Avoid India Realty, Metal Stocks Amid Rising Rates, Peerless Say

Kaushik Dani, a Mumbai-based fund manager at Peerless Mutual Fund, which has 49 billion rupees in assets, comments on the outlook for Indian stocks. Dani spoke in a phone interview.

On market outlook:

“Global concerns are still there, which continue to affect markets. A major concern is the high inflation rate, which is not softening. Credit options are also slowing down. Everyone is eyeing the U.S. jobs data to come out today, to see how markets will go.” 

On interest rates:

“There is a general consensus of a 25-basis point rise in interest rates on Sept. 16. The most important thing to watch out for is the monthly inflation data, which is out before the policy is announced. Inflation is not decreasing month-on-month and if comes on the higher side, it will show things in the economy are not improving.”

The central bank has raised its repurchase rate 11 times since the start of 2010 and last increased it by 50 basis points on July 26 to 8 percent to damp living costs that are rising the fastest among the so-called BRICS nations.

On investment strategy:

“For the past couple of quarters, we have been focusing on non-interest rate sensitive sectors, like consumer goods, health-care and select technology stocks. We also like a few automobile stocks. Investors should avoid high rate-sensitive sectors, where leverage is high, such as realty, metals and power-generation.”

Source: http://www.bloomberg.com/news/2011-09-08/avoid-india-realty-metal-stocks-amid-rising-rates-peerless-say.html

International themes could boost your portfolio

While retail investors can look at international mutual fund schemes, HNIs have good options in real estate.

With the Indian stock markets being among the worst-performing in the world in recent months, many, especially high net worth individuals (HNIs), are looking abroad to maximise returns.

G Chokkalingam, executive director and chief investment officer, Centrum Wealth Management, says real estate in Europe, especially Britain, is available at cheap rates and likely to fall even more. "One should invest in real estate in a phased manner. Investors had made good money by investing in real estate in countries like the UK, post the Lehman crisis. One can look at agri-commodities like natural rubber, too," he says.

Adding: "The perception-driven volatility is rather high in equities at the moment. So, it is best for a person with an average risk profile to have only about 30 per cent exposure to it, whether it be domestic or global equities."

Investing in equities or commodities abroad is more cumbersome than investing domestically. This can be very risky, as sitting in India, we might not be able to gauge foreign markets properly. Those who want to participate in the international markets but lack the funds can use the mutual fund route. These funds pool money from local investors and invest in stocks or other assets.

According to Value Research, international funds gave investors three per cent returns over the past year. But in the past six months, these gave a negative return of 8.9 per cent and in the past three months, minus 7.3 per cent.

HSBC Asset Management has a Brazil-dedicated fund and Reliance AMC has an Indonesia fund (Reliance Indonesia Opportunities Fund). JP Morgan's Asean fund invests in Singapore, Indonesia, Malaysia, Thailand, Vietnam, Philippines, Cambodia, Brunei, Laos and Myanmar. Motilal Oswal AMC has a Nasdaq-linked exchange traded fund (ETF).

Rajesh Saluja, CEO and managing partner at ASK Wealth Advisors, says one should not look at a particular economy but at 'themes'. "One should look at ETFs linked to gold, silver and platinum, for instance. Investing in developed markets is very risky. Whereas in emerging markets, the GDP is very skewed. A majority of the contribution to the GDP comes from a single sector," he explains.

However, not everyone is so keen yet on the international theme. Prashanth Prabhakaran, president-retail broking at India Infoline, says he is recommending Indian equities and commodities to his retail investors and high net worth clients. "After six months to a year, if the scenario has changed, we will advise our clients to invest in the markets that look the most attractive at that point in time. The global markets will take some time to recuperate from these levels," he explains.

However, for ones looking abroad, there are options, especially for HNIs. Armed with the $200,000 per head limit allowed by the Reserve Bank of India, an investor can look at assets classes abroad.

Source: http://www.business-standard.com/india/news/international-themes-could-boost-your-portfolio/448419/

Peerless Mutual Fund launches “Peerless Equity Fund”

Peerless Equity Fund is multi-cap diversified fund.

Peerless Mutual Fund has announced the launch of its first pure equity offering, “Peerless Equity Fund”, an open ended equity scheme. Peerless Equity Fund is multi-cap diversified fund. The portfolio will have optimal blend of large, mid and small cap stocks based on prevailing macro-economic & socio-political environment, both domestically and globally. Akshay Gupta, Managing Director and CEO said, “Indian equity markets have corrected significantly. Since peak in Jan 2008 the market has corrected more than 20%. The SENSEX P/E for FY 2012 on forward basis is estimated close to 14, which is way below its peak of around 25. We believe in terms of risk-reward ratio, reward is more favourable on longer a term basis. On the macroeconomic side, inflation has been key concern domestically, which is being tackled with hawkish monetary policy measures. Globally, sovereign debt situation, prevailing across US and Europe, has impacted the market adversely. We expect situation to stabilize over next 2-3 months. Therefore, retail investors should take opportunity of market correction and enter the equity assets class for long term out performance.” The primary investment objective of the scheme is to generate long term capital appreciation by investing in an actively managed portfolio predominantly consisting of Equity & equity related securities diversified over various sectors. The scheme will allocate its 80% to 100% in equity and related instruments and 0% to 20% in debt and related instruments. The scheme comes with two investment options – Growth (Default) and Dividend Option (pay out and Re-investment). The issue price of the scheme is Rs. 10 each for cash during the New Fund Offer and continuous offer for Units at NAV based prices .The entry load charges are nil for the scheme but exit load will be 1% if redeemed before 1 year & nil on or after 1 year.  Minimum application amount is Rs. 1000 and in multiples of Rs. 1/ & additional Rs.1. The scheme shall reopen for all the transactions within 5 days of allotment.

