Indian bond yields end lower as new supplies slow

Indian federal bond yields ended lower on Monday as a slowing supply pipeline supported demand, although higher-than-expected inflation data heightened expectations of an interest rate rise in coming months.
The yield on the 10-year benchmark bond IN069019G=CC ended at 7.56 percent, below Friday's closing of 7.58 percent, recovering from a rise to 7.59 percent after the inflation data.
Volumes were a heavy 103.35 billion rupees ($2.2 billion) on the central bank's trading platform.
"Today the rally has been actually short-circuited by the inflation data," said K. Ramkumar, head of fixed income at Sundaram BNP Paribas Mutual Fund, adding he expected the rally based on reducing supplies to continue for some more time.
Ramkumar said the market was already aware that rates would rise, the only question was when, and so the market would be driven more by demand and supply on a day-to-day basis.
India's wholesale prices rose faster than expected in November, and analysts said inflation worries could see the central bank withdraw more liquidity support in coming weeks and increase rates early next year. [ID:nSGE5BD0CC]
The government will sell 60 billion rupees of treasury bills on Wednesday and 90 billion rupees of bonds on Friday, including 20 billion rupees of 11-year floating rate bonds. [ID:nMBI006020]
"The floating rate instruments suits a lot of investors ideally, either for their ALM (Asset Liability Management) (or) reflecting their interest rate views," Ramkumar said.
After Friday's auction there will be a two-week gap before the next auction.
Excluding Friday's auction, the government is due to sell only 350 billion of bonds in the remaining fiscal year after selling 3.83 trillion rupees of bonds since the start of April.
In interest rate futures on the National Stock Exchange (NSE), the December contract N10Z9 was at 7.9581 percent, above its previous close of 7.8653.
The yield implied in the March contract N10H0 was 8.2239 percent, marginally down from 8.2570 percent.
The benchmark five-year interest rate swap ended at 6.81/84 percent, from previous close of 6.78/81 percent.

Source: http://in.reuters.com/article/companyNews/idINSGE5BD0NY20091214?sp=true

Don’t let numbers misguide you

As the Indian cricket team reached the pinnacle of the ICC Test Rankings, a certain statistic in a newspaper caught my eye. It said that Dhoni has a 100% win record as Indian Test captain. That sounds highly impressive, doesn’t it? But probe a bit deeper and you come to know that Dhoni has captained the team in only 10 Test matches as yet. While nothing can be taken away from his leadership qualities, it can be said that numbers can often be misleading. When we look at numbers from just the top, we often miss out on the real picture.
The same happens with retail equity fund investors. Newspapers of late have been running headlines about the inflating size of the fund industry’s assets under management. From Rs 6 lakh crore in May, to Rs 7 lakh crore in August to Rs 8 lakh crore in November, these numbers seem so impressive that any lay investor can be forgiven for thinking that people are putting in huge amounts into funds once again. However, that is not really the case. Let me explain why.
Basically, the Indian mutual fund industry is made up of two very distinct industries within itself. First is the wholesale debt fund industry (where the money comes largely from corporate companies) and then there is the retail equity fund industry (where the money comes largely from individual investors). Of course, there is an overlap of the two parts, but in context of the total AUM, this overlap is of a minor quantity.
Over the past few years, the wholesale debt fund industry has come along quite well. In 2004, the size of this industry was about Rs 1.15 crore. It has reached Rs 5.9 lakh crore now, a growth rate of almost 40% a year.
During this same time, the retail equity fund industry grew at a rate of about 50 % a year, from Rs 25,000 crore in 2004 to Rs 1.9 lakh crore now. This statistic, by itself, is fairly impressive. But when we probe further, we find that picture to be not so rosy because during this time the markets grew by 3.5 times, taking the Sensex at the floor level. Compare this to the equity fund industry’s growth of 2.4 times, and it becomes clear that the holla created over reaching Rs 8 lakh crore doesn’t paint the right picture.
The reason behind this is the investor behavior towards market gyrations. When the markets rise, everyone starts investing money, when the markets fall, everyone sort of hangs around, waiting and watching, and when a slight recovery is seen, everyone redeems their investments to avoid further losses. I have written about the futility of this investment approach a number of times. And the fact that the equity fund industry has grown so sluggishly can also be attributed to this approach.
For example, in February 2009, equity fund assets were at Rs 1.09 lakh crore. They rose to Rs 1.44 lakh crore in May 2009. Had the equity fund industry’s growth been in line with that of the markets, then the assets should have been at Rs 1.8 lakh. The missing Rs 36,000 crore is the amount that was redeemed by investors in a hurry. No wonder the funds underperformed the markets.
We are partly to be blamed for the equity fund industry’s sluggish growth, but we are completely at blame for the underperformance of our own portfolios. Had you stayed invested and not redeemed when the markets rose, then today your investments would have certainly been worth more than what you got. And therein lies the lesson that all investors need to learn.

