Suggested portfolio returns as on 3rd June 2009

On 3rd March we have posted one article about suggested portfolio as per our research.(Click here to view article posted on 3rd March 2009) We had suggested good blending of mid cap, small cap and large cap with small allocation to balance fund too. We bat on JM funds after direct meeting with fund manager and research analyst, JM worked in our suggested portfolio as a black horse.

We have kept 12 % in liquid fund to average in funds whose NAV falls more after investment or to take advantage of sharp correction by investing in to any Index fund.

You can see we have allocated 88% in equity fund which have generated 96% absolute return in three month time.

Now, if you have got returns as per your expectation than you must move out of equity.

If you want to book partial profit, we advice you to take out 20 to 25% from equity mutual fund to liquid fund and start weekly STP in the same fund for next five month.

I do not want to take much of your time; let me present you a suggested aggressive portfolio result as on 3rd June 2009.

If you are not able to view it properly click here or click here to get attachment

Note: Portfolio allocation and requirement changes from individual to individual.

Retail investors take MF route to join mid-cap rally

Having burnt their fingers in small- and mid-cap shares last year, retail investors have taken a more cautious approach this time: they are playing the mid-cap rally through the mutual fund (MF) route. Market watchers say this could further fuel the rally in second-line stocks, as fund managers will have to deploy the money collected through these schemes, even if it means having to chase prices.
As per May figures, renewed inflows and appreciation in portfolio value have boosted the asset base of mid- and small-cap schemes by 18-30%.
"The idea is to invest in these schemes with a very short-term view — say 3-5 weeks. When the investor touches a preset target (about 20-25%), he’ll redeem his investments," said Emkay Global Financial Services wealth management head, Akhilesh Singh.
"Even if the investor pays a 2% exit load for prematurely redeeming his fund investments, he's still making good money. Moreover, the investor is free from traps such as illiquid counters or rigged stocks," Mr Singh added.
Several stock brokers hold the view that even if there is a broader market correction, mid-cap stocks will have more 'price upside' (than their large cap peers) when the market turns around. The BSE Midcap index and BSE SmallCap index have risen 51% and 62%, respectively, over the past one month compared with a 30% rise in the Sensex.

"Expectations that second line stocks could rally further is drawing investors into lower group funds," said Sundaram BNP Paribas Mutual, head-equities, Satish Ramanathan.
"If one considers the impact cost involved in buying midcap stocks, it is much cheaper to have an exposure to a lower group through mutual funds. Lower group stocks have run up quite a bit; we’re expecting the prices to correct in that segment," Mr Ramanathan added.
According to sources, quite a bit of institutional money is flowing into midcap/smallcap funds with a large corpus.

Source: http://economictimes.indiatimes.com/Investors-take-MF-route-to-join-mid-cap-rally/articleshow/4614547.cms

Diversified equity funds rise average 33% in one month

The funds performed better than the Sensex because of the momentum in small- and
mid-cap stocks

India’s diversified equity funds (DEFs) rose an average 33% between 1 May and 1 June, with at least half of the 227 funds doing better than the 30% gain made by the Bombay Stock Exchange’s benchmark index, the Sensex, data from mutual fund tracker Value Research shows.This is for the first time since January 2008—when the stock markets started falling—equity funds have outperformed the Sensex.The data is based on the net asset value (NAV) of funds on Monday. NAV is the current market value of a fund’s net assets divided by the number of outstanding shares.The thumping win of the Congress party-led United Progressive Alliance without depending on the Left parties cheered the market. The Sensex has gained 20% since 18 May, the first day of trading after the general election results were declared.

“(Diversified) equity funds have performed well because of the momentum in small- and mid-cap stocks,” said Dhirendra Kumar, chief executive officer, Value Research. “While the Sensex is made of large-cap stocks, equity funds are reasonably into small- and mid-cap stocks.”Valuations of many small- and mid-cap stocks had plummeted to near-lifetime lows by the first week of March, when the Sensex dropped to 8,427.29 points, a three-year low.

In the beginning of a rally on 9 March, the price-earnings (P-E) multiple for Sensex constituents was 11.6. In comparison, the same valuation measure for the mid-cap index was 8.69 and the small-cap index 5.94. The P-E multiple is calculated by dividing the price of a stock by its earnings per share. The higher the multiple, the costlier is the stock. Currently, P-E multiples of mid-cap and small-cap indices are 16.3 and 13.41, respectively.The performance of DEFs, however, lagged the benchmark index in the year to 1 May. While the Sensex declined by 9.5% in the period, DEFs slipped by 11%. The top DEF gainers in the past one month were Taurus Infrastructure Fund, JM Basic Fund and Sundaram BNP Paribas Capex Opportunities Fund, which gained 67%, 65% and 60%, respectively. The worst performers are Religare AGILE Fund and IDFC India GDP Growth Fund, with returns of 10% and 14%, respectively.“This rally, after the initial spurt in large-caps, it’s been mid-caps and small-caps all the way,” said Hemant Rastogi, chief executive officer of Wise Invest Advisors.

