FII Activity On 23-06-2008 - June 24, 2008

The FIIs on Monday stood as net seller in equity and debt. The gross equity purchased was Rs2,501.50 Crore and the gross debt purchased was Rs0.00 Crore while the gross equity sold stood at Rs3,454.00 Crore and gross debt sold stood at Rs56.00 Crore. Therefore, the net investment of equity reported was (Rs952.50) Crore and net debt was (Rs56.00) Crore. 

5 reasons to say goodbye to your mutual fund

Advice on when you must invest in a mutual fund is available dime a dozen. But it takes a certain degree of expertise and proficiency to redeem your mutual fund investment at the right time. Since this is the dilemma that many investors grapple with, we have outlined the five most critical reasons for redeeming your mutual fund investment.
At the outset, it is important to note that the ‘right time to redeem’ does not mean that there is a timing element involved over here. Rather the right time to redeem means when the time is up on your mutual fund investment and it is no longer prudent to hold on to it.
While there may be several occasions to redeem your mutual fund investment, we have narrowed it down to the five most pervasive reasons.
1. When you have achieved your investment objective

A mutual fund investment is made with the intent of achieving a specific investment objective. Some of these investment objectives include, among others, planning for child’s education, planning for retirement, saving for a house/car. If you haven’t achieved your investment goal, there is no reason to redeem your mutual fund (assuming, of course, that it is performing on expected lines). When you have achieved or are close to achieving your investment objective, you should stagger your mutual fund redemptions so that you are completely liquid (i.e. in cash) when it is time to realise the investment objective (i.e. pay your child’s college fees or buy the house).
2. When your mutual fund revises its mandate

Mutual funds have an investment mandate. The mandate sets the ‘guidelines’ for fund managers about how they should manage their funds. Since the mandate is formally stated, investors know about this beforehand and invest in the fund if they believe that it will enable them to achieve their investment goals. Mutual funds are known to revise their mandates if they believe that the existing mandate does not serve the mutual fund’s interests anymore. For instance, in the recent past a leading private sector fund house converted its index fund into an actively managed fund.
From your perspective, you will have to evaluate whether the mutual fund with a revised mandate merits a place in your portfolio. If it doesn’t, then its time to redeem it. In the event of a revision in the mandate, regulations require that investors be given the option to redeem the mutual fund without an exit load, so you can redeem the investment without worrying about the exit load (if any).
3. When the star fund manager quits

A category of investors track the fund managers more than they track the fund house and its schemes. These investors invest in a mutual fund relying mainly on the star fund manager’s investment prowess and skills. While the domestic mutual fund industry does not have many star fund managers, the few who can be considered stars have a committed fan base. At Personalfn, we discourage investors from falling prey to this trend; investing in process-driven fund houses is a more reliable way of investing than betting on star fund managers. Nonetheless, if you have invested in a fund based on the star fund manager appeal, then your investment decisions should correspond with the fund manager’s migration (across fund houses). If he quits the present fund house, then there is a case for you to redeem your investments because it is unlikely that the rest of the fund management team will be able to replicate the performance in the star fund manager’s absence.
4. When your mutual fund is not performing

We often hear of investors complaining about the below par performance of their mutual fund investments. Our advice to them is to be patient and evaluate their investments over an appropriate time frame and with the right perspective. For instance, equity funds should ideally be evaluated over the long-term (at least 3 years). Taking a decision in haste without understanding the investment proposition of the mutual fund could prove counterproductive and expensive (if there is an exit load). However, all points considered, if you and your financial planner are convinced that your mutual fund is a dud, then its best that you redeem it.
5. When you have invested in a thematic fund

We recommend that investors avoid thematic funds, the reality is that thematic funds are a feature in the portfolios of many investors. Some of these investors are well-informed and have a view on the underlying theme/sector. However, for a vast majority of investors, thematic funds are an unknown entity simply because they do not have the necessary skills and resources to track the underlying sector/theme. They only got invested in them either because everyone they knew was investing in them or their agent made a compelling marketing pitch for the fund. Either ways they are invested in the fund and want to know when they can redeem. If you are one of them, then the right time to redeem your thematic fund is when the stock markets give you the opportunity. Since a rising tide lifts all boats, it is likely that the performance of the underlying theme/sector will improve in a stock market rally. That is an opportunity for you to sell that thematic/sector fund that you always wanted to redeem but could not because of unsuitable market conditions.
Another mutual fund investment that you can redeem in a stock market rally is the dud that you invested based on a ‘hot tip’ and have regretted ever since. These funds are like deadwood in your portfolio, which you should never have invested in, in the first place. But having invested in them, make the most of a stock market rally to either redeem at a profit or to minimise losses.

