Equity funds do well under bear attack of January

Among the best-performing fund houses was Reliance, JM continues to be the laggard in the pack

In January, the Indian markets came under a bear attack, when the Sensex and the S&P CNX Nifty fell by 11% each.

However, equity mutual funds on the whole did better than their respective benchmarks.

Out of the 228 equity growth schemes, 118 have outperformed; 82 schemes have underperformed and 26 schemes have just about managed to equal their benchmark returns.

The top-performing three schemes for January 2011 were-JM Core 11, Reliance Natural Resources and Reliance Small Cap. JM Core 11 fetched a return of -4%, while its benchmark was down 11%. Reliance Natural Resources and Reliance Small Cap fetched returns of -5% and -8% ((benchmark return of -10% and -12% respectively).

Among the top performers of January 2011 were nine funds from Reliance Mutual Fund-Equity Advantage, Equity, Reliance Growth, Natural Resources, NRI Equity, Quant Plus, RSF, Small Cap and Reliance Vision. They suffered an average loss of -8% and have beaten their benchmarks by 3%, on an average.

If Reliance was the best fund house, JM's funds continued to destroy investors' wealth, barring one fund, the JM Core 11, which was a top performer for January, in our current analysis. This is not a surprise.

As we pointed out in our article in Moneylife (1 July 2010), JM is indeed the worst fund house by any parameter.

Among the 20 worst-performing schemes over past one month, JM has as many as ten. These include Agri & Infra (-13%), Basic (-15%), Contra (-14%), Emerging Leaders (-16%), Equity (-12%), Hi-Fi (-13%), Large Cap (-11%), Mid Cap (12%), Multi Strategy (-13%), Small & Mid-Cap (-13%).

The others in the bottom 20 were ICICI Prudential Emerging STAR (-13%), Taurus Discovery (-12%), Birla Sun Life India Reforms (-12%), SBI Magnum Multiplier Plus 93 (-12%), Birla Sun Life Mid Cap (-12%), Kotak Midcap (-13%), Principal PNB Long Term Equity (-13%), ICICI Prudential Equity Opportunities (-12%), Sahara Star Value (-13%), HSBC Midcap (-15%), Sundaram Rural India (-14%), HSBC Progressive Themes (-14%), SBI Magnum Sector Umbrella-Emerging Businesses (-14%).

Out of the various schemes in this category from the Tata stable, the only underperformer of the lot was Tata Equity Opportunities Fund (-12% underperformance with respect to its benchmark).

Source: http://www.moneylife.in/article/equity-funds-do-well-under-bear-attack-of-january/13858.html

Canara Robeco MF Launches Capital Protection Oriented Fund

Canara Robeco Mutual Fund has launched a new fund named as Canara Capital Protection Oriented Fund - Series 1 - 36 Months (Plan A), a close ended capital protection oriented fund. During the New Fund Offer (NFO) period, units will be offered at Rs. 10 per unit. The new issue is open for subscription from 11 February and closes on 24 February 2011. The scheme has been rated CARE AAAf (SO) by CARE.

The investment objective of the scheme is to seek capital protection by investing in high quality fixed income securities maturing on or before the maturity of the scheme and seeking capital appreciation by investing in equity and equity related instruments.

The scheme offers growth & dividend payout option.

Canara Capital Protection Oriented Fund - Series 1 - 36 Months (Plan A) would allocate 75% to 100% of assets in Indian Debt Instruments and Money Market Instruments with low to medium risk profile. It would further allocate upto 25% of assets in equity and equity related instruments with medium to high risk profile

The minimum application amount is Rs. 5,000 and in multiples of Rs. 1 thereafter.

The fund seeks to collect a minimum subscription amount of Rs. 1 crore under the scheme during the NFO period.

Entry and exit load charge will be nil for the scheme.

Benchmark Index for the scheme will be Crisil MIP Blended Fund Index.

