MFs investing in small cos clock big gains

While many large cap stocks with over Rs 10,000 crore in market capitalisation have lead the bull rally, mutual funds invested in mid-cap and small-caps have landed stellar gains riding stock performance. A quick look at around 35 mutual fund schemes that are known to have invested in smaller companies shows that the average fund's net asset value (NAV) has appreciated 90% in the last 3 months.
Topping the charts is SBI Magnum Midcap Fund having managed to gain 127% gains in the last 3 months. Others funds such as JM Emerging Leaders, JM Small & Mid-Cap, SBI Magnum Sector Umbrella Emerging Businesses, Principal Junior Cap, Sundaram BNP Paribas Select Midcap, Principal Emerging Bluechip, Canara Robecco Emerging Equities, DSP BlackRock Micro Cap and Sahara Midcap Fund have doubled their NAVs in the space of just 90 days, AMFI data till June 3 shows.
"When markets have momentum, mid-caps tend to outperform. Even when markets are range-bound, midcaps still perform reasonably well compared to larger companies. The only thing that could stall their rise would be 10-15% correction. I don't see any India-specific factor that would bring down the indices by that much," Vivek Pandey, fund manager of SBI Magnum Midcap Fund, said.
Others such as Birla Sun Life Mid Cap, DBS Chola Midcap, DBS Chola Small Cap, Franklin Indian Smaller Companies, JM Mid Cap, Sundaram BNP Paribas Select Small Cap and ING Midcap have given returns between 80% and 90% in the same period. Even the laggards have managed to deliver 60-65% returns in the last 3 months.
With benchmark indices mainly consisting of large caps and most stocks having delivered returns at the start of a bull run, smaller companies maintain rally in the next wave, point out analysts.
"It is interesting to note that while large caps typically go into consolidation mode after a strong monthly performance (May), the tailwind in the case of midcaps seems to be substantially better. This trend could be likely attributed to a contraction in the valuation gap as investor sentiment improves," Bharat Iyer of J P Morgan India said.
The presence of performing stocks as top-10 holdings that gave 100% returns such as Federal Bank, Balrampur Chini Mills, Bank of Baroda, Rural Electrification Corporation, Mphasis BFL, Mundra and stocks that 'tripled' in value such as Voltas and Sintex Industries in the same period widened gains for many funds. In the same period, BSE Midcap Index has appreciated by 100% and BSE Small Cap Index has jumped by around 110%.

Source: http://timesofindia.indiatimes.com/Business/India-Business/MFs-investing-in-small-cos-clock-big-gains/articleshow/4622748.cms

Suggested portfolio returns as on 3rd June 2009

On 3rd March we have posted one article about suggested portfolio as per our research.(Click here to view article posted on 3rd March 2009) We had suggested good blending of mid cap, small cap and large cap with small allocation to balance fund too. We bat on JM funds after direct meeting with fund manager and research analyst, JM worked in our suggested portfolio as a black horse.

We have kept 12 % in liquid fund to average in funds whose NAV falls more after investment or to take advantage of sharp correction by investing in to any Index fund.

You can see we have allocated 88% in equity fund which have generated 96% absolute return in three month time.

Now, if you have got returns as per your expectation than you must move out of equity.

If you want to book partial profit, we advice you to take out 20 to 25% from equity mutual fund to liquid fund and start weekly STP in the same fund for next five month.

I do not want to take much of your time; let me present you a suggested aggressive portfolio result as on 3rd June 2009.

If you are not able to view it properly click here or click here to get attachment

Note: Portfolio allocation and requirement changes from individual to individual.

Retail investors take MF route to join mid-cap rally

Having burnt their fingers in small- and mid-cap shares last year, retail investors have taken a more cautious approach this time: they are playing the mid-cap rally through the mutual fund (MF) route. Market watchers say this could further fuel the rally in second-line stocks, as fund managers will have to deploy the money collected through these schemes, even if it means having to chase prices.
As per May figures, renewed inflows and appreciation in portfolio value have boosted the asset base of mid- and small-cap schemes by 18-30%.
"The idea is to invest in these schemes with a very short-term view — say 3-5 weeks. When the investor touches a preset target (about 20-25%), he’ll redeem his investments," said Emkay Global Financial Services wealth management head, Akhilesh Singh.
"Even if the investor pays a 2% exit load for prematurely redeeming his fund investments, he's still making good money. Moreover, the investor is free from traps such as illiquid counters or rigged stocks," Mr Singh added.
Several stock brokers hold the view that even if there is a broader market correction, mid-cap stocks will have more 'price upside' (than their large cap peers) when the market turns around. The BSE Midcap index and BSE SmallCap index have risen 51% and 62%, respectively, over the past one month compared with a 30% rise in the Sensex.

