SEBI Revises Valuation Method

In an order to all mutual funds/asset management companies (AMCs), the Securities and Exchange Board of India (SEBI) has revised the valuation method of debt and money market instruments.

This is a continuation of the efforts of SEBI, started in the wake of the global meltdown, to ensure the industry does not get into another crisis situation.

SEBI is, through its rule change, looking to ensure that the valuations do not stray too far from the underlying securities.

According to the market regulator this will, "Ensure that the value of money market and debt securities in the portfolio of mutual fund schemes reflects the current market scenario."

Impact areas are:

I. Valuation of money market and debt securities with residual maturity of up to 91 days:

All money market and debt securities, including floating rate securities, with residual maturity of up to 91 days shall be valued at the weighted average price at which they are traded on the particular valuation day.

When such securities are not traded on a particular valuation day they shall be valued on amortization basis. It is further clarified that in case of floating rate securities with floor and caps on coupon rate and residual maturity of up to 91 days then those shall be valued on amortization basis taking the coupon rate as floor.

II. Valuation of money market and debt securities with residual maturity of over 91 days:

All money market and debt securities, including floating rate securities shall be valued at weighted average price at which they are traded on the particular valuation day. When such securities are not traded on a particular valuation day they shall be valued at benchmark yield/matrix of spread over risk free benchmark yield obtained from agency(ies) entrusted for the said purpose by AMFI.

III. Valuation of securities not covered under the current valuation policy:

In case of securities purchased by mutual funds that do not fall within the current framework of the valuation of securities then such a mutual fund shall report immediately to AMFI regarding the same. Further, at the time of investment AMCs shall ensure that the total exposure in such securities does not exceed 5 per cent of the total AUM of the scheme.

The valuation of such securities must get covered in the valuation framework within six weeks from the date of receipt of such intimation from mutual fund.

In the interim period, till AMFI makes provisions to cover such securities in the valuation of securities framework, the mutual funds shall value such securities using their proprietary model which has been approved by their independent trustees and the statutory auditors.

IV. Dissemination of information:

All mutual funds shall provide transaction details, including inter scheme transfers, of money market and debt securities on daily basis to the agency entrusted for providing the benchmark yield/ matrix of spread over risk free benchmark yield. Submission of data would help in daily matrix generation and would improve uniformity and accuracy of valuation in the mutual funds industry.

The valuation would be applicable with effect from July 1, 2010.

Source: http://new.valueresearchonline.com/story/h2_storyView.asp?str=101220

HDFC Launches Systematic Savings Plan

HDFC Ltd. India’s premier housing finance company, is introducing ‘HDFC Systematic Savings Plan’ [HDFC SSP], a first-of-its-kind deposit product, which offers a variable rate of interest. It is a monthly savings plan, where one can deposit a fixed sum every month to accumulate a larger capital for future needs. This plan will be available February 3, 2010 onwards to all resident individuals in select Indian cities where ECS facility is available.

Announcing the launch of the HDFC Systematic Savings Plan, Mr. V.S. Rangan, Executive Director, HDFC Ltd. said, “HDFC has always been quick to recognize the market pulse and set higher benchmarks of service delivery through introduction of pioneering products and services. HDFC SSP is a disciplined approach to wealth creation. It allows the investor to adopt a systematic and dedicated approach to financial planning by inculcating a regular savings habit according to his convenience and ability. We have developed this unique installment plan keeping in mind the safety and growth requirements of especially the younger working individuals. For investors looking at earning assured returns over a 2-5 year horizon, SSP will surely emerge as an attractive investment avenue.”

HDFC Systematic Savings Plan offers medium to long-term installment options, where the depositor can choose any period between 24 and 60 months and monthly installment amount can range from Rs. 2000 to Rs. 50,000. Being a variable interest rate plan, the rate of interest applicable is linked to the benchmark rate, reset at the beginning of each calendar quarter. The current interest rates for this plan with effect from February 3, 2010 are 7% p.a., 7.25% p.a. and 7.75% p.a. for 24-35 months, 36-59 months and 60 months respectively.

The key-differentiating factor of HDFC SSP is that it offers depositors a secure and steady way to grow their savings. HDFC SSP is also safe from the volatility of the capital market and the variable interest rate offering ensures that the depositor gets the benefit of higher rate when interest rates increases. The ECS (debit clearing) facility makes investing in HDFC SSP convenient for all.

Product Features:

– Variable Rate of Interest
– Attractive Rate of Interest
– Wide Tenure
– Easy Payment Mode

HDFC Ltd., has displayed consistent performance for over three decades and today is the largest deposit mobilizer outside the banking system in India. With a deposits base of over Rs. 22,000 crore, depositor base of over 10 lakh and a strong distribution network of over 25,000 deposit agents, HDFC is well equipped to offer a host of deposit products with different maturities catering to the unique needs of every investor be it individuals, trusts, institutions or corporate bodies.

HDFC Deposits provide Highest Safety, Attractive Returns and Impeccable Service Standards. HDFC is the only institution in India to have received ‘AAA’ rating from 2 leading credit rating agencies – CRISIL and ICRA for fifteen consecutive years for its deposits program, thus building maximum trust and confidence year-on-year.

