Economy may recover by Sept: ICICI Prudential

Offering atleast three pre-requisites, Nilesh Shah, deputy managing director of ICICI Prudential Asset Management Company said the economy may recover by September this year.

According to Shah, if the next few months witness a good monsoon, capital flows from abroad and further rate cuts by RBI, Indian economy may come out of the current slowdown.
Shah, who was in the city to launch 'ICICI Prudential Target Returns Fund', an open ended diversified equity fund, further said that the country may witness negative inflation between May and September.
"What we may see will not deflation but negative inflation for a short time. The economy may witness negative inflation between May and September," he said.
The AMC's Target Return Fund seeks to generate capital appreciation by investing predominantly in equity shares of the large market capitalization companies constituting the BSE 100 index.
The scheme will have pre-determined triggers set for investors based on their risk appetite, which provides investors with an option to automatically switch the appreciation or entire investment with appreciation to pre-selected debt schemes of ICICI Prudential Mutual Fund.
The entry load for the scheme is 2.25 per cent for investments of less than Rs 2 crore under the retail option, while it is nil in the case of institutional investments. The subscription for the scheme will close on May 14, 2009. The assets under management of the ICICI Prudential mutual fund as of March 2009 were Rs 51,432 crore against Rs 54,321 crore in the same month previous year.

Source: http://www.business-standard.com/india/news/economy-may-recover-by-sept-icici-prudential/356294/

India-fund flows turn positive

Global investors are warming up to India, it appears from the fact that money has started flowing into India dedicated funds after the local markets gained close to 40% in a global rally.
These funds saw inflows of around Rs 500 crore in the week ended April 22 and a little over Rs 1,000 crore over the past four weeks, Citigroup analysts Elaine Chu and Markus Rosgen wrote in a report.
Inflows for the year were marginally negative by around Rs 10 crore until the latest inflows. Following the inflows, however, cumulative inflows have turned positive at around Rs 490 crore.
The same week (to April 22) last year had seen outflows of Rs 4,000 crore.
The Sensex has gained 3211 points since the beginning of the rally.
From the beginning of the year till March 9, after which the rally began, FIIs sold Indian equities worth Rs 9,000 crore.
Since March 9, they have invested Rs 8,000 crore in the Indian markets.
Experts, however, aren't celebrating just yet. While it is true that investors have allotted money for India, when and how it comes into India would depend on the new government at the Centre, the banking system in the US and economic numbers, they say.
The fiscal position and the general elections are still a cause for concern.
However, the outlook may be improving.
"While the first worry is justified, we believe the risk of an anti-market government emerging is very low. An attractive prospective PE of 11.4x suggests India could rebound once the election is out of the way," HSBC analysts John Lomax, Wietse Nijenhuis and Anupama Rao said in a report.
The Indian economy was likely to rebound with growth returning in the second quarter of FY10 and real GDP growth for CY09 could come in at 6.2%, the HSBC analysts said. "We expect earnings growth of 5-10% this year too, whereas the consensus has already been cut to 4%."
Jagannadham Thunuguntla, equity head at SMC Global Securities feels India's attractiveness as an investment destination would depend on the outcome of the elections. "There would be a bit of herd mentality as far as foreign money is concerned. Once the initial flow begins, then a lot more can follow. Right now, FIIs would be looking to a stable government for cues. If there is sufficient flexibility for the government to act, then one can expect foreign money to chase India," he said.
Ajay Argal, co-head, equity investments at Birla Sun Life Mutual Fund agrees that most FIIs would be playing a waiting game as far as the elections are concerned. But they would also watch the health of the financial system in the US and data in India. "The first week of May will reveal how well banks are holding up to stress tests and that will have an impact on the financial sector and global sentiment. In India, FIIs would be watching for numbers like industrial production," he said.