Source: http://www.financialexpress.com/news/dont-let-numbers-misguide-you/553625/0

Equity portfolios in November — What's in, what's out

The month of November delivered a divided verdict on the direction of equities. While it may never be easy to call the market direction with perfection, what retail investors can do is take cues from the way the various mutual fund managers, known for their investment acumen, fare.
Last month, though a few retail investors opted out of market, what with high redemptions reported in equity schemes over the month, fund-houses did undertake their usual realignment in weights to sectors and stocks.
Though only an indicator, tracking what mutual fund houses buy and sell every month can go a long way in helping retail investors build their equity portfolio. Here's a look at what the many fund managers bought and sold last month.

Sector Choices
Driven by the need to fortify their portfolios as also diversify sector exposures, fund houses appear to have added exposure to sectors such as hotels, oil and gas and minerals. They, however, pared exposure to telecom equipment, auto ancillary and paper products.
Another interesting sidelight was that funds reduced their exposure to the consumer non-durables sector. Even as the telecom sector was being de-rated by analysts — with players aggressively slashing rates — fund-houses stepped in as buyers. Most funds seem to have used the price correction in telecom stocks to accumulate them.
Yet another trend was the increased debt allocation in fund portfolios compared with the levels seen the previous month. The move to debt may have been driven by the funds' dividend declarations and higher redemption obligations.

What's in?
Hindalco appeared to have attracted the most attention last month, with fund holdings in the stock increasing by more than 63 per cent over October to 8.24 crore. Among the other stocks that saw accumulation were Indian Hotels, Spice Jet, ITC, Mercator Lines and Pantaloon Retail.
Even the newly-listed stock NHPC managed to attract buying interest. Metal stocks such as Adhunik Metaliks and SAIL also drew significant interest; while the former stock saw an addition of 88 lakh shares; holdings in the latter went up by 22 per cent.

What's out?
The quarterly earnings numbers weren't reason enough for MFs to hold on to the auto ancillary stock Apollo Tyres, which topped the list of stocks sold. Over 91 lakh shares of the company moved out of the funds' portfolio.
However, in terms of market value, it was Jaiprakash Associates, Hindustan Lever, Unitech and Suzlon Energy (in that order) that topped the ‘sell' list. Another interesting trend — while funds added stocks from oil refineries, they diluted their holdings in oil market companies such as HPCL.

What mid-cap funds bought
Mid-cap funds too had their share of action. Software stock Hexaware rose to be the most sought after stock in the mid-cap space, followed by Everonn Education, Dena Bank, Brigade Enterprises, and Vijaya Bank. A few large-cap names also figured in the ‘buy' radar, with Adani Power, NTPC and JSW Steel making their way into mid-cap funds' portfolios.