Source: http://chackojoseph.com/hdfc-launches-systematic-savings-plan

Top 5 MFs' assets fall 4 per cent in Jan: Amfi

On the back of less deployment of funds by banks in mutual fund (MF) schemes and amid volatile equity markets, the average asset under management (AAUM) of top five fund houses fell over 4 per cent in January over the December figure.

Out of the 37 fund houses, 36 have declared their AAUM. Of these, 23 reported a fall in assets whereas only 13 saw a rise, according to the Association of Mutual Funds in India (Amfi) data released today.

The AAUM of the top five fund houses — Reliance, HDFC, ICICI, UTI and Birla Sun Life — squeezed to Rs 4,27,522.93 crore in January from Rs 4,45,847.48 crore in December.

Source: http://www.business-standard.com/india/storypage.php?autono=384377

Distributors Not Hot About NFOs

If you have been reading newspaper reports you would well aware that asset management companies (AMCs) have been hit by the ban on entry loads. Distributors are not selling aggressively and fund sales have taken a beating. But in no way has that come in the way of AMCs launching new fund offerings (NFOs).

The entry load ban came into effect on August 1, 2009. Ever since then, there have been 24 equity fund offers filed with the market regulator, the Securities and Exchange Board of India (SEBI). Looking at the period prior comparatively, the five months spanning March to July 2009 had 27 NFOs filed. Of the NFOs launched since the entry load ban, the public sector theme has caught the fancy of two fund houses with them launching focussed thematic offerings: Religare PSU Equity and Sundaram BNP Paribas PSU Opportunities. Funds with an international flavour have also caught on with DSPBR World Mining Fund and Mirae Asset China Advantage Fund.

Despite their enthusiasm to launch new schemes with the market being revived, the AMCs don’t have it easy. The lack of entry load has not got over-eager distributors pushing the schemes. The total NFO amount raised post the entry load ban has been just around Rs 268.64 crore. But in the March to July period it was a much weightier Rs 4,056.64 crore. Part of the reason could be investors not wanting to burn their fingers after the market carnage of 2008, while a large part could very well be distributors not eager to push fund products enthusiastically.


Source: http://new.valueresearchonline.com/story/h2_storyView.asp?str=101216

Exit ELSS post lock-in & go for diversified plans

Is it prudent to keep your money in a tax-saving mutual fund scheme beyond the mandatory lock-in period of three years?

A large number of investment experts think otherwise. They believe that transferring the money from a tax-saving scheme to a diversified scheme after the lock-in period would help you as an investor to maximise your returns as most tax-saving schemes are trailing diversified schemes on returns posted in the three- and fiveyear periods.

Tax-saving schemes or equity-linked saving schemes (ELSS) qualify for deduction of up to Rs 1 lakh under section 80C of the I-T Act.

‘‘ Though we recommend ELSS because of the prospects of getting better returns among available options under section 80C, we don't encourage staying invested in it beyond the mandatory period,'' says Hemant Rustagi, CEO, Wiseinvest , a Mumbai-based wealth management firm. Financial advisors maintain that ELSS can deliver double-digit taxfree returns after the lock-in period, whereas most other tax saving options -- mostly government-backed investments like PPF, NSC, etc -- offer only 8% returns. However , they add that ELSS is still not a wise option for longterm investment as these schemes fall behind diversified schemes. ‘‘ If you look at average returns, you will find that diversified funds score over tax-saving schemes in the long term,'' adds Rustagi.

A look at category average figures don't support the theory . According to Valueresearch , while ELSS has returned around 6.7% and 20.9% in the last three and five years, the corresponding figures for diversified schemes were 7.3% and 23% — not a major difference to worry about.

Experts say the number of funds that gave double-digit returns in the ELSS category is much less than the diversified sector. Valueresearch data shows that only 8 tax-saving schemes managed to post double-digit returns (10-18 %)in the last three years, whereas 58 diversified schemes managed to give between 10 and 24% in the same period. The difference is even more striking in the five-year performance : 90 diversified schemes gave double-digit returns (10-32 %) versus only 55 ELSS products that managed the same feat (10-24 %).

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/Exit-ELSS-post-lock-in-go-for-diversified-plans-/articleshow/5522218.cms

IDFC MF introduces Daily SIP

IDFC Mutual Fund has decided to introduce Daily Systematic Investment Plan (SIP) for all the schemes in which SIP facility is available with effect from 1 February 2010.

Daily SIP transaction will be processed only on business day.

The minimum number of installments shall be six.

All the other features i.e minimum SIP amount, load structure, applicable NAV, etc. shall remain the same.

Source: http://profit.ndtv.com/2010/01/30100004/IDFC-MF-introduces-Daily-SIP.html

Sundaram BNP Paribas MIP NFO

Sundaram BNP Paribas Mutual Fund has announced the launch of Sundaram BNP Paribas Monthly Income Plan (MIP) – Aggressive and Conservative plans.

This is an open-ended fund.