Source: http://www.dnaindia.com/report.asp?newsid=1251072

UTI mutual funds to merge equity schemes

UTI Asset Management Company (UTI AMC), one of the largest fund houses in the country, is planning a mega merger of the equity schemes in its portfolio. The process is likely to be kicked off in the current financial year.
Speaking to TOI, UTI MF chairman & MD U K Sinha said the organisation currently had too many equity schemes, which would be pruned by over 50%. Currently, the fund house has 96 schemes, of which equity schemes number 29.
The number of equity schemes is likely to be brought down to 10 through mergers over a period of time. Sinha said too many schemes in the market only proved that the Indian mutual fund industry still remained immature.
“Here, investors prefer new fund offerings than an existing fund. But it is just the opposite in matured markets. One should understand that the possibility of higher returns is much more in existing schemes. NFOs are more of a marketing strategy. But as all fund houses are doing that, we, too, have to come out with NFOs,” he added.
Sinha said that during the last financial year, it had merged nine schemes into three. This year, it would consolidate four schemes into two. Commenting on balanced schemes, he said that UTI has a very good bouquet of balance funds. “We have now also introduced systematic investment facility under ULIP. There is no plan to change the number or add any new scheme in this space,” he added.
Sinha said the number of fixed maturity plans (FMP) at 35 is also quite high. But he added that it is not possible to prune FMPs. “FMPs have a different maturity period and so it is not possible to merge them,” he added.
He said demand for corporate bonds is very high as banks are still very cautious about lending. “UTI has lend over Rs 5,000 crore in last couple of months. The figure for the MF industry, as a whole, is Rs 35,000 crore,” he added.
Meanwhile, UTI AMC has tied up with Coopers Wealth Creators and Tower Infotech for providing investment opportunities through micro pension initiative under UTI Retirement Benefit Pension Fund to employees and business associates of Tower Infotech.
Senior V-P and regional head (east) of UTI AMC, T K Maji, said the micro pension initiative is aimed at providing social security cover to private and unorganised sectors.

Source: http://economictimes.indiatimes.com/Personal-Finance/Mutual-Funds/UTI-mutual-funds-to-merge-equity-schemes/articleshow/4457379.cms

Is it the right time to invest in gold schemes?

In times of turbulence, when equity seems to have lost out in race, fund houses have begun to cash in on the interest generated by the yellow metal. Gold has gained over 57% in the last two years. But, the moot question is: does it make sense to invest in the metal at current levels?
Fund managers and investors have been the beneficiaries of the spike in gold prices in last two years and both gold exchange traded funds (ETFs) and world gold funds (WGFs) have become highly popular among investors these days.
Gold ETFs are mutual funds that invest directly in pure gold while WGFs invest in equities of gold mining companies across the globe. Both these categories of mutual fund schemes have generated handsome returns for the investors, though WGFs have been affected by the stock market meltdown.
Gold ETFs, whose returns are directly linked to the gold price, have generated over 20% returns in last one year. The spectacular show by this category has resulted in healthy inflows into these schemes. Since January 2008, the assets (AUM) of gold ETFs has surged by about 59% to Rs 756 crore by the end of March this year.
Currently five fund houses offer gold ETFs in India, but more are gearing up to join the group. Recently SBI Magnum joined the bandwagon of Benchmark, UTI, Reliance, Kotak and Quantum, who currently offer gold ETFs. Interestingly, Kotak AMC now plans to launch another gold fund. According to its offer document filed with Sebi, the new gold fund would be a feeder fund that would invest in existing gold ETFs.
WGFs have also put up a decent show in the last six months. These are however feeder funds and thus not actively managed in India. Both AIG and DSP Blackrock, the only two fund houses currently to have WGFs, manage these funds through their internationally based parent gold fund.
While the equity meltdown did impact WGFs, especially in the first half of the last fiscal, the sensational rise in the gold prices did benefit the stocks of gold mining companies where WGFs usually invest. Both the WGFs have thus reported more than 50% rise in returns over the last six months, which is even higher than the rise in gold prices.
Encouraged by the rising price of the gold, fund houses are now devising plans to diversify portfolios to incorporate the yellow metal . While UTI has launched a wealth builder fund that invests in equity, debt and gold ETFs, Sundaram BNP Paribas is also planning to launch a scheme on similar lines whose offer document has been filed with Sebi. Investors can now thus look forward to many more options to invest in gold.
But is it the right time to invest in gold schemes?
Recently a brief rally in equity markets resulted in the fall in gold prices from $967 an ounce to $865 in just two weeks. If the equity rally continues for some more time, gold prices may see further downside and may see the the range of $840- $800.
Historically too, the April-September period has been a subdued one for gold. However, if gold manages to close above $915- $920 in the coming days, the metal could rise to around $1000 by the second half of the current year.Nevertheless, gold’s outstanding performance last year continues to makes it one of the most preferred investment avenue for several investors.

Source: http://economictimes.indiatimes.com/Investors-Guide/Is-it-the-right-time-to-invest-in-gold-schemes/articleshow/4452961.cms

A comeback for value investing

Though growth stocks have made the most of the bull market momentum, value
stocks did much better in containing falls during the inevitable reversal. The
result: a better long-term record.