"Expectations that second line stocks could rally further is drawing investors into lower group funds," said Sundaram BNP Paribas Mutual, head-equities, Satish Ramanathan.
"If one considers the impact cost involved in buying midcap stocks, it is much cheaper to have an exposure to a lower group through mutual funds. Lower group stocks have run up quite a bit; we’re expecting the prices to correct in that segment," Mr Ramanathan added.
According to sources, quite a bit of institutional money is flowing into midcap/smallcap funds with a large corpus.

Source: http://economictimes.indiatimes.com/Investors-take-MF-route-to-join-mid-cap-rally/articleshow/4614547.cms

Diversified equity funds rise average 33% in one month

The funds performed better than the Sensex because of the momentum in small- and
mid-cap stocks

India’s diversified equity funds (DEFs) rose an average 33% between 1 May and 1 June, with at least half of the 227 funds doing better than the 30% gain made by the Bombay Stock Exchange’s benchmark index, the Sensex, data from mutual fund tracker Value Research shows.This is for the first time since January 2008—when the stock markets started falling—equity funds have outperformed the Sensex.The data is based on the net asset value (NAV) of funds on Monday. NAV is the current market value of a fund’s net assets divided by the number of outstanding shares.The thumping win of the Congress party-led United Progressive Alliance without depending on the Left parties cheered the market. The Sensex has gained 20% since 18 May, the first day of trading after the general election results were declared.

“(Diversified) equity funds have performed well because of the momentum in small- and mid-cap stocks,” said Dhirendra Kumar, chief executive officer, Value Research. “While the Sensex is made of large-cap stocks, equity funds are reasonably into small- and mid-cap stocks.”Valuations of many small- and mid-cap stocks had plummeted to near-lifetime lows by the first week of March, when the Sensex dropped to 8,427.29 points, a three-year low.

In the beginning of a rally on 9 March, the price-earnings (P-E) multiple for Sensex constituents was 11.6. In comparison, the same valuation measure for the mid-cap index was 8.69 and the small-cap index 5.94. The P-E multiple is calculated by dividing the price of a stock by its earnings per share. The higher the multiple, the costlier is the stock. Currently, P-E multiples of mid-cap and small-cap indices are 16.3 and 13.41, respectively.The performance of DEFs, however, lagged the benchmark index in the year to 1 May. While the Sensex declined by 9.5% in the period, DEFs slipped by 11%. The top DEF gainers in the past one month were Taurus Infrastructure Fund, JM Basic Fund and Sundaram BNP Paribas Capex Opportunities Fund, which gained 67%, 65% and 60%, respectively. The worst performers are Religare AGILE Fund and IDFC India GDP Growth Fund, with returns of 10% and 14%, respectively.“This rally, after the initial spurt in large-caps, it’s been mid-caps and small-caps all the way,” said Hemant Rastogi, chief executive officer of Wise Invest Advisors.

“Sensex and Nifty (the S&P CNX Nifty index on the National Stock Exchange) are only 30 and 50 stocks...but small-caps and mid-caps have done well.” “All mutual funds deployed (their funds) in small- and mid-cap stocks and they have done significantly better,” said Gopal Agrawal, head of equity at Mirae Asset Global Investment Management (India) Pvt. Ltd. “Mid-caps and small-caps rose sharply because they were at a significant discount to large-caps. A lot of fund managers avoided them due to risk aversion and they fell sharply. Now there is activity in these stocks,” he added.

Source: http://www.livemint.com/2009/06/02224519/Diversified-equity-funds-rise.html?h=B

MF Performance

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Reliance MF open to acquisitions if opportunity comes: CEO

The country's largest fund house, Reliance Mutual Fund, on Tuesday said that it is open to acquisitions if some good opportunities come its way.

"We remain open to opportunities if appropriate valuations come up," Reliance MF CEO Sundeep Sikka told. The Anil Ambani group firm, which is the biggest mutual fund in the country in terms of assets under management, has also become the first fund house to cross an average AUM of Rs one lakh crore. "Consolidation has already started in the industry and going forward, only top 5-7 fund houses would command the major chunk of funds as investors will have confidence in large fund houses," Sikka said.

