Axis AMC floats fund focused on large caps

Axis Asset Management Company (AMC), the mutual fund arm of Axis Bank, has launched a new fund offer, Axis Focused 25 Fund, an open-ended equity fund. The fund will invest in large-cap companies selected from the top 200 companies.

“The fund will have a concentrated focus on select 25 best ideas at any point of time, with a majority of companies being drawn from the top 200 Indian companies (based on market capitalisation),” Axis AMC said in a release.

Portfolio will be biased to larger companies with up to 90 per cent in top 200 companies by market cap.

The fund is expected to outperform market in adverse situations based on the fact that quality companies tend to maintain their growth trajectory despite downturns.

Data from 2003 to 2011 performance analysis of the companies show the top 10 companies within the BSE 100 Index delivered an average return on equity of 37 per cent, compared with 26 per cent for the BSE 100 index, the fund house quoted a Bloomberg analysis.

The share prices too, for these companies have witnessed significant outperformance.

The share price of these top 10 companies appreciated by as much as 30 per cent, compared with a negative-15.8 per cent for the bottom 10 BSE 100 companies, Axis AMC added.

“Axis AMC will rely strongly on its internal research capabilities to identify these companies,” the fund house said adding, “Axis Asset Management will ensure that the portfolio though restricted to a maximum of 25 companies, is well-diversified across sectors and is not illiquid.”

Rajiv Anand, MD and CEO, Axis AMC said, “The key feature of the fund is the fact that we will attempt to nurture these companies over their business cycle without being unduly concerned by short-term market volatility. It is thus ideal for patient and long-term equity investors with an investment time horizon of more than five years.”

Chandresh Nigam, head investments, Axis AMC said, “We believe sustainable business performance drives stock returns. Picking business cycles therefore is important.”

The new fund offer closes for subscription on June 25.

Investors can either invest in the new fund offer through monthly instalments of Rs 1,000, or a one-time investment of Rs 5,000.

Source: http://wrd.mydigitalfc.com/mutual-funds/axis-amc-floats-fund-focused-large-caps-916

Appreciation of rupee key for Indian markets to rally

A weakening rupee is a big negative for the market, says Anoop Bhaskar, the head of equity at UTI Mutual Fund. In an interview with Ashley Coutinho, he says investors should not try to time the market, but invest systematically over the next 12-18 months.

Your outlook on Indian equities...

Two weeks ago, the mood was very despondent. Now, things are looking up a bit. Growth expectations have been toned down and expectations for earnings growth have come down over the past three quarters. There is a belief that the government’s inaction on the policy front has hurt the economy. I believe the rupee depreciation is a very big negative for the market. The rupee has to be stable with an upward bias for the markets to rally from here on. There are very few examples, if any, of an emerging market where the domestic currency kept weakening yet the market received robust overseas inflows. The rupee will appreciate over the next few months if global crude oil prices continue to fall, the global situation doesn’t deteriorate, RBI takes some action to cut interest rates and government takes decisions on issues that really need fixing. This appreciation (of the rupee) can then become the foundation on which our markets rally.

What are some of the key positives for the market?

Market participants are trying to see things in a positive light. In India, a GDP growth rate of below 6% will be fairly unacceptable to the political class and they will make all efforts to ensure we stay above that level. With the GDP numbers so low, the RBI will be forced to cut interest rates. The rupee is showing some signs of stability and is not headed to the 58-59 levels it was assumed to be headed to earlier. Global crude oil prices have come off and there are hopes of something positive happening on the policy front.

Your advice to retail investors...

Investors should not try to play the market at different levels; enter every time the Nifty touches, say, 4,700 and exit when the market reaches 5,200 or 5,300 levels. It is better to take a certain view and buy quality companies that will do well over a cycle. Investors should not feel that they have missed out on a rally just because they failed to enter at the 4,700 levels or stay away just because they find the market expensive at the current levels. Rather than trying to time the top and bottom, they ought to invest systematically over the next 12-18 months. We will see significant volatility during this period and it will be very difficult to time each of the rallies and falls.

Which sectors do you like?

We are adopting a cautious stance. Several of our funds are equal weight on banking, a sector with the highest beta. A cut in interest rates will benefit banks. We are also equal weight or overweight on defensives like pharmaceuticals and consumer staples. We want to play selectively on industrials or capital goods. Our view on infrastructure is they are stressed assets where the element of dilution is difficult to calculate. If a company’s debt to market cap is 3.5 times, it cannot repay debt from its operations and raise equity to pay off the debt. It can only sell assets. So, we would rather look at these companies when the asset sales start to happen.

What is the outlook on FII money?

Surprisingly, money hasn’t flown out of India despite the spate of bad news. But the inflows are difficult to predict. The quantitative easing, as and when it happens, will change the mood and perception on risk-on assets rather than actually bringing in any tangible inflows into emerging markets like India.

How will the global headwinds impact Indian equities?