The stock market has rallied 40 per cent in a flash; mid-cap stocks have kept pace with blue-chips and the action in small-cap stocks is reaching frenzied proportions, with many of them clustered at the upper circuit limit on any given trading day.
While speculative froth is undeniably building up in one segment of the market, there has been a rational element to how stock prices behaved in this unexpected rebound. Value investing, or buying stocks that trade far below their intrinsic value, has paid rich dividends in the bounce-back from the March trough.
And that’s not a flash in the pan. Our analysis shows that value investing has delivered good results for Indian investors over the long term as well. That contrasts with the popular notion that India is a “growth” market where investors shouldn’t mind paying a high price for alluring earnings prospects.

Consider the stock market surge from the recent low (8100 for Sensex). In the BSE-500 basket, the highest returns have been amassed by stocks with a PE multiple of less than 5. These stocks delivered an average 60 per cent gain between March 9 and now. Stocks with a modest PE below 10 averaged 53 per cent. Both classes of stocks easily outpaced the index return of 37 per cent.
Low PE stocks within each sector have also delivered better gains than their more expensive peers. Tata Motors has zoomed ahead of Maruti Suzuki (75 per cent versus 21), Reliance Communications has delivered thrice the returns of Bharti Airtel and Suzlon Energy has beaten NTPC hollow (65 per cent versus 6 per cent).
All three outperformers are clear instances where investors have bet on a deeply discounted price, brushing aside concerns on near term earnings or business uncertainties.
Further analysis shows that it is not just stock selection based on low PE that has worked. Investors who used other “value” filters — a high dividend yield or a low price-to-book value ratio — were rewarded equally well. Stocks with a high dividend yield (see table) have delivered a 55 per cent gain between March 9 and now, while those trading below their book value have gained 58 per cent.

This cherry-picking of stocks ties in with the fact that the triggers for this market rebound came from instituional investors returning to Indian stocks. Since mid-March, there has been consistent FII buying and deployment of cash positions by domestic mutual funds and private insurers, even as retail investors cashed out. Institutional investors may have preferred undervalued stocks for two reasons. One, the ongoing slowdown has made it difficult for investors, even institutional ones, to make multi-year forecasts on revenues or earnings of companies. With projections subject to higher uncertainty, it appears safer to stick to stocks which discount only modest growth expectations.
Two, the steep market falls of last year and the 80-90 per cent erosion in some mid- and small-cap names has made investors pay greater attention to downside risk in recent times, leading to a “value” bias.
But is this partiality for low PE stocks a recent trend? Should investors go for less expensive stocks while building a long-term portfolio? While the answer to this question may have been very different during the bull market years from 2003 to 2007, recent evidence suggests that they should.
The market meltdown of 2008 has done much to restore the credentials of ‘value investing’ as a strategy suited to the Indian market. Though India is widely believed to be a growth market where institutional investors seek stocks for their heady growth prospects (and not for their bargain prices), today’s return numbers as of today, tell a different story. After two gut-wrenching market cycles, value stocks today sport a much better long-term track record than growth stocks, having delivered much better returns over 3, 5 and 10-year holding periods.
Compounded annual returns on the MSCI India Value Index (the key benchmark for value-style managers, Source: MSCI Barra) for a ten-year period at nearly 17 per cent, are at almost double the returns delivered by the MSCI India Growth Index (8 per cent).
A ten-year analysis shows that though growth stocks have made the most of the bull markets during their momentum years, value stocks did much better in containing falls during the inevitable reversal.
Given the tendency of the Indian market to swing (without warning) from a bull to a bear phase once every few years, it is the MSCI Value Index that has built up a better long-term track record than the Growth Index, till date.
For equity investors keen to build wealth over the long term, containing losses in a market fall may be as important as participation in upside during a bull phase. The message is, if you are looking at reasonable returns along with a less bumpy ride in the stock market, have a ‘value’ tilt to your portfolio.

Another reason why investors may be better off owning under-valued stocks in market conditions such as this is that value stocks have usually led the initial leg of a market recovery from a bear phase.
As Indian markets commenced a new bull market after bottoming out in April 2003, the MSCI Value index climbed by 101 per cent in the eight months that followed, while the Growth index rose by just 77 per cent. Value stocks would also have delivered better returns after the May 2004 correction.
Value strategies also posted lower losses than growth-led ones during the vicious downturns in equities. The MSCI India Value index (decline of 42 per cent) fell much less than the Growth index (down 67 per cent) in the aftermath of the dotcom bubble.
This pattern was again repeated in the meltdown between January and November 2008, when the Growth Index plunged by 64 per cent while the Value Index got away with a 55 per cent decline.

