underperformed the category average over all the time periods.

Over three-month period ended as on 13 April 2009, the scheme posted returns of 14.25% underperforming the Sensex that posted returns of 20.90%. Over 6 month period, the scheme's returns dropped to 3.34% underperforming the Sensex that fell 3.02%.

The returns of the scheme over one year period fell 30.92% underperforming the Sensex that plunged by 30.62%.

ETFs V/s Mutual Funds

You must have heard from people that the gold ETF was the best investment in 2008! Are you aware what a gold ETF is? Let us first know what basically an ETF is.
ETF is the abbreviation for exchange traded fund, a financial instrument that tries to imitate its benchmark index by investing in stocks in the same proportion as that of the benchmark index.
On other hand a mutual fund is a trust that pools the savings of a number of investors and invests the collected money.
You can say that an ETF is similar to an index mutual fund which also invests in stocks in the same proportion as that of the benchmark index. So Nifty BeES ETF by Benchmark Mutual Fund invests in the same stocks as that of its benchmark S&P CNX Nifty Index.
You may be wondering how are ETFs different from mutual funds, as both collect money from investors and invest in scrips or other assets like gold.
The factors in which these two differ from each other are

Low cost:

ETF have lower cost as they are generally passively managed and invest only in index based stocks. They don’t trade, buy or sell stocks frequently, and the proportion for investment in each scrip is normally fixed, based upon the weightage of that scrip in the index.
Thus, ETF requires low management expertise as research and marketing expenses are less.
Mutual Funds on the other hand are more dynamically managed and hence have a higher expense ratio. Fund houses spend a lot of money on research of scrips. They buy and have a tendency to churn the scrips more frequently.
Take this for example Nifty BeES has a cost structure of around 0.50% as compared to 1.25% of ICICI Prudential Index Fund. Apart from management costs, mutual funds also charge entry and exit load which take almost 2% out of your total investments; whereas in ETF, you have to pay only brokerage charge.

Liquidity:
ETFs can be sold or bought like stocks during market hours, unlike mutual funds which can be bought and sold only at the day’s end as per their calculated net asset value (NAV).
To understand the above, lets us assume, if you want to redeem your investment on a particular day for some monetary need and by sheer bad luck the market begins to fall. As ETFs are traded on the markets you can minimize your loss by immediately selling your ETF.
Had you wanted to redeem from a mutual fund you would have had to wait till the end of the trading session for the generation of NAV; by the time the market might have fallen substantially, leading you to suffer a higher loss.

Long-term investor protection:

the stock exchanges, thus Asset Management Company managing the ETF is not involved in the transaction. However, in case of mutual fund, units are purchased and sold by the Asset Management Company.
This may lead to investors suffering if there is a large exit of money from the scheme as was witnessed in many mutual fund schemes during the October-November 2008 period. During the period, long term investors had to suffer, due to large outflow of funds from schemes which led to many fund managers selling their best assets in fire sales.
Thus, ETF protects long-term investors` value as assets are not sold even when there is large selling seen in ETFs.

Low tracking error:
ETFs have very low tracking error, which is the difference between the returns by funds measured against its benchmark index. This is because, ETFs invests in stocks that constitute the benchmark index, in the same proportion as their weightage in the index. Also the gap between ETF`s NAV and market price is less because of arbitrage opportunities which traders take advantage of.
On the other hand, mutual funds are not so keen to invest in stocks in the same proportion of the benchmark index of the scheme, and mostly deviate from the returns posted by the index. Index funds have high tracking error as there is no arbitrage between the funds` NAV and market.
Thus, if you believe that index will gain, have limited funds to invest in stocks, and not comfortable with any particular scrip, then exchange traded fund will be the right investment option.

Source: http://in.reuters.com/article/personalFinance/idINIndia-39097720090417?sp=true

What are the kind of stocks/sectors one should be buying now?

Find below views of Mr. Sandip Sabharwal

Part I - The anatomy of the bear
As I sit to analyze the kind of stocks and sectors one should be buying into at this point of time with a medium term perspective it is important to analyze the anatomy of the bear market. In order to do this I would first go back to the last phase of the bull market, which was the main phase of excesses and extreme euphoria.
Epilogue – The big blow off - This phase started from the month of September 2007 and lasted till January 2008. This was the period in which the Sensex went up from around 14500 to 21000. This was the time period in which valuations went up ridiculous levels, there was a huge deluge of money from hedge funds, there was extreme leveraging and retail investor frenzy was at its maximum. At the risk of repeating this was also the period in which even most professional fund mangers could not see the fact that the bubble had become so big that it had to burst. The genesis of the last phase of the bull market lay in the beginning of the rapid monetary easing by the US Federal Reserve subsequent to the start of the mortgage crisis and the beginning of the emergence of the financial crisis in the US and Europe. As a very good friend of mine puts it “ This was a phase where as the easing cycle started a large number of hedge funds thought that the liquidity is now going to over flow from a glass that was already full, without realizing that there was actually a very very big hole in the glass”.This was the phase of the market where fundamentals were of no relevance and companies with grand plans and worst cash flows outperformed most of the other stocks. In this phase the BSE Mid cap index went up from 6000 to 10000 level a gain of a whopping 66%.
I will break up the bear market of the last 15 months into three parts
PART 1