Last year, there were 11 European summits and the world markets rallied for 2-4 days after these summits. The same will be the case in 2012. However, you can’t build a portfolio based on events for which the probability varies from 30% to 60%. The only thing a fund manager can do is adopt a more cautionary stance.

Source: http://www.financialexpress.com/news/appreciation-of-rupee-key-for-indian-markets-to-rally/961208/0

Dormant status on account statements sows confusion among investors.

AMCs are looking at calling dormant accounts by another name.

AMCs are contemplating changing the nomenclature of ‘dormant’ folios which has lately been creating confusion among investors. SEBI had asked AMCs to send half-yearly consolidated account statements to investors who have not transacted during a six-month period ended March or September.

AMCs are questioning the logic behind this move. “On one hand we are talking of long-term investing, and on the other, we are telling investors that there have been no transactions. Some NRI investors are also concerned when they see ‘dormant’ in their account statements,” says the marketing head of a large fund house.

A few AMCs are planning to change the terminology. “We might call such folios a different name so that there no confusion in the minds of investors,” says the sales head of a top AMC.

“We are trying to change the terminology. We are mentioning these folios as ‘inactive’ currently. We are thinking of telling investors that ‘inactive’ doesn’t mean that they have to carry out some transactions or complete certain formalities. People are equating dormant folios with dormant bank accounts. The reason for mentioning folios as ‘dormant’ was to keep investors updated on a half-yearly basis,” says an operations head of a mid-sized AMC.

Most AMCs call accounts ‘dormant’ while others are calling them ‘inactive’. AMCs tag the folios as ‘dormant’ if there are no financial transactions like purchase, redemption, switch, dividend payout, dividend reinvestment, SIP, SWP, and STPs during a six-month period ended March or September.

Industry officials say that mentioning ‘dormant’ against accounts with no transactions is not serving any purpose. They are of the view that this terminology could be altogether dropped as well. Often investors tend to forget their investments and many forget their folio numbers. Distributors tell Cafemutual that some of their clients are worried after noticing the term ‘dormant’ in their statements. A few clients have gone ahead to redeem their investments.

Source: http://www.cafemutual.com/News/InnerNews.aspx?srno=1546&MainType=New&NewsType=Industry&id=21

Strong inflows into liquid funds shore up MFs' asset base in May

Strong inflows into liquid funds helped Indian mutual funds log a near-3% rise in their asset base in May.

The fund industry added over Rs 26,742 crore during the month, taking the overall asset base to Rs 6,99,284 crore, according to data released by the Association of Mutual Funds in India.

Most fund categories witnessed inflows during the month. Equity funds posted inflows worth Rs 506 crore in May. Liquid funds netted over Rs 25,000 crore, making them the largest contributors to the industry asset base.

Income fund assets swelled by over Rs 1,580 crore while gilt funds posted outflows worth Rs 371 crore. Redemptions outpaced investments in ELSS funds, which lost over Rs 86 crore last month.

Gold exchange traded funds logged outflows of Rs 41 crore while balanced funds saw positive inflows worth 61crore.

"Redemptions from equity funds were lower in May. On the flip side, money trickled in through systematic plans. Liquid funds received investments from corporates, which helped the industry record positive numbers last month," said Vijai Mantri, CEO of Pramerica Asset Management.

Income funds, which include short-term debt funds and fixed maturity plans, saw inflows for the second month in a row.

The rising interest rates in the economy over the past two years have seen the share of FMPs in the category grow to 43% in May from 8% in May 2010, a recent Crisil report said. Inflows into this category can be attributed to several fixed maturity plans launched during the month.

"Money has to come into equity funds for asset managers to make money," said the chief executive of a leading fund house. "These are bad times... The number of live SIP folios has come down significantly over the past four months. The industry needs more investors to stay afloat," the official said.

Markets, too, have not been very conducive for new investors; the 30-share Sensex corrected over -6.26% in May.

Returns of most equity funds have also not offered any cheer. Large cap, diversified equity and small & mid-cap funds yielded an average -5.5%, -5.6% and -4.9% returns, respectively, during May, going by the data sourced from Crisil.

Source: http://articles.economictimes.indiatimes.com/2012-06-09/news/32140764_1_liquid-funds-equity-funds-short-term-debt-funds

Bullish on rural consumption story: Aviral Gupta, Indiabulls Mutual Fund

In an interview with ET Now, Aviral Gupta, Fund Manager-Equity, Indiabulls Mutual Fund, gives his views on the Indian economy and key sectors. Excerpts:

ET Now: This week alone we have seen something like a 4% run up in the Indian equity markets. There was some weakness today, but would you say broadly the direction is up from here on?
Aviral Gupta: We will break this into three parts what is exactly going on in the world economy. I will touch on Europe, the US, China and then India. We have had QEs, we have had LTROs, but has anything really worked? We really do not know what is going to work over there. Now coming to China, China is trying to shift from an export-oriented economy to a domestic economy. It is not going to happen in a day's time or a year's time or two years' time or even five years' time. Coming to emerging markets, coming to Brazil, growth rate has come down to 2.1%. Now where does India stand in all this? We are at very great advantage right now compared to other economies. That is the kind of view which I am taking in. Now how do we take advantages? Only if the government comes up with some reforms, some policies.