So what are the implications of the above trends for retail investors looking to rejig their portfolios?
With recent stock price gains driven mainly by re-rating of PE multiples (as the earnings picture remains quite bleak for many sectors), use the recent market rally to book profits in the more expensive stocks in your portfolio. That may also mean reducing exposure to the stiffly valued “defensive” stocks among FMCGs, power generation and pharmaceutical companies. Within sectors, switch to those that are available at less demanding valuations.
While adding cheaper stocks to your portfolio, beware of value ‘traps’— stocks that are trading at a low valuation, but could yet get cheaper as the company’s business or liquidity conditions deteriorate. Stocks of commodity companies (they appear cheap because of a high earnings base, which won’t be sustained), realty companies (who may post sharp profit falls) and the highly leveraged companies appear to be classic value traps in today’s context. If you find selecting value stocks a tricky proposition, take the mutual fund route. Most fund managers in the Indian context tend to be “growth oriented”. But value-focussed funds such as Templeton India Growth Fund, ICICI Pru Discovery Fund and UTI Dividend Yield Fund make a good addition to your portfolio.

Source: http://www.thehindubusinessline.com/iw/2009/04/26/stories/2009042650500700.htm

Markets are waiting for a clear picture on the political front

Indian markets have started looking attractive; fresh inflows are being witnessed from foreign institutional investors (FIIs) and markets are rallying upwards. Mahesh Patil, equity co-head, Birla Sun Life Mutual Fund, while speaking Chirag Madia of The Financial Express, says that once the election results come out on May 16, a clear picture will emerge. He also says that the Indian Mutual Fund (MF) industry is on the path of a gradual recovery post the redemption pressure during October-November last year. Excerpts:

•What are the factors which are leading the domestic market in the current scenario?
Indian markets are following global markets and the liquidity problems that we faced during the last year are slowly getting over. Apart from that, we are growing at a rate of over 5-6% and till now quarterly earnings have also been better than expected.
I think that overall, the condition is improving and that’s the reason we are witnessing and upward rally in domestic markets. I don’t think that there might be much negative news from the quarter’s results which are currently on. There are very low chances that Indian equity bourses will again touch the lows witnessed during the October-November last year. Markets are likely to remain in the range of 8,500-12,000 for the next few weeks.

•Despite the upward rally in Indian markets, there is sense of fear in the mind of investors as a huge amount of profit booking is taking place and investors are waiting for political uncertainties to ease...
Yes, there might be some pauses in the market as general elections results are awaited. We can also say that till before the election results, markets are likely to remain under pressure and there will be clear picture of where we are heading; it will emerge only after the results are declared on May 16. If the Congress-led UPA or BJP-led NDA comes to power, there are chances that markets will run ahead. If the third front takes office, then markets are likely to see some downward corrections.

•Recently, the RBI, in its monetary policy, cut the repo and reverse repo rates by 25 basis points. Do you think this will have any major impact on the markets?
I think the central bank has taken the right step by slashing the repo and reverse repo rates; there are chances that interest rates will start coming down from here. However, it is essential to point out that it may not have a huge impact on the markets. The markets will wait till results of the elections are announced.

•FIIs are entering the market yet again. Do you see increased inflows from them after the election results are announced?
I think that risk appetite is increasing slowly and FIIs are coming in as they feel that this is the only market that has some future growth prospect. With interest rates going down, they feel this is the right time to invest in the market as well. Apart from that, FIIs are also doing a good amount of profit booking. So, once we have clear picture on political front, we will witness more inflows from FIIs.

•After the tremendous redemption pressure seen by various fund houses last year, the MF industry’s AUM is improving. Despite that, investors are shying away from investing in MF schemes…
The MF industry, in line with the equity indices, has shown some smart recovery.
Gradually, people have realised that we are coming out of the financial crisis. People are waiting for the right time to invest in MFs, and I think this is the right time.

•More and more mutual fund houses are increasing their exposure to large-cap stocks. What are the reasons for this?
Various factors are playing in the minds of fund managers, like corporate governance and most importantly, the liquidity issue. These factors are good in large-cap stocks compared to small-cap stocks. Apart from that, mid-cop stocks have also given some fabulous returns in the past.

•During January and February this year, we witnessed several fund houses holding cash. But, in the last month, they have started deploying the cash in the market. Also, despite, an upward rally in the markets, fund houses are not offering new equity schemes. When do you see new equity schemes flowing in the markets?
Markets have improved in the last one month. So, fund houses think that this is the right time to invest. Now onwards, there might not be much correction in the markets and we feel that, investing at this time might give good returns to investors.
We haven’t seen much inflow in equity schemes, compared to debt schemes. But, I think that we will start witnessing new equity schemes being launched by various fund houses in the coming days. We too are coming out with an equity combined with debt scheme very soon.