The end of Euphoria – January to September 2008 – This was the first phase of the bear market and was pre Lehman Brothers collapse. In this phase there was a sudden reversal of liquidity flow and was also the phase in which commodities kept on rallying ( till around July to September depending on the commodity we are talking about) and was the phase in which inflation was a bigger concern in most emerging markets and euro zone. In this phase there was a very rapid increase in policy rates by central bankers all over the world as crude, copper, steel prices etc kept on rallying in the backdrop of a slowing global economy and reducing liquidity. This was the phase in which most market participants underestimated the scale of the problems in the financial systems in the Western economies and in general loss levels were underestimated. Economies all over the globe kept on moving from bad to worse in this period. However this was also a period in which lot of emerging market economies were believed to be relatively insulated and their suffering would only be due to collateral damage. This was the time period in which both mid cap and large cap companies fell in value. However this was also a phase where there was some sort of distinction in the markets between companies that would be relatively insulated from the slowdown effect. Companies that had good order books or a good execution history were relatively spared in the carnage. This was sort of a normal bear market phase in which markets fall by 25-30%.In this phase hedge funds faced huge redemption pressures and most emerging markets saw significant outflows. In this phase which lasted till the middle of September 2008 the Sensex fell by 30% and the BSE Mid Cap index by 45%.
PART II

End of liquidity and execution disbelief – September 2008 to January 2009 – This was the period in which financial institutions in the USA started collapsing. Although smaller companies were collapsing the big one like Lehman hit everyone on the head. This led to liquidity totally drying up globally. The three month LIBOR shot up to nearly 4%, yields on US Treasury bills became virtually zero as capital preservation became the prime focus. This was the time period in which there was forced selling from a large number of FII’s and Hedge Funds due to the virtual collapse of the financial system in Western economies. There was extreme panic in the month of October/November 2008 and led to the formation of a panic bottom in the markets in October 2008. This was also the phase till be beginning of December 2008 where there was a virtual collapse in mid cap stocks although large cap stocks started stabilizing after making the panic bottom. In this phase valuations were of no importance. There was huge execution disbelief and due to the liquidity crunch the market started doubting the execution ability of projects that were already awarded. In this phase order books lost their relevance and most market participants started believing that things will never improve. This was the time when central bankers globally started cutting rates aggressively and also started pumping huge amount of liquidity into the system. However the fear was so high that nothing seemed to have any impact. Markets started to improve from the beginning of December before Mr. Ramalinga Raju burst into the scene in the first week of January.In this phase companies with high debt levels, requirements of refinancing, high forex exposure, requiring large working capital fell the most.In this phase the Sensex fell by another 35% and the BSE Mid cap index fell by another 40%.
PART III

Total Disbelief and the lack of confidence – January 2009 to Beginning March 2009 – Even as markets had started stabilizing from the beginning of December 2008 the Satyam scam broke out and this combined with the process of change in regime in the USA and a constantly deteriorating scenario in the economic scenario globally led to the virtual “Falling off the cliff” of the markets, specially on the mid cap space. This was the phase in which no one wanted to own any mid cap stock and even large cap stocks with suspect accounting standards or suspect managements saw their stock prices crashing extremely badly. This was a phase in which most Western economies stock markets made new lows and most emerging markets held on to their October lows in term of large cap indices. However mid caps continued their free fall. This was the phase in which I believe that mid caps finally bottomed out as investors who were still holding out finally lost patience and sold these stocks at dirt cheap valuations. This was the phase which was the total reverse of October 2007 to Jan 2008 where investors just wanted out of mid caps. This was also the time in which investors wanted to stick to the bluest of blue chips and risk perception was the highest.In this phase companies with suspect management practices, suspect accounts, commodity companies or those with exposure to the Middle East countries fell the most.In this phase the Sensex fell by around 23% and the BSE Mid Cap index fell by around 30%.
In the second part of the article I will talk of what are the segments of the markets to buy into now.
INCIDENTLY MARKETS ARE LOOKING OVERSTRETCHED IN THE NEAR TERM. SHOULD GIVE UP SOME GAINS.

Source: http://sandipsabharwal.blogspot.com/

SBI Mutual Fund cuts minimum investment limit in 4 funds

State Bank of India's mutual fund unit on Wednesday lowered the minimum monthly investment limit in select funds to 100 rupees, joining the likes of UTI Mutual Fund and ICICI Prudential Asset Management.
The funds are Magnum Balance, MMPS-93, MSFU Contra fund and SBI Blue Chip fund.
SBI Mutual Fund hopes to attract about 250,000 investors in the first year with this initiative, SBI chairman O.P. Bhatt said.
Typically, the minimum investment into Indian mutual funds is 500 rupees, but an increasing number of money managers are lowering the investment threshold, in a bid to attract small investors from tier II and tier III cities.
Source: http://in.reuters.com/article/domesticNews/idINBOM28785320090415