Mutual fund houses likely to announce tailor-made schemes

The mutual fund industry may look at launching equity schemes tailored for first-time investors in the Rajiv Gandhi Equity Savings Scheme (RGESS).

The Government has granted approval for equity mutual fund schemes and exchange-traded funds to be included in the ambit of the RGESS. First-time investors have been defined as those who do not have a demat account or have a demat account but have not as yet transacted in stocks or derivatives.

The new MF schemes may help achieve the objective of higher investor participation sought by the Securities and Exchange Board of India. However, it clashes with its objective of reducing the number of schemes in the industry.

‘Simplify schemes’

SEBI has been asking mutual fund houses to merge schemes with similar mandate to simplify the process of scheme selection for investors.

However, industry experts feel that not all existing equity schemes qualify under the RGESS norms. Most equity schemes are diversified equity schemes which invest across sectors and market-caps. For new investors this may not be the safest route, they said.

“As of now, it is too early to decide whether the industry would launch new funds aimed at the RGESS. We are still awaiting SEBI guidelines on this matter. The regulator does not allow launch of schemes with similar mandates,” said R.S. Srinivas Jain, Senior Vice-President and Chief Marketing Officer of SBI Mutual Fund.

“Schemes under the RGESS are only for first-time investors. We need to ensure that their investment is in companies from the large-cap segment that are safe. The idea is to expand the market by targeting new investors,” said the marketing head of a mid-sized asset management company.

Modification, easier option

The RGESS norms state that investors should only invest in companies which are part of the BSE-100 or CNX-100 indices or public sector companies which are Navaratnas, Maharatnas and Miniratnas.

Industry officials said that modifying existing schemes was also an option. Compared to launching of a new scheme, modification of an existing one was an easier and cheaper option.

Some fund officials wonder whether it is worth the effort.

Investors up to Rs 10 lakh income bracket are eligible for RGESS and the permissible investment limit is Rs 50,000. Such investors would get a 50 per cent deduction on the amount invested from the taxable income for that year.

But, with the levels of financial literacy in the country, industry officials wonder if this would have an impact. “Would someone in that income bracket want to invest in equities even if it is for tax rebate? Educating the investor is more important. Relationship managers and IFAs need to ensure that the investors understand what they are buying,” said an official of a small-sized fund house.

Source: http://www.thehindubusinessline.com/markets/stock-markets/article3938610.ece

Niraj Bhatt: How you can invest in Google, Apple and Exxon

Investing abroad is quite easy through the mutual fund route and can bump up your total portfolio returns.

It's been difficult to make money from equities in the last three years. The BSE Sensex has largely traded between 15,500 and 21,000 in the past two years, and if you’d not got your timing right on the broad market, it would have been tough to beat even fixed deposit returns. Yes, there have some money-making opportunities like in the fast-moving consumer goods sector or stock-specific stories, but otherwise it’s mostly been range-trading.

A spate of positive news from the government in the past few weeks has taken the stock market indices to a 15-month high and the Sensex is up 15.5 per cent over the last 12 months. But over a two-year period, the Sensex has lost 6.75 per cent. Even the three-year compounded return is a measly 3.85 per cent, which is less than the yield on expensive real estate.

But one investment category that has done very well this year is international mutual funds. There has been the kicker of 8-9 per cent rupee depreciation in one year, which adds to the returns, but even without it international funds have given reasonably good returns. Eleven of 32 international funds tracked by Value Research have earned over 25 per cent. The best performer is the Motilal Oswal MOSt Shares Nasdaq-100 ETF (exchange-traded fund), which is up 40 per cent in one year. This Nasdaq-100 index ETF offers domestic investors an option to invest in the best tech companies of the world. Apple has nearly 20 per cent weightage in the index, and since the stock has gained 50 per cent over the past year, the index has managed to reach a 12-year high. If you think Apple is going to crack the four-figure mark from the current $673.5, then this ETF may make a good investment. Along with Apple, the other heavyweights of this index include Microsoft, Google, Oracle, Amazon and Intel, and all of these add up to 46 per cent of weightage.