Source: http://www.financialexpress.com/news/markets-are-waiting-for-a-clear-picture-on-the-political-front/450567/0#

DSP BlackRock World Energy Fund looks Sebi's approval

Open ended fund of funds scheme, investing in international fund
DSP BlackRock Mutual Fund has filed offer document with Securities and Exchange Board of India (Sebi) to launch DSP BlackRock World Energy Fund, an open-ended fund of funds scheme, investing in international fund. The face value of the new issue will be Rs 10 per unit.
The primary investment objective of the scheme is to seek capital appreciation by investing predominantly in the units of BlackRock Global Funds – World Energy Fund and BlackRock Global Funds – New Energy Fund. The scheme may, at the discretion of the investment manager, also invest in the units of other similar overseas mutual fund schemes, which may constitute a significant part of its corpus. The scheme may also invest a certain portion of its corpus in money market securities and/or money market/liquid schemes of DSP BlackRock Mutual Fund, in order to meet liquidity requirements from time to time.
Features of the scheme
Investment option: The scheme offers two plans viz. regular and institutional plan with growth and dividend option. The dividend option further offers dividend payout and dividend reinvest facility.
Minimum application amount: The minimum investment amount under regular plan will be Rs 5000 and in multiples of Re 1 thereafter and under institutional plan will be Rs 5 crore and in multiples of Re 1 thereafter.
The scheme seeks to collect a minimum subscription amount of Rs 1 crore during NFO period.
Asset allocation: The scheme will invest 50-100% in units of BlackRock Global Funds (BGF)-World Energy Fund (WEF) or other similar overseas mutual fund scheme(s) with high risk profile. It will invest 0- 30% in units of BlackRock Global Funds (BGF)-New Energy Fund (NEF) or other similar overseas mutual fund scheme(s) with high risk profile (in the shares of BGF – WEF and BGF - NEF, an Undertaking for Collective Investment in Transferable Securities (UCITS) III fund). It will also invest 0-20% in money market securities and/or units of money market/liquid schemes of DSP BlackRock Mutual Fund with low to medium risk.
Load structure:
Regular Plan:
Entry load: The scheme will levy an entry load of 2.25% for investments less than Rs. 5 crore of the initial value of Rs. 10/- during NFO/applicable NAV during continuous offer. For investments of Rs. 5 crore and above, no entry load will be charged.
No entry load on direct applications, i.e. applications not routed through a distributor/agent/broker.
Exit load: 1% will be the exit load for holding period less than 6 months from the date of allotment. 0.50% exit load for holding period more than 6 months but less than 12 months from the date of allotment. While no exit load will be levied for holding period more than 12 months.
Institutional Plan: There will be no entry load and exit load.
Benchmark index: 70% MSCI World Energy (Net) and 30% MSCI World (Net).
Fund Manager: Aditya Merchant will be fund manager for the scheme.

Fund Action: Jubilant Organsosys; Rolta India; Yes Bank

Jubilant Organsosys: Deutsche Securities buys 19.16 lk shrs at Rs 120/sh.
Rolta India: Ward Ferry Mgmt sells 14.28 lk shrs at Rs 89.90/sh.
Yes Bank: Abhi Ambi Financial Svcs buys 40.9 lk shrs at Rs 82.50/sh.
Indiabulls Securities: Sandstone Cap India Master Fund buys 54.77 lk shrs at Rs 27/sh. Orient Global Cinnamon Cap sells 62.26 lk shrs at Rs 27/sh.Motherson Sumi: Samvardhana Motherson Fin buys 1.92 cr shrs at Rs 81.50/sh. Motherson sells 1.4 cr shrs at Rs 80.50/sh. Renu Sehgal sells 12.05 lk shrs at Rs 83/sh. Laksh Vaaman Sehgal sells 14.40 lk shrs at Rs 85/sh.
Ispat Industries: Jaypee Capital buys 4.08 lk shrs at Rs 13.90/sh.
K Sera Sera: Basmati Securities buys 2.2 lk shrs at Rs 10.35/sh.
Astral Poly: IDFC Mutual Fund 2.58 lk shrs at Rs 51.90/sh.
Parekh Aluminex: AAP Investments buys 3 lk shrs at Rs 56.10/sh. Merrill Lynch sells 3.47 lk shrs at Rs 56/sh.