Dont stop your SIP

Mr . Mitesh started to invest through SIP in two proven equity diversified funds last June. He started of with a aim to keep investing for five years. ( a very good long term plan indeed). He was an happy man till Jan'08, as he was seeing his funds growing. Now after the downward run in the stock market, he is thinking whether he should discontinue his SIP. He is not happy because his portfolio has moved into negative territory.
Mr. Mitesh should actually be happy for the fall now because he is able to get more units at these lower prices. Instead of stopping- a better strategy would be increase the SIP , if possible. The amount you SIP in equity MF during bearish phases would yield more returns when the market turns around.
Don't stop your SIP , if you are baffled by the downturn!!!

Comment on investing

Recently there were a lot of comments from other blogs. They all talked about how the investors (??) have lost money lost in the market in the recent past.
These were a sort of advertising comments having links to the respective blogs.The comments were not published not because of this reason, but all along they did talk about traders as investors.
If one does trading and calls it an investing, its like calling an engineer ..a doctor...!!. If someone is buying and selling stocks just for a price increase/ decrease that he expects in a short term ( period of one day to a couple of years), he is a trader.
The best way to create wealth is to stay invested in the market for a longer time horizon. Mutuals funds are the best way as most of us are not experts in picking up stocks.
1) Never get swayed by any articles/comments which calls trading as investing.
2) Believe in long term investing in equity through SIP route in proven diversified MF.

Shying away from Mutual Fund New Fund Offers

After some trouble days in the stock markets, investors seems to have lost confidence a bit and trying to stay away from New Fund Offers from Mutual Funds. This is because of the fact that almost all recently launched NFOs are in the negative NAV. Of course, even the senior fund schemes too are tasting trouble times after the recent correction in both the domestic and the global markets. With the US economy in a possible recession, crude oil touching newer highs every day, just few months of Indian Elections, the stock markets, it seems, wont go in for a huge rallies at least for some time now. Needless to stay, even the most cautious Mutual Fund investor too is trying to stay cautious and this is appearing from the inflow of the Mutual Fund NFOs. Are the good days for the NFOs over for some time now? or aren’t the marketing campaigns of the mutual fund houses not looking that savvy? Let’s wait and see..

Ansal Properties’ arm gets investment of $ 55 million from HDFC AMC

HDFC Asset Management Co (HDFC AMC) has informed that it has made an investment worth US$ 55 million in Ansal Hi-Tech Townships, a subsidiary of the New Delhi-based property developer, Ansal Properties & Infrastructure (API), for a minority stake in the project.
Ansal Hi-Tech Townships, a special purpose vehicle (SPV), is building a 2,500- acre modern township with a developable area of 75 million sq ft in Greater Noida in the National Capital Region.
Presently, the project is in the land acquisition stage and is expected to be completed in the next 6-7 years. Ansal is expecting a turnover of Rs 26,000 crore from the project and expects to invest over Rs 12,000 crore in the project.

RBI may step in to contain inflation rate

Indian inflation shot above 11 per cent in early June to a 13-yearhigh following a rise in state-set fuel prices, rattling markets andprompting the finance minister to warn of stronger anti-inflationmeasures ahead.
Inflation is on the rise globally and has also reached double digitsin other countries, including Indonesia, Vietnam, Sri Lanka andPakistan as oil, food and other commodity prices soar.
What experts say about inflation Inflation rate surges to 13-yr highat 11.05%
India government bond yields jumped to their highest in nearly sevenyears after Friday's data and the finance minister's warning, whileshares fell to their lowest levels in 2008 on concern that interestrates will move up.