“Sensex and Nifty (the S&P CNX Nifty index on the National Stock Exchange) are only 30 and 50 stocks...but small-caps and mid-caps have done well.” “All mutual funds deployed (their funds) in small- and mid-cap stocks and they have done significantly better,” said Gopal Agrawal, head of equity at Mirae Asset Global Investment Management (India) Pvt. Ltd. “Mid-caps and small-caps rose sharply because they were at a significant discount to large-caps. A lot of fund managers avoided them due to risk aversion and they fell sharply. Now there is activity in these stocks,” he added.

Source: http://www.livemint.com/2009/06/02224519/Diversified-equity-funds-rise.html?h=B

MF Performance

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Reliance MF open to acquisitions if opportunity comes: CEO

The country's largest fund house, Reliance Mutual Fund, on Tuesday said that it is open to acquisitions if some good opportunities come its way.

"We remain open to opportunities if appropriate valuations come up," Reliance MF CEO Sundeep Sikka told. The Anil Ambani group firm, which is the biggest mutual fund in the country in terms of assets under management, has also become the first fund house to cross an average AUM of Rs one lakh crore. "Consolidation has already started in the industry and going forward, only top 5-7 fund houses would command the major chunk of funds as investors will have confidence in large fund houses," Sikka said.

Reliance MF's average AUM jumped 16 per cent to Rs 1,02,730.15 crore in May, while the second-largest fund house HDFC MF's AUM stood at Rs 75,406.10 crore, followed by ICICI Prudential which clocked Rs 65,549.85 crore. Asked whether Reliance MF is in discussion with any fund house for a possible acquisition, S ikka said, "We are not in talks with anyone at this time." The mutual fund industry has witnessed a surge in the assets under management in the past two months and the combined average AUM of 33 fund houses crossed the Rs six-lakh -crore mark in May.
Source: http://economictimes.indiatimes.com/Personal-Finance/Mutual-Funds/MF-News/Reliance-MF-open-to-acquisitions-if-opportunity-comes-CEO/articleshow/4608238.cms

UTI Mutual Fund declares bonus on its ‘Top 100 Fund’

UTI Mutual Fund, one of the top performing mutual fund investment company in India managed by UTI Asset Management Company Private Limited, has announced a bonus to its investors, under its 'UTI Top 100 Fund' scheme.
The bonus has been declared in the ratio of 1 unit for every 1 unit held of face value of Rs 10 each, under dividend and growth option.
It should be noted that UTI Top 100 Fund is an open-end equity scheme, which aims to provide long-term capital appreciation or dividend distribution by investing predominantly in equity and equity related instruments of top 100 stocks by market capitalization.
Pursuant to the payment of bonus, the NAV of the scheme would fall to the extent of bonus units allotted and statutory levy if any. The record date for the bonus is June 4.
On May 28, the NAV per unit of UTI Top 100 Fund was Rs 37.89 under dividend option, while Rs 43.84 under the growth option.

Source: http://www.topnews.in/uti-mutual-fund-declares-bonus-its-top-100-fund-2173797

Nomura to buy 35% in LIC Mutual Fund

Japan's Nomura Group is set to acquire 35 per cent in LIC Mutual Fund, India's seventh largest mutual fund, after the board of directors of Life Insurance Corporation (LIC) approved a proposal to induct the Japanese financial services major as a strategic partner in the mutual fund business, sources in the state-owned life insurer said.

The insurance company has formed a four-member committee headed by LIC Chairman TS Vijayan to decide the valuation of LIC Mutual Fund. Exim Bank Chairman T C Venkat Subramanian and GIC Chairman Yogesh Lohiya are among the other members.
“Besides the valuation, the committee will also decide the terms and conditions of inducting Nomura Holdings or its subsidiary into LIC Mutual Fund Asset Management Company and LIC Mutual Fund Trustee Company,” sources said.
Asked about the deal, LIC Managing Director Thomas Mathew said, “We are in the middle of the process. Therefore, we cannot give you a timeline.” He declined to discuss other details.
As of April 2009, LIC Mutual Fund had assets under management (AUM) of Rs 24,104 crore over 32 schemes. Industry experts said the asset management company is expected to be valued at around Rs 1,500 crore or about 6 per cent of AUM, because the equity portion of the fund is just Rs 1,000 crore.
LIC Mutual Fund is likely to be valued on the lines of Standard Chartered Mutual Fund, bought by IDFC for $205 million in March 2008, which amounted to 5.67 per cent of its AUM at the end of February 2008.
One member of the committee said the valuation process has not yet started, and therefore, it would be premature to put a figure to it.

Source: http://www.business-standard.com/india/news/nomura-to-buy-35-in-lic-mutual-fund/359941/

MF industry's assets zoom, cross Rs 6 lakh crore mark….