For the Aggressive plan, the fund would invest up to 100 per cent in government securities, debt securities and money market instruments, up to 30 per cent in equity and equity related securities and up to 70 per cent in securitized debt.

For the Conservative plan, the fund would invest up to 100 per cent in government securities and debt securities and money market instruments, up to 10 per cent in equity and equity-related securities and up to 75 per cent in securitized debt.

Both the growth and dividend payout options are available. Dividend reinvestment will be on monthly, quarterly and half yearly basis. The default option is monthly dividend payout.

The fund would be managed by K. Ramkumar (for debt portfolio) and Satish Ramanathan (for equity portfolio).

The fund has been benchmarked against CRISIL MIP Blended Index.

The New Fund Offer (NFO) opened on January 25, 2010 and closes on February 23, 2010.

The minimum application amount would be Rs 5,000.

One per cent exit load would be applicable if redeemed within one year.


Source: http://new.valueresearchonline.com/story/h2_storyView.asp?str=101213

10 investment resolutions for 2010

Every year starts with a handful of New Year resolutions – losing weight, giving up a bad habit, spending more time with family, or anything personal or professional. When we can make so many commitments to different parts of our lives – why forget our money? Let us welcome 2010 with ten simple investment resolutions we can all strive to make:

1. I will truly invest for the long-term
Everybody claims to be a long-term investor, but nobody really is. Most investors are relentlessly checking their portfolio every day, often more than professional money managers, and they lose sight of the long term. Checking your portfolio every day leads to overtrading, which only makes your broker and the tax department richer. Don’t forget that when you invest in a stock, you invest in a business – businesses don’t change materially every day.

2. I will not trade on tips
We love investment tips, from our brokers, bankers, family, and cocktail party acquaintances, particularly when they come for free. We are also happy to trade on those tips, forgetting that most of them are not grounded in any kind of reality. Anybody with an opinion who has watched a little bit of TV will give you a tip – that does not mean it makes sense and that certainly doesn’t mean you put hard earned money behind it.

3. I will be disciplined and not emotional about investments
It’s very easy to see an article about the 10% rise in a mid-cap stock and go out and buy it, forgetting that news is meant to get you excited. If there is one place where discipline and not emotion pays off, it is your money. Make a plan when you build a portfolio – why are you building a portfolio, when do you intend to sell it to use the money, when would you increase it?

4. I will do due diligence on my fund manager
It is very easy to invest with a fund manager and then blame him when something goes wrong. Do the due diligence before investing. Just because you are investing in a known fund house doesn’t not mean the fund manager is competent. Find out about the fund manager’s track record and ask the manager about their practices – accounting, reporting, redeeming funds, talking to clients – to see if you can really rely on them.

5. I will have reasonable expectations with my money
Investing in the stock market will not double your money in a year – you should stop working if it did. Have reasonable expectations from your money and money manager. A manager who can beat the market by 5% every year net of all fees has done very well by global standards and a manager who claims they can beat it by 30% a year is lying. Any equity investment will lose some money in a 2008 like crisis – no manager can perfectly call a crisis and neither can you.

6. I will try something new with my money
Are you tired of saying every money manager sounds the same and that there is nothing new in the market? Think again – the market is full of young boutique managers with interesting ideas and new approaches to investing. All you have to do is seek them out and give them a listen. Suspend your existing beliefs and learn new approaches to investing, and try them out, at least in a small dose. If nothing, it adds valuable diversification to your portfolio.

7. I will invest based on my needs
No two investors are the same and every investor has different needs based on their income, life stage and responsibilities. Investing isn’t about gambling or playing the market for fun, it is about building long term wealth to meet your future needs. Understand what your needs are and then invest appropriately in different asset classes and instruments.

8. I will think about risk
Most investors conveniently ignore the more important side in the risk-return equation of finance – the risk side. Risk exists and is different by stock, sector, and asset class, and every investor should have a basic understanding of risk. Don’t evaluate the return on any investment independent of the risk of that investment. Get mathematical with risk – you always want to know the return numbers on an investment, ask for the risk ones too.

9. I will not follow the herd
Who doesn’t love following the herd, whether it is movies, music or money? If everyone is subscribing to the Reliance Power IPO, there must be something great about it, right? Wrong. What everyone is investing in or not investing in doesn’t have to be right – in fact, investing by nature is about discovering opportunities that others haven’t. Next time, when you make an investment decision, don’t look to the world for validation.

10. I will invest, today
If you do one thing in 2010, don’t try to time when you invest. There is always a great excuse not to invest – market has run up too much, I am busy with other things, I don’t understand the market, afraid of a correction, can’t afford it. All the stars in the investing world never align and no time is a perfect time to invest – that is why markets work. If you are truly investing for the long term (Resolution 1), there is no difference between today and two weeks later.

Keeping even of a few of these simple resolutions will make us smarter, safer, and if nothing else, saner investors. This decade, let’s remember the lessons of the financial crisis, let’s be cautious yet creative with our money, and most importantly, let’s take our money seriously.

Source: http://www.moneycontrol.com/news/mf-experts/10-investment-resolutions-for-2010_432912.html