The fund manager for the scheme will be Ritesh Jain and Anand Shah.

Source: http://www.indiainfoline.com/Markets/News/Canara-Robeco-MF-Launches-Capital-Protection-Oriented-Fund/3548613992

Investors flee India's inflation war

Want to see why investors worry so much about the world’s emerging markets that they are taking money out? Just take a gander at India.

In an effort to fight inflation, the Reserve Bank of India has raised interest rates seven times in the last 12 months. So far, the effort hasn’t slowed inflation -- India’s wholesale price index, the Reserve Bank’s inflation measure, was up at an 8.43% annual rate in December. But it does look like the interest-rate increases may have started to slow the economy. Industrial production in India climbed at an annual rate of just 1.6% in December. That’s a big drop from the 3.62% rate of growth in November.

And, with inflation still racing higher, Reserve Bank governor Duvvuri Subbarao has signaled the bank will keep raising rates, even though growth has slowed. The bank’s benchmark repurchase rate went up another 0.25 percentage points to 6.5% in January, a two-year high.

The effect on the Indian stock market has been exactly what you’d expect. With interest rates headed higher and growth slowing, the Mumbai stock market was down 15% year to date as of Feb. 10.

Economists have started to lower their forecasts for Indian GDP growth. For the fiscal year that ends in March 2011, the Indian economy is projected to show growth of 8.6%. Recent revisions from economists put growth for the fiscal year that will end in March 2012 at 7.7% to 8.1%. That’s not a huge drop -- but investors fear that growth will be revised still lower.

That’s a real danger, since the Reserve Bank is giving no indication that it sees victory in the battle against inflation or indeed any sign that inflation is moderating. Bank governor Subbarao recently raised his projections for inflation for the fiscal year that ends in March 2011 to 7% from his earlier estimate of 5.5%.

With those trends in place, it’s hard to make an argument for investing in India now, and that means cash flows out of the Indian market are likely to continue and prices are likely to erode further.

Investors can, of course, make exactly the same arguments for Brazil, Indonesia, Turkey, China, and other emerging stock markets.

Source: http://money.msn.com/top-stocks/post.aspx?post=9958982a-959d-417c-b623-a434ba41f07a

Peerless shelves JV plan in MF venture

The Peerless Group has shelved its plan for a foreign joint venture partner for its mutual fund venture as solo growth in the first year gives an assurance that it doesn’t need a partner for the local market.

“There is nothing the foreign partner can bring to the table right now,” Peerless Funds Management Co managing director & CEO Akshay Gupta told ET.

The company’s assets under management at Rs 4,500 crore in less than a year gives it the confidence that it could be on its own in the domestic market which is at Rs 6.9 lakh crore. Principal Mutual found more than a decade ago has assets at Rs 5,642 crore and JM Mutual Fund’s is at Rs 6,524 crore, according to data from the Association of Mutual Funds in India (Amfi) website.

Many funds from Australia, France, Japan and the US were interested in buying a stake.

“The best fit partner will be the one who will give access to an overseas distribution network, enable it to build an international presence and tap investors’ abroad,” said Peerless director and PFMC board member Jayanta Roy.

He said the option of building an overseas distribution channel would be considered in the medium term. Whenever it happens, Peerless would like to remain the principal sponsor. “We would like to consolidate our position in the market first with a full range of product suite,” said Gupta. “We still need time to test out a lot of market movements.” In last 12 months, the company has mainly targeted institutional clients to grow business.

Source: http://economictimes.indiatimes.com/articleshow/7472302.cms?prtpage=1

Strong inflows into debt funds lift MFs’ asset base 10% in January

Strong inflows into debt funds helped Indian mutual funds clock a growth of 10% in their asset base in January. The fund industry added over Rs 64,000 crore during the month, taking its overall asset base to Rs 6,91,080 crore, according to data released by the Association of Mutual Funds in India (Amfi).