Assets under management (AUMs) of the Indian mutual fund industry for May’09 have set the record by piercing the Rs 6 lakh crore mark once again. This level had been last topped in May 2008.
Average assets under management of 34 out of 35 mutual funds rose 16% to Rs 6,37,609 crore in May. AIG is the only fund house yet to disclose its AUM.
Reliance Mutual Fund, the country’s number one fund house by assets, has seen its AAUM cross the Rs 1 lakh crore mark for the first time siunce May 2008. At Rs 1,02,730 crores, its AAUM has risen 16% over the previous month.
Sundeep Sikka, CEO, Reliance Capital Asset Management, attributes this rise to an increase in valuations(due to the recent stock market rally) as well to an influx of fresh money into the schemes. “We have witnessed an increase in activity by retail investors and have been adding new customers in the last few months.”

Naval Bir Kumar, MD, IDFC Asset Management too said that equity schemes were beginning to see fresh inflows.
“Investors are coming back to equities, but not in hordes. They are being selective and past performance has become a threshold in selecting investments. However there has been a change in the investment pattern with the number of investors opting for lump-sum investment surpassing those opting for the SIP route”, he stated. His fund house has seen its assets surge by about 26% to over Rs 20,000 crore since April ’09.
While fresh money is streaming into equities, it is the income and debt category that has once again been the torch-bearer for the overall rise in assets. “As long as the market is flush with liquidity, liquid and short term debt funds shall continue to receive a good chunk of that money”, added Mr Kumar.

Source: http://economictimes.indiatimes.com/Market-News/MF-industry-cross-Rs-6-lakh-cr-mark/articleshow/4608225.cms

'Investors' risk appetite is gradually returning'

The mutual fund industry has come for some serious criticism in the recent past. The reason: It has completely missed the stock market rally that started from early March and has given returns of over 70 per cent to investors. Madhusudan Kela, head (equities), Reliance Mutual Fund, which has the highest average assets under management and investor base, speaks to Palak Shah and explains why fund houses are being judged unfairly. Excerpts:

Last year, fund houses faced a lot of criticism because they went overboard with their exposures in certain risky sectors. Even in the recent rally, fund houses have been simply sitting on cash. Is there a case that fund houses are unable to read markets correctly?

It would be wrong to say that the mutual fund industry, especially Reliance Mutual Fund, has missed the recent rally. The problem is that even when we are investing in Nifty futures, it is deemed as sitting on cash. Most fund houses do not have more than 15 per cent in cash. While it can be said that majority of the fund houses have not been able to maximise their returns from the recent rally, labelling them as complete failures would be too much of an exaggeration.
Mutual fund returns should not be judged on a month-on-month basis. While schemes have underperformed the stock market for sometime, it is the only vehicle in which investors have not suffered huge losses. In fact, some could be sitting even on decent returns. Those, who have been regularly investing in the past one year, have got better average returns than bank deposits. Even the net asset values (NAVs) of various Reliance schemes have moved up significantly in the recent rally.

Do you think there are enough hedging tools available for funds to minimise risk during rising as well as falling markets?

For instance, mutual funds don’t make good use of the options segment. Is there a reluctance to pay high premium?There is no level playing field for mutual funds compared to foreign institutional investors (FIIs). The rules for FIIs are far more liberal. The only tool available for funds is to short sell Nifty futures. There is no reluctance to pay the premium for options. But at an individual level, investors have to shell out only 10 per cent margin. Funds, on the other hand, have to make a provision for the entire position. As a result, there isn’t enough leverage available and hence, not many funds take huge positions in this segment.

What is the average churning ratio of your portfolio? Is there any intra-day trading involved too?

The churning of portfolio at Reliance Mutual Fund is very little. Most of the schemes hold stocks for three to five years. However, when faced with extreme situations like in 2008, it becomes necessary to find defensive stocks and switch over to reduce risk. Most of the intra-day trades are only in the futures segment.

After the Satyam fraud, there were talks that the mutual fund industry was planning to make the due diligence process much more stringent. There were also reports that extreme steps like shunning companies with a bad track record were on the anvil. Has the industry reached any consensus?

I can only say that the due diligence has increased after the Satyam scam. The industry has become more vigilant and decided to be more proactive in approaching authorities against errant companies.

The recent rally has been quite frenzied though the fact remains that the world economy is still not out of woods. Economic problems in the US and Europe continue to persist. Do you think that there is a decoupling of the Indian market from the other world markets?

The emerging markets, especially India, will be decoupled from the US and European markets for a while. In fact, the situation in India would start improving significantly after the decisive mandate to the United Progressive Alliance (UPA) because it would give the government a lot of freedom to act without any pressure.
While the economic recovery might be slower-than-expected by markets, the demand in economy will not fall too significantly. Reforms will be able revive our economy.

Has the investor’s risk appetite changed in recent times? What are the sectors you are bullish on?

The investor’s risk appetite is gradually changing. Our fund house has followed a strategy to maintain across the sector themes to increase investor base. We believe that the sectors that are driven by domestic demand would do extremely well. But specifically, we are bullish on infrastructure and power sectors. I also believe that the pharmaceutical sector also would do well.

Source: http://www.business-standard.com/india/news/%5Cinvestors%5C-risk-appetite-is-gradually-returning%5C/359803/