The other international funds available for Indian investors through the mutual fund or ETF route invest in Hong Kong’s Hang Seng index, China, Asean, other emerging markets and even Brazil by geographies. Others such as gold mining, real estate, mining, agriculture, commodities and energy offer sector or thematic options. Some of these are index funds, while the others are fund of funds. The JP Morgan JF Asean Equities Off-shore fund, a fund of fund investing in South East Asian companies, has posted 36.5 per cent annual gain with Singapore’s DBS Group being its top holding. Fidelity Global Real Assets, up 33.5 per cent in a year, is a fund of funds investing in commodities, property, industrials, utilities, energy, materials and infrastructure, with Exxon being its top holding.

Investing abroad gives an option of geographical diversification. For a long time, Indian investors didn’t have the option of buying foreign securities, which is now opened up. Also, the Indian market was providing better returns than many other global markets, which isn’t the case right now. Even as our current market rally progresses, investors could think of starting to learn the ropes.

Domestic investors also need to look at global investments more seriously considering that when our government was hit with policy paralysis, there was little money-making opportunity besides gold and a handful of stocks and sectors. Yes, the currency is a risk but one can factor that in or even invest abroad as a currency play. The existing funds and ETFs provide good opportunities to access global markets in a tax-efficient manner. Derivatives of the Dow Jones Industrial Average, the S&P 500 and the FTSE 100 are traded on the National Stock Exchange but unlike the mutual funds, these are not exempt from long-term capital gains tax. And if you want to buy Turkey, lumber or natural gas ETF, you can always open a brokerage account to trade abroad up to an investment of $200,000 (Rs 1 crore) per person a year.

Source: http://www.business-standard.com/india/news/niraj-bhatt-how-you-can-invest-in-google-appleexxon/188515/on

Schroder Singapore acquires 25 per cent stake in Axis AMC

Private sector Axis Bank today said Schroder Singapore Holding has acquired 25 per cent stake in its subsidiary, Axis Asset Management Company.

The transaction provides Axis AMC access to Schroders' global distribution network and to advise overseas funds invested in Indian securities, Axis Bank said in a statement.

Private sector Axis Bank today said Schroder Singapore Holding has acquired 25 per cent stake in its subsidiary, Axis Asset Management Company.

The transaction provides Axis AMC access to Schroders' global distribution network and to advise overseas funds invested in Indian securities, Axis Bank said in a statement.

Source: http://articles.economictimes.indiatimes.com/2012-09-18/news/33926311_1_axis-amc-schroders-overseas-funds

FII inflows strong, DIIs continue to sell

Experts expect domestic flows after market touches new high

Even as foreign investors have stepped up buying, owing to the announcement of bold reforms in the last few trading sessions, domestic institutional investors (DIIs) continue to sell.

Market experts believe portfolio flows from foreign investors would remain strong due to reforms and stimulus programmes announced by the US Federal Reserve and the European Central Bank (ECB). However, DII flows could continue to languish due to redemption pressure on mutual funds and lack of retail participation in the market.

In the last three trading sessions, foreign institutional investors (FIIs) bought net shares worth Rs 6,135 crore after the government increased diesel prices and opened up the retail and aviation sectors to foreign direct investment (FDI). In contrast, DIIs, which include entities like mutual funds and insurance companies, sold net shares worth nearly Rs 2,200 crore during these three sessions.

Strategists at several foreign brokerages like Morgan Stanley, Citigroup and Deutsche Bank have increased their Sensex targets due to the improved domestic sentiment and the global liquidity scenario. Some brokerages expect a rise of about 10 per cent from the current levels, with the Sensex surpassing 20,000.

According to Securities and Exchange Board of India data, so far this year, FIIs have invested about Rs 61,000 crore ($13.7 billion) in Indian equities. However, DIIs sold shares worth about Rs 32,000 crore during the same period — the highest since 2005.

In a report, Aditya Narain, head of India research, Citigroup, stated the market would continue to rise, primarily due to foreign flows. He added domestic flows would only start coming in after the market rose another 10 per cent from its current levels.