Almost all fund categories witnessed inflows during the month. Liquid funds and income funds netted about Rs 73,000 crore and Rs 10,000 crore in January, making them the largest contributors to industry asset base. Equity funds saw a net inflow of Rs 881 crore.

However, the 10% fall in the market in January caused a shrinkage in the asset base of equity funds. At the end of January this year, 39 fund houses had over Rs 1,65,000 crore in equity assets.

“Money is trickling in to equity funds,” said Vikaas Sachdeva, CEO, Edelweiss Mutual Fund. “We are seeing a gradual rise in the number of SIPs. Debt funds are seeing an increase in allocations because of higher yields,” Mr Sachdeva said. The sliding market in January presented a great opportunity for mutual funds to buy stocks at lower levels. Funds net bought shares worth Rs 864 crore and debt papers worth Rs 37,427 crore in January, according to figures released by market regulator Sebi.

“Significant sums of money have flown into fixed maturity plans and ultra-short term funds in January,” said Vijai Mantri, CEO, Pramerica Asset Management.

Corporate treasuries, banks and even retail investors are investing in medium-term debt funds, thanks to rising yields. Rates on one-year paper are currently hovering at 10.25-10.50%. The yield on three-five year papers average 9.5-9.75%. Five-ten-year government papers earn anywhere between 8% and 8.5% as yields. A mediumterm debt portfolio will earn the investor about 30% return in three years time.

“We expect the industry to see more inflows in the months to come,” Mr Mantri said. Balanced funds, equity-linked savings schemes and gold ETFs have logged inflows worth Rs 251 crore, Rs 245 crore and Rs 125 crore, respectively, in January.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/strong-inflows-into-debt-funds-lift-mfs-asset-base-10-in-january/articleshow/7457543.cms

Rel MF launches Gold Savings Fund

Anil Ambani group firm Reliance Mutual Fund launched a new Gold Savings Fund, a first-of -its-kind investment scheme focused on gold, to tap a market that it expects to become bigger than even equity mutual funds.

The new fund, which is different from gold ETFs (Exchange Traded Funds) that require subscribers to have a demat account, will also offer investors the option to invest as little as Rs 100 per month, the company said here.

The company said that its Reliance Gold Savings Fund will enable investments in gold without any locker or demat account -- a first in the country.

Announcing the launch of the New Fund Offer -- which will be open from February 14-28 -- Reliance Capital Asset Management CEO Sundeep Sikka said: "We expect this gold investment industry to surpass equity MFs in the next three years."

Sikka said the gold investment opportunity in India was not optimally tapped and the new product will offer a simple, affordable and investor-friendly solution for investing in gold to the masses.

"Indians are known for their love for gold. However, with low demat penetration in India, a lot of investors have not been able to participate in this safe mode of investment.

"This product will create a new avenue for pure gold investments for the retail investor without the need of having a demat account or a locker," he added.

The scheme's performance will be benchmarked against the price of physical gold.

The company said the new fund will enable investors to avail long-term taxation benefits from the first year itself, unlike physical gold, wherein long-term taxation can only be availed after three years.

The investors will not be charged any entry load on the fund, though there would be a 2 per cent exit load if redeemed before completion of the first year.

A part of Anil Ambani group's financial services arm Reliance Capital, Reliance Capital Asset Management is the country's largest fund house and manages assets worth USD 24 billion across mutual funds, pension funds, managed accounts and hedge funds.

Source: http://www.indianexpress.com/news/rel-mf-launches-gold-savings-fund/747938/

HDFC MF unveils 'cancer-based' fund

Amidst a growing interest in philanthropy, HDFC Mutual Fund today announced the launch of an unique debt product to support needy cancer patients, a first for the AMC industry.

Dividend earned under the product christened HDFC Debt Fund for Cancer Cure, a three-year close-ended capital protection oriented income scheme, will be donated to the Indian Cancer Society, HDFC's charity of choice.