What they sold
Fund houses focussed on mid-caps, however, diluted more than 67 per cent of their holdings in Indiabulls Financial Services.
They also selectively pruned their holdings in the cement space, with stocks such as India Cements, Kesoram Industries and Mangalam Cement losing preference.
Among other notable stocks that moved out were Tata Steel, Jet Airways, and Everest Kanto Cylinder. While funds preferred mid-cap education service provider Everonn Education, they seem to have diluted their exposure in sector leader Educomp Solutions.

Source: http://www.thehindubusinessline.com/iw/2009/12/13/stories/2009121351151000.htm

MF distributors' nod not a must for shifting investments, says Sebi

The Securities and Exchange Board of India (Sebi) has asked asset management companies (AMCs) not to compel investors to get no-objection certificates (NoCs) from their existing distributors for shifting their investments.

This is a reiteration of the Association of Mutual Funds of India (Amfi) advice to AMCs to allow investors to change their distributor on the basis of a letter from them.

However, “it appears that this mandate is not being followed by the mutual fund industry,” it said.“Some AMCs are insisting on the investor procuring an NoC from the existing distributor for this switch over, despite the guideline from Amfi,” said Sebi.

Source:http://www.business-standard.com/india/storypage.php?autono=379292

Sebi cracks whip on incomplete MF documentation

In a move to make the mutual fund (MF) industry more transparent, the Securities and Exchange Board of India (Sebi) today asked asset management companies (AMCs) to stop paying commissions to intermediaries, including banks and other distributors, who did not keep proper documents of their clients.

The documents relate to know-your-client (KYC) and power of attorney (PoA) norms for the industry.
“All documents related to investors, including KYC, PoA, in respect of transactions or requests made through some mutual fund distributors are not available with AMCs and registrar and transfer agents. The same are to be maintained by the distributors,” it said.
The regulator has also asked fund houses to set up a separate customer service, mechanism for queries and grievances of unit holders.

Source: http://www.business-standard.com/india/storypage.php?autono=379293

India Infoline to start MF operations in Q1 FY11: Chairman

Financial services firm, India Infoline, plans to set up its mutual funds operations in the first quarter of FY11, after securing the final approval from Sebi, its Chairman said.
"We have received the in-principle approval from Sebi (to set up the asset management company). The final approval is expected in the next 2-3 months," India IIFL, Chairman, Nirmal Jain told reporters here.
IIFL plans to start AMC operations on its own but may also look at the option of partnering with any existing players in the future, Jain said.
Presently, IIFL has operations in equity and derivative brokerage and investment management amongst others. The company is operating from 1,500 locations.
It plans to increase the current branch strength, around 500 by 25-30 per cent over the next one year, while the number of franchises, now at 1,000, will be doubled during the period.
Commenting on its mortgage business, Jain said that the company has grown its mortgage business to a loanbook size of Rs 600-crore.
"We now have a loanbook of Rs 600-crore. We are currently offering the loan products from 20 centres, which would be scaled to 40 over the next 3-4 months," Jain said.

Source: http://economictimes.indiatimes.com/India-Infoline-to-start-MF-operations-in-Q1-FY11-Chairman/articleshow/5323933.cms

Sundeep Sikka, CEO, Reliance Capital Asset Management Ltd

Sundeep Sikka, CEO, Reliance Capital Asset Management Ltd. (RCAM) has been instrumental in expanding RCAM’s footprints in both domestic & international territories. Sundeep has been with RCAM since November 2003 and has more than 13 years of leadership experience with NBFCs and Banks. Sundeep brings a proven track record of success and a broad understanding of the company's business. Prior to RCAM, Sundeep has held a number of other senior management positions and his last stint was with ICICI Bank.
Reliance Mutual Fund (RMF) is India’s leading Mutual Fund, with Average Assets Under Management (AAUM) of Rs. 1,22,252 CRORES and an investor base of over 75 Lacs. (AAUM and investor count as of 30th, November 2009)Reliance Mutual Fund, a part of the Reliance - Anil Dhirubhai Ambani Group, is one of the fastest growing Mutual Funds in the country. RMF offers investors a well-rounded portfolio of products to meet varying investor requirements and has presence in 400 cities across the country. It also has presence in the form of representative office in Dubai and three wholly-owned subsidiaries operating out of United Kingdom, Singapore, Mauritius and Malaysia.
Speaking with Yash Ved of India Infoline, Sundeep Sikka says "In the long term, we are bullish on the Indian economy and corporate earnings."