Experts say flows from retail investors and DIIs would improve once the market stabilises or crosses the previous all-time high. “When the 2003 rally began, domestic investors started coming into the market only when the market crossed its then all-time high in 2004. This time, too, domestic investors would start investing only after the market crosses its all-time high. I expect this to happen in the January-March period next year,” said Sandip Sabharwal, chief executive (portfolio management services), Prabhudas Lilladher.

“The way the market has moved up, it has not given anybody a chance to enter. Domestic participation would only be seen if the market stabilises at current levels,” said Prashanth Prabhakaran, president (retail broking), India Infoline. “Equity mutual funds are facing huge redemption, signalling fear is still there,” he added.

Heavy redemption pressure on equity mutual funds this year also led to heavy selling by domestic institutions, especially mutual funds. In August, equity mutual funds recorded their second-highest outflow — about Rs 2,300 crore. So far this year, net outflow from equity funds stands at about Rs 7,800 crore.

“The right time to invest was in December 2011, when there was gloom and doom. Since then, the market has given returns of about 20 per cent. Unfortunately, the money comes only after the market moves up,” said Anand Shah, chief investment officer, BNP Paribas Asset Management India.

Source: http://www.business-standard.com/india/news/fii-inflows-strong-domestic-institutions-continue-to-sell/486867/

IT, pharma mutual funds shine in August

Volatile mkt conditions also prompted investors to flock to pharma and FMCG sector shares

IT sector funds were the top performers in August among Indian mutual funds that focus on domestic stocks as lower valuations of the sector's shares after their sharp declines in July revived investor interest.

The BSE Sensex gained 1.1 percent in August, but IT stocks outperformed as the BSE IT index surged 8.3 percent after falling 7.3 percent in July, with shares in India's top software services firm TCS rising 8 percent, and rival Infosys gaining 6 percent.

"IT is now fast becoming a stock-specific scenario," said Waqar Naqvi, chief executive of Taurus Mutual Fund, adding that the outlook for the sector will be "neutral" in the coming months.

In August, IT funds gained almost 6 percent on average, with Franklin Infotech Fund registering a rise 7.5 percent to top the category, data from fund tracker Lipper, a Thomson Reuters company, showed.

Volatile market conditions also prompted investors to flock to defensive sectors, helping the pharma and the FMCG (fast-moving consumer goods) category of funds to appear among the top gainers for the month.

Gains of 4.6 percent in the BSE healthcare index helped pharma funds clock an average rise of 5.1 pct, while FMCG funds gained 4.8 percent in August, on the back of a 6.9 percent rise in the BSE FMCG index.

Among other schemes, international companies-focused AIG World Gold Fund gained more than 10 percent to end as the month's best performer, on the back of rising yellow metal prices in August.

Banking funds were the worst hit during the month, ending with average losses of 4.5 percent. Five of the six top India fund losers were banking funds, Lipper data showed.

DIVERSIFIED EQUITY FUNDS

India's quarterly GDP grew at a slightly better-than-expected 5.5 percent in the June quarter, dashing investor hopes of an early rate cut by the RBI, as inflation continues to remain at stubbornly high levels.

Slowing growth in Asia's third-largest economy and uncertainty about passage of reforms after a parliament deadlock over the CAG's report on misallocation of coal blocks kept investors on the edge in August.

Diversified stock funds, which represent the biggest category of stock funds in India by number and assets, ended with small gains of 0.4 percent in August.

While the main index managed to eke out gains, the BSE mid-cap index ended marginally in the red while the small-cap index lost almost 1 percent.

These losses also weighed on such funds' unit values as mid- and small-cap stocks accounted for more than a third of their assets as of end-July, data from Morningstar India showed.

Some analysts said Indian markets will continue to be range-bound going ahead, and the political deadlock is likely to hurt sentiment.

"Politics as of now is a more important reason rather than economics as far as the markets are concerned," Naqvi of Taurus Mutual Fund said.

Source: http://www.business-standard.com/india/news/it-pharma-mutual-funds-shine-in-august/185285/on