"At an individual level, people want to give back to society but do not know where to go. A doctor serves society by treating patients free, we will use our distribution network to get good subscriptions for the scheme and help the cause," HDFC's Chairman, Deepak Parekh, told reporters here today.

Parekh said there are two categories of the product – one in which 50 per cent dividend is given to charity and the other where the entire dividend is donated. At the end of three years, the investor will get back the entire principal with the dividend, if applicable.

HDFC MF has launched the product to commemorate its 10th anniversary and had to take special permission from the capital market regulator Sebi before it launched the product.

The offering will be open for investors between February 18 and March 4 and the minimum application amount is Rs one-lakh.

HDFC will not charge any fees for the investment.

The dividend amount donated to the society will get tax benefits and HDFC will also try to convince corporates and other trusts to invest in the scheme, Parekh said.

The move comes within weeks of Indian business leaders like HCL's Shiv Nadar and Wipro's Azim Premji making headlines for donating substantial amounts to various charities, creating a right traction for social causes.

Source: http://www.indianexpress.com/story-print/747574/

Systematic investment plans deliver double market returns

Over the last three years the Sensex actually went nowhere on a point-to-point basis, yet could you have managed a 30 per cent annual return in this period?

Yes, simply by investing in mutual funds, in the popular Systematic Investment Plans (SIPs). SIPs have scored over investing lumpsum from 2008, when the market correction started, till date.

Investing regular sums every month in ICICI Pru Discovery Fund, for instance, would have given a handsome 36 per cent in the last three years through monthly SIPs. Had you invested a lumpsum three years ago, you would have had to be content with a mere 16 per cent gain.

Even an SIP started in the Sensex in March 2008 and continued till today would have delivered a 15 per cent return though the benchmark has fallen 1 per cent between these two dates (on a point-to-point basis).

Returns higher

A calculation of the SIP returns (through internal rate of return or IRR) for the top 25 equity funds, suggests that SIPs were a far superior option to investing one-time in each of these funds over the last three years.

Investments through SIPs garnered returns 10-20 percentage points higher than the lumpsum invested in all the 25 funds. SIPs allow investors to buy units of mutual funds by putting in small sums on a daily, weekly or monthly basis, through an automated process for a period chosen by investors.

Why SIPs worked

As an investment strategy, SIP has excelled over the last three years simply because this was an exceptionally turbulent period for stock prices. The deep plunge in stock prices in 2008 allowed investors who continued to buy mutual fund units to ‘average' their costs by buying additional units at lower prices. The choppy markets in 2010, too, ensured that additional units were bought at market dips, thus ensuring better returns. For instance, an SIP kicked off in HDFC Top 200 Fund would have allowed you to start investing at a NAV of Rs 141.8 per unit in March 2008, but as markets fell in 2009, the costs would have plunged as low as Rs 82 a unit in March 2009.

Top funds such as HDFC Equity or Quantum Long Term Equity and Birla Dividend Yield Plus, while generating market-beating annualised returns of 13-16 per cent over a three-year period, delivered even better returns through the SIP route, making a 30 per cent return.

Lifting fund performance

SIPs have not just enabled superior returns from top funds. More important, they ensured that investments in funds with mediocre performance did better, too. For instance, Reliance Growth expanded its NAV by merely 5 per cent compounded annually over three years. However, an SIP in the fund would have ensured you a 21 per cent return. This essentially means that investors do not have to worry much, even if they had invested in a middle-of-the road performer. They could still have managed returns that beat the markets by a good margin.

SIPs do not, however, work the same wonder in shorter time-frames of, say, one year.

An SIP in a rising market would mean buying every additional unit at a higher cost. HDFC Equity, for instance, would have delivered a mere 2.8 per cent over the last one year through a monthly SIP, whereas a lumpsum invested a year ago in the fund would have delivered a superior 21 per cent.

Source: http://www.thehindubusinessline.com/markets/stock-markets/article1159502.ece?homepage=true