Reliance MF's average AUM jumped 16 per cent to Rs 1,02,730.15 crore in May, while the second-largest fund house HDFC MF's AUM stood at Rs 75,406.10 crore, followed by ICICI Prudential which clocked Rs 65,549.85 crore. Asked whether Reliance MF is in discussion with any fund house for a possible acquisition, S ikka said, "We are not in talks with anyone at this time." The mutual fund industry has witnessed a surge in the assets under management in the past two months and the combined average AUM of 33 fund houses crossed the Rs six-lakh -crore mark in May.
Source: http://economictimes.indiatimes.com/Personal-Finance/Mutual-Funds/MF-News/Reliance-MF-open-to-acquisitions-if-opportunity-comes-CEO/articleshow/4608238.cms

UTI Mutual Fund declares bonus on its ‘Top 100 Fund’

UTI Mutual Fund, one of the top performing mutual fund investment company in India managed by UTI Asset Management Company Private Limited, has announced a bonus to its investors, under its 'UTI Top 100 Fund' scheme.
The bonus has been declared in the ratio of 1 unit for every 1 unit held of face value of Rs 10 each, under dividend and growth option.
It should be noted that UTI Top 100 Fund is an open-end equity scheme, which aims to provide long-term capital appreciation or dividend distribution by investing predominantly in equity and equity related instruments of top 100 stocks by market capitalization.
Pursuant to the payment of bonus, the NAV of the scheme would fall to the extent of bonus units allotted and statutory levy if any. The record date for the bonus is June 4.
On May 28, the NAV per unit of UTI Top 100 Fund was Rs 37.89 under dividend option, while Rs 43.84 under the growth option.

Source: http://www.topnews.in/uti-mutual-fund-declares-bonus-its-top-100-fund-2173797

Nomura to buy 35% in LIC Mutual Fund

Japan's Nomura Group is set to acquire 35 per cent in LIC Mutual Fund, India's seventh largest mutual fund, after the board of directors of Life Insurance Corporation (LIC) approved a proposal to induct the Japanese financial services major as a strategic partner in the mutual fund business, sources in the state-owned life insurer said.

The insurance company has formed a four-member committee headed by LIC Chairman TS Vijayan to decide the valuation of LIC Mutual Fund. Exim Bank Chairman T C Venkat Subramanian and GIC Chairman Yogesh Lohiya are among the other members.
“Besides the valuation, the committee will also decide the terms and conditions of inducting Nomura Holdings or its subsidiary into LIC Mutual Fund Asset Management Company and LIC Mutual Fund Trustee Company,” sources said.
Asked about the deal, LIC Managing Director Thomas Mathew said, “We are in the middle of the process. Therefore, we cannot give you a timeline.” He declined to discuss other details.
As of April 2009, LIC Mutual Fund had assets under management (AUM) of Rs 24,104 crore over 32 schemes. Industry experts said the asset management company is expected to be valued at around Rs 1,500 crore or about 6 per cent of AUM, because the equity portion of the fund is just Rs 1,000 crore.
LIC Mutual Fund is likely to be valued on the lines of Standard Chartered Mutual Fund, bought by IDFC for $205 million in March 2008, which amounted to 5.67 per cent of its AUM at the end of February 2008.
One member of the committee said the valuation process has not yet started, and therefore, it would be premature to put a figure to it.

Source: http://www.business-standard.com/india/news/nomura-to-buy-35-in-lic-mutual-fund/359941/

MF industry's assets zoom, cross Rs 6 lakh crore mark….

Assets under management (AUMs) of the Indian mutual fund industry for May’09 have set the record by piercing the Rs 6 lakh crore mark once again. This level had been last topped in May 2008.
Average assets under management of 34 out of 35 mutual funds rose 16% to Rs 6,37,609 crore in May. AIG is the only fund house yet to disclose its AUM.
Reliance Mutual Fund, the country’s number one fund house by assets, has seen its AAUM cross the Rs 1 lakh crore mark for the first time siunce May 2008. At Rs 1,02,730 crores, its AAUM has risen 16% over the previous month.
Sundeep Sikka, CEO, Reliance Capital Asset Management, attributes this rise to an increase in valuations(due to the recent stock market rally) as well to an influx of fresh money into the schemes. “We have witnessed an increase in activity by retail investors and have been adding new customers in the last few months.”

Naval Bir Kumar, MD, IDFC Asset Management too said that equity schemes were beginning to see fresh inflows.
“Investors are coming back to equities, but not in hordes. They are being selective and past performance has become a threshold in selecting investments. However there has been a change in the investment pattern with the number of investors opting for lump-sum investment surpassing those opting for the SIP route”, he stated. His fund house has seen its assets surge by about 26% to over Rs 20,000 crore since April ’09.
While fresh money is streaming into equities, it is the income and debt category that has once again been the torch-bearer for the overall rise in assets. “As long as the market is flush with liquidity, liquid and short term debt funds shall continue to receive a good chunk of that money”, added Mr Kumar.

Source: http://economictimes.indiatimes.com/Market-News/MF-industry-cross-Rs-6-lakh-cr-mark/articleshow/4608225.cms