ET Now: What is the portfolio approach that you are adopting and do you think that someone who is sitting on cash now start putting their money into the markets? Are these attractive or compelling valuations according to you?
Aviral Gupta: Valuations are very compelling at this point of time. No doubt about it, but I would say you might get the stocks much cheaper from these levels. Let us see how Greece pans out and that will be the key deciding factor. Second thing is the markets globally have run up, but I do not think there would be that much of upside this time in case QE3 is announced. All those things have completely failed. So why would I trust another QE?

ET Now: Everyone has agreed that you will have a fractured mandate come out of Greece and there will be some development in Greece even if they do not leave the Euro. By the end of July Spain is going to default in some manner or the other because it has got to bail out its territories, it will have to seek an international bailout. Now given these two significant developments, do you believe that the markets or rather central banks will have to push ahead with some form of QE and that in turn can drive up equities and EMs irrespective of what is happening in Europe?
Aviral Gupta: That will definitely drive the equities and the EMs, but that turn will be a very short-term run. That is what I feel. If we want our markets to be sustainably on a bullish mode, the government has to come out with certain reforms, that would be the key. Because, as I said earlier, all the actions which have been taken in the past have failed completely. So what else can they bring now? Which tools are left there, that is a very big question mark.

ET Now: Let us break it down. If we look stock specifically or sector specific, which sectors would you start nibbling into which look attractive?

Aviral Gupta: We are still very bullish on rural consumption story simply because elections are due in the next two years. They may happen earlier also. In that case rural economy will be again flushed with money. They will push in money to the rural economy. So that is one sector which I am looking into. Secondly, some defensives like pharma are something which I am looking into, given the account specifically in lieu of rupee depreciation. I am very stock specific in IT. I cannot name the stocks specifically because of regulations, but a lot of bellwether have completely disappointed.

ET Now: How about the infrastructure sector, are you positive on that given some noise that came out of Delhi just two days back?
Aviral Gupta: Announcement, implementation and completion. They have to be cleared; more clarity is needed on that.

ET Now: For the markets you are basically saying that one should sit on the sidelines, wait for the dust to settle and then perhaps enter. What levels do you think one should look at?
Aviral Gupta: The current valuation levels are pretty comfortable at this point of time, but you can start nibbling in. That is something one can do. But I feel the downside risk is high even now because of the global events, and not because of India-specific events.

Source: http://economictimes.indiatimes.com/articleshow/13927756.cms?prtpage=1

Equity mutual funds get surprise Rs 506-cr fresh investments in May.

Nothing would make Indian mutual fund players happier than investors returning to their equity schemes. This turned out to be a reality in May, as retail investors pumped Rs 506 crore in fresh investments in equity categories, after four months.

For the first time this year, equity segments saw positive flows during a month when the key benchmark indices lost over six per cent, amid weak global economic scenario. Fund managers are pleasantly surprised at this development.

The chief marketing officer of a large-sized fund house said, “It’s contrary to our expectations. We had noticed a positive momentum was building up, but had not expected inflows to cross Rs 500 crore. I believe, market corrections propelled investors to get into opportunistic buying, which is good from a long-term perspective.”
 

CHANGE OF FORTUNES Net inflows in equity mutual funds so far in 2012
Month	Net inflow/outflow
January	-456
February	-2,680
March	-196
April	-455
May	506
All figures in Rs crore Source : Association of Mutual Funds in India

At a time when the industry had been losing its equity folios and none of the schemes could earn investors positive returns, “positive inflows is quite encouraging,” he added.

Prior to this, the industry had mopped up Rs 360 crore of fresh money into equities in December last year. What followed, gave shocks to fund managers. Around Rs 3,800 crore went out of the system from diversified equity schemes during the January-April period.

Dhirendra Kumar, chief executive officer of Delhi-based fund-tracking firm, Value Research, said, “Indian mutual fund investors have become quite mature. They pump in money when markets substantially correct. In such a scenario, investors need enough confidence to participate in markets on a regular basis. If strong sentiments continue for another few months, I believe mutual fund investors will come back to the markets."

Interestingly, gold exchange-traded-funds (ETFs) saw net outflow of Rs 41 crore while investors continued to pull money out of equity-linked saving schemes (ELSS), which stood at Rs 81 crore in May. Barring these two fund categories, all other segments saw positive flows during the month.

Assets under management as on 31 May stood at Rs 6,99,284 crore.

Source: http://www.business-standard.com/india/news/equity-mutual-funds-get-surprise-rs-506-cr-fresh-investments-in-may/476657/