Traders said the central bank, which raised rates just last week,stepped in to support the weakening rupee after the release of India'swholesale price index (WPI), the country's most widely watchedinflation measure.
The index showed annual inflation jumped to 11.05 per cent in the 12months to June 7, its hottest pace since May 1995 and much higher thanforecasts for 9.82 per cent.
It also marked a big jump from 8.75 per cent in the week-earlierdata.
"The number is quite intimidating and it will require some responsefrom the fiscal authorities and the Reserve Bank of India," saidAbheek Barua, chief economist at HDFC Bank.
"So I wouldn't be surprised if there is another monetary measure onits way in the next fortnight or so, and this is likely to be a reporate hike of about 25 basis points."
The double-digit inflation figure -- inflamed by a fuel price hike ofabout 10 per cent early this month when India cut subsidies, will alsoheap more pressure on a ruling coalition, which faces state andnational elections in coming months.
The coalition is already struggling to unify behind a controversialnuclear energy deal with the United States.
The central bank surprised financial markets last week by raisinginterest rates, its first increase in more than a year. It boosted itsrepo rate by 25 basis points to 8 per cent.
Economists said with inflation running significantly higher thananticipated, another increase was likely.
Reflecting such expectations, the benchmark 10-year government bondyield jumped 10 basis points to 8.64 per cent, while the benchmarkstock index was down just over 3 per cent in mid-afternoon.
Political fallout
Political worries have already rattled markets this week, fuellinglosses on Wednesday and Thursday, while surging food bills havecontributed to a string of defeats for the ruling Congress party atstate elections over the last few months.
Now the coalition's communist allies have renewed threats to withdrawsupport for the government over the nuclear deal. The government hasjust a week or so to decide if it wants to risk early polls -- atwhich rising prices will be a key battleground -- by going ahead withthe agreement.
Earlier this month, India joined a stable of Asian countries no longerable to afford big fuel subsidies in the face of rising prices,sparking street protests and calls for industrial strikes.
Where to next?
India's inflation rate was last this high in the week of May 6, 1995,when it stood at 11.11 per cent. In the latest figures, inflation forthe week of April 12 was revised up to 7.95 per cent from 7.33 percent.
Energy costs account for 14.2 per cent of the WPI index and Friday'sdata showed the index for fuel, power, light and lubricants rose 7.8per cent in the week of the price rise.
Finance Minister Palaniappan Chidambaram promised action.

"This is indeed a very difficult time and we will have to takestronger measures both on the demand side and monetary side," he toldreporters.
Food prices have been a source of concern for the Congress party-ledcoalition as these impact the poor the hardest, but the food articlesindex fell 1.1 per cent in the June 7 data.
Nonetheless, Indranil Pan, chief economist at Kotak Mahindra Bank,said inflation could go towards 12 per cent. "The next 3 to 5 monthsare going to be very crucial."
Robert Prior-Wandesforde, economist at HSBC in Singapore, saw both therepo rate and the cash reserve ratio (CRR), used by the central bankto drain surplus cash from the money market, rising by 50 and 75 basispoints respectively by year-end.

Contrarian Investing

Contrarian investment strategy can be defined as acting in a manner contrary to the conventional stock market wisdom at any particular time. It is a preference for fundamental analysis in picking individual stocks, while ignoring the overall trends in the market.
George Soros is among the most famous contrarian investors of our time. Along with Jim Rogers, he created the Quantum Fund based on a contrarian philosophy. The fund went on to give returns of about 4000% over a period of 30 years. The most famous contrarian move that George Soros made was going short on the British pound and earning US$1 billion in a single day in 1992. Rogers's famous contrarian bets were getting into the equity market in the early 1980s when most of investors avoided them and into the commodity markets in 1990s at the peak of the dot com boom.
In the conventional model, investors look favorably upon stocks that are rising in price and shy away from those stocks that are falling. This approach causes investors to overlook quality companies with prices that have fallen because of events or perceptions that are temporary in nature. Contrarians behave in a manner opposite to the majority and buy when stocks are falling in price. The philosophy behind it is that out of favor companies involve less risk, since purchase are usually made at the low end of valuation cycles.
Contrarian investment encompasses several themes such as picking up neglected stocks with strong asset values, under-owned sectors with high growth prospects, companies with latent earnings potential etc.
How to apply contrarian investment strategy
By focusing on stock selection: An investor should focus on fundamental analysis of a company rather than following the market trends. He should look for value hidden in the company and try to pick them up before others realise the potential locked in the company.
By changing the diversification strategy: A contrarian investor should reduce his over diversification and commit a large amount to few stocks where the odds weigh heavily in his favor.
By accepting market volatility: A contrarian needs to accept the volatility of equity markets. By maintaining plenty of cash through bull and bear markets, he can deploy funds during price drops.
By concentrating over absolute return than relative returns: A contrarian investor should not worry about index. An investor should plan how much cash he needs at the end of his investment time horizon and should try to perform in line with that strategy. By doing so, the investor will be more focused on his individual portfolio instead of worrying about the index performance.
A word of caution Contrary thinking is emotionally demanding. It requires courage to stand alone when there is a great deal of pressure to follow the majority. The key to contrarian investing is making independent decisions and believing in them. And finally, it requires patience.