Tell us about the Reliance SMART STEP fund?

Reliance SMART STEP is a special product feature available in selected liquid/debt schemes of Reliance Mutual Fund. It gives the advantage to the investors by investing smaller amount at higher market values and higher amount at lower market levels. It’s a proprietary business model. Also market volatility takes into account.

What impact do you see on Indian markets from of Dubai’s debt problems?

Indian markets and world markets are integrated now. I do not see Dubai debt problem impacting India to a great extent. We have seen that all Asian markets have recovered well. Initially, Indian markets too reacted to the Dubai fiasco but they have recovered well. There is lot of money waiting on the sidelines. In the coming years, we see Indian economy doing better and better.

Where do you see Sensex by March 2010?

The markets are always a function of liquidity, sentiment and earnings. In the immediate short term, we have to see various factors like global liquidity, risk appetite and FII money besides expectations on the budget.
However, in the long term, we are bullish on the Indian economy and corporate earnings. We see double digit growth in India Inc’s earnings. Global macro trend and domestic micro trend are also very positive.

What is the outlook on the global economy?

How do you inflation next year?The global macro trends seem to be better. Overall things are much better, whether it is household data or economic data. I will not be worried on inflation right now. One big negative factor is the fiscal deficit which may impact interest rates going ahead. In the next 1- 2 quarters, there will be hardening of interest rates for sure.

What is your outlook on gold and crude oil?

We are bullish on gold and the general demand on the jewellery is also rising. Gold needs to be part of every investor’s portfolio. We see more upside in gold. At least 3-5% of the portfolio should be invested in gold.
Crude oil movement is based on two factors i.e. genuine demand and speculation. We don’t see crude oil shooting up too much from here onwards.

Are you planning any NFO?

We would like to focus on existing schemes. The track record on our portfolio plays a bigger role. We have filed for a SEBI approval for an Arbitrage Fund, Small Cap fund and International equity fund.
As a fund house what are the sectors you are bullish on?We are bullish on Pharma, Domestic Consumption theme, Power and Banking.

Source: http://www.indiainfoline.com/Research/LeaderSpeak/Default.aspx?ReportNo=847

De-jargoned: trigger

What is it? What does it do? What to do with it? Who offers it?

What is it?
Suppose you invest in a mutual fund (MF) scheme at a net asset value (NAV) of Rs10. Your target is Rs15. Time goes by and you soon forget about it. Before you realize you have already reached your target, markets turn volatile, your NAV falls to Rs11 and you have missed your chance. Is there anything you could have done to avert this? Enter Trigger.

What does it do?
Through this facility, you can pre-set a target and opt for an automatic redemption or at least get a reminder once you reach the target. You can set your target in your application form at the time of investment. Most MFs offer targets in terms of NAV or Sensex or Nifty levels or gains in the total corpus.

What to do with it?
You can either choose to get reminded once your trigger gets activated or you could tell your fund to automatically redeem your corpus. Further, instead of getting cash in your hands, you could opt for an automatic switch from, say, an equity fund to a liquid fund. This books profits and yet continues to earn liquid fund returns.

Who offers it?
Initially, a few MFs such as UTI and Principal used to offer it. Now many MFs such as Birla Sun Life, HDFC and Reliance offer it. This facility is not compulsory and it will depend on the customer whether he wants to opt for it. So if you choose a reminder trigger, you may still continue to stay invested. Nothing changes and life goes on.

Source: http://www.livemint.com/2009/12/07220826/Dejargoned-trigger.html