Source: http://www.indiainfoline.com/Markets/News/Peerless-Mutual-Fund-launches-Peerless-Equity-Fund/5237327326

SEBI notifies infra debt schemes in official gazette

SEBI's amendments to its mutual fund regulations have been notified in the Gazette of India on August 30. The Government had in June released guidelines for infrastructure debt funds that can be set up by mutual funds and NBFCs. While SEBI will monitor the schemes launched by mutual funds, NBFCs launching such schemes will be regulated by the RBI.

The notification by SEBI defines an infrastructure debt fund scheme as a mutual fund scheme that invests primarily (minimum 90 percent of scheme assets) in the debt securities or securitized debt instruments of infrastructure companies or infrastructure capital companies or infrastructure projects or special purpose vehicles which are created for the purpose of facilitating or promoting investment in infrastructure, and other permissible assets in accordance with these regulations or bank loans in respect of completed and revenue generating projects of infrastructure companies or projects or special purpose vehicles.

An existing mutual fund may launch an infrastructure debt fund scheme if it has an adequate number of key personnel having adequate experience in infrastructure sector.

Source: http://www.thehindubusinessline.com/markets/stock-markets/article2430206.ece

UTI Mutual Fund announces merger of UTI Wealth Builder Fund into its Opportunities Fund

UTI Mutual Fund has announced the merger of UTI Wealth Builder Fund with UTI Opportunities Fund. The 5-year term of the UTI Wealth Builder Fund is getting completed in October 2011. So, it is being merged to maintain the open-ended nature of the fund. If unit holders of UTI Wealth Builder Fund do not wish to continue, they can redeem existing units at prevailing NAV without any load from 5th September 2011 to 4th October 2011.

Source: http://www.mutualfundsindia.com/news_viwe.asp?news_headline=UTI+Mutual+Fund+announces+merger+of+UTI+Wealth+Builder+Fund+into+its+Opportunities+Fund@MF045

Five years on, majority of actively managed funds perform below benchmark: report

A majority of actively managed Indian mutual funds have underperformed their respective benchmarks over the past five years, according to the latest Standard & Poor’s Index Versus Active Funds (SPIVA) scorecard, produced in partnership with CRISIL.

The scorecard reveals that 65 per cent of large cap equity funds failed to beat the S&P/CNX Nifty, the leading benchmark index for large cap companies listed on the National Stock Exchange over the five years ending June 2011. This under performance has continued into the latest 12-month period, with 60.61 per cent of large cap equity funds producing lower returns.

Diversified equity funds, which offer a wider choice of stocks than large caps and therefore a greater chance of generating excess returns, also underperformed their benchmark but to a lesser degree. Some 55.71 per cent of diversified equity funds were beaten by the S&P/CNX 500 over the past five years. Taking the latest one-year period in isolation, 53.62 per cent of diversified equity funds underperformed.

This picture of under performance by active managers of equity funds in India is one which we have seen replicated in other well-established markets, including the US. Active managers of Indian fixed income funds have performed better than their US counterparts, however; with the exception of emerging market debt, more than 50 per cent of US active managers failed to beat benchmarks in all fixed income categories”, said Simon Karaban, Director of S&P Indices Asia Pacific Research.

Active managers of Equity Linked Saving Schemes (ELSS) and gilt funds have also fallen behind benchmarks over the past five years. In contrast, the majority of active managers of MIP (hybrid) and debt funds (which invest mainly in corporate debt) have outperformed their benchmarks. For balanced funds, half have outperformed their benchmark while half have underperformed.

It highlights the challenges faced by active fund managers picking well-performing stocks in volatile market conditions. In recent years, the higher volatility associated with equities compared to bonds has not been rewarded with higher returns for the majority of these funds”, said Tarun Bhatia, director, Capital Markets at CRISIL Research.

The SPIVA scorecard for India also revealed that asset-weighted returns were higher than equal-weighted returns for all fund categories apart from gilts over the past five years.

Asset-weighted large cap equity funds have returned 14.64 per cent over the past five years compared to 13.45 per cent for their equal-weighted equivalents.

This indicates that funds with larger assets under management performed better than smaller funds.

Source: http://www.indianexpress.com/news/five-years-on-majority-of-actively-managed-funds-perform-below-benchmark-report/842838/0