Mutual funds favourite investment option for Indians: Nielsen

Indians are more dependent on others while taking decisions for investments through the internet compared with their global peers, says a survey by information and measurement firm Nielsen.

Only 41 per cent of online Indian consumers make their own decisions for investments with mutual funds, metals, stocks and bonds emerging as their preferred options, according to the Nielsen Global Survey of Investment Attitudes.

When it came to investment options for the Indians, 64 per cent of the respondents favoured mutual funds among the top four asset classes, Nielsen said.

The survey, however, said compared to ordinary customers, net savvy Indians are more independent while taking investment decisions.

“As opposed to the average customer, online consumers in India appear to be far less dependent on others in decision exhibiting a marked independence in being self-sufficient and not entirely trusting of people around them,” Nielsen India director Subhash Chandra said.

The report said 16 per cent of Indian respondents indicated that they would take the advice of friends, relatives and colleagues while making financial decisions.

In the list of investment options, mutual funds were followed by precious metals (63 per cent), stocks (56 per cent) and bonds (40 per cent) as the most favoured investment options.

“The increasing popularity of mutual funds as an important investment tool is fuelled by the aware online consumer, who sees great benefit in systematic investment plans on offer now,” Chandra said.

Besides, Indian netizens continue to be enamoured by precious metals for traditional purposes as well as investments because of the perception that these are profitable over the years, he added.

The global study, which surveyed over 28,000 internet respondents in 56 countries, showed that a total of 42 per cent online Indian consumers made investments.

Source: http://investmoneyinindia.com/4134/mutual-funds-favourite-investment-option-for-indians-nielsen

Gold ETFs hit hard at Rs 30k investors book profits

After equity schemes, it seems gold exchange-traded-funds (ETFs) are now on investors’ radar for redemption.

In June, Gold ETFs witnessed an all-time-high monthly net outflow at Rs 227 crore. Thanks to the depreciating rupee, this catapulted gold prices to above Rs 30,000, despite the fact that prices of yellow metal prices have softened globally.

“I believe investors booked profits as the currency depreciation led to higher gold prices,” says Deepak Chatterjee, chief executive officer of SBI Mutual Fund.

Dollar-denominated gold imports to India escalate prices locally as rupee saw sharp weakness touching levels of as low as 57 against dollar.

Prior to the month of June, one of the highest outflows from gold ETFs at 41 crore in May had made industry analysts skeptical about the performance of gold as an asset class.  And now with close to six times of the previous net outflows, fund managers say opportunistic selling has hit gold ETFs.

There are several gold fund of funds (FoFs) which have cut their exposure to gold by as high as 15 per cent over the last one month.

Akshay Gupta, chief executive officer, Peerless Mutual Fund, says, “It was to happen. No one had seen gold prices above Rs 30,000, so investors, large opportunistic investors in particular, booked profits.

Amid skepticism that global gold prices may dip down to $ 1200 an ounce from the current level of around $ 1600 an ounce has further made Indian investors vary of investing in gold funds.

According to Gupta, in general there is a feeling that rupee may not depreciate further and will stabilize now. So, it made sense for investors to move out, he adds. Moreover, redemption pressure had started exerting its force when gold prices were hovering around Rs 28,000 per 10 grams. Industry executives say that had the rupee not depreciated, gold prices would have taken a U-turn to lower levels.

“But suddenly, currency depreciated by more than 10 per cent and investors held on at Rs 28,000 and made an opportunistic move when gold prices reached Rs 30,000,” notes Gupta.

According to Sunil Singhania, head of equity at Reliance Mutual Fund, “Gold should be used as a hedge. I would suggest investors not to put more than 5-10 per cent of their investment in gold.”

With a significant chunk of outflows from gold funds, the overall net outflows from this asset category in the first quarter (April-June) of FY12 has reached Rs 218 crore against a net inflow of Rs 942 crore during the previous corresponding period.

Amid gold funds saw net outflow during the month, equity funds too were hit as Rs 288 crore flowed out of the schemes.

Though income, balanced and other exchange-traded-funds managed to garner some fresh assets; heavy outflow from liquid and money market schemes at Rs 26,128 crore brought the overall flows in the negative territory. Outflows seen in liquid and money market category was owing to the quarter ending phenomena during which banks and corporate tend to redeem to meet their advance tax payments and other financial requirements.

Source: http://business-standard.com/india/news/gold-etfs-hit-hard-at-rs-30k-investors-book-profits/177941/on

Franklin India High Growth Co Fund - Change in Fund Manager

Franklin Templeton Mutual Fund has announced change in fund manager under Franklin India High Growth Companies Fund with effect from July 9, 2012. The scheme which was earlier managed by K.N.Sivasubramanian and Anand Radhakrishnan will now be managed by K.N.Sivasubramanian and Roshi Jain.

The scheme belongs to Diversified Equity category and has been ranked 3 by Crisil. The investment objective of the scheme is to generate capital through investments in Indian companies/sectors with high growth rates or potential.

Source: http://www.moneycontrol.com/news/mf-news/franklin-india-high-growth-co-fund-changefund-manager_728263.html

“There is value for the patient investors”

Over the last four years, the investment engine in India has slowed down owing to some domestic and global factors, but there is money to be made in long term, believes Ved Prakash Chaturvedi, CEO – Capital Markets and Investment Management, L&T Finance. “For an exciting market like India, it is difficult to say equity has lost its charm,” he said in an interview with Ritu Kant Ojha.

Excerpts:

The investors are losing patience with equity. Do you agree equity has gradually lost its charm over last three years?

The Indian equities market is being influenced by several factors — concerns about Eurozone, domestic inflation, interest rate and the rupee situation and a close watch of foreign investors on growth of our economy and earnings growth of various companies. In the near term it is expected that gloomy sentiment in business and investment and some headwinds from overseas markets and news flow may reflect in the market movement. However, the general belief now is that the worst period of our equity market is behind us and if some positive things fall in place, market sentiment may improve significantly. Thus, it is difficult to say that equity investing has lost its charm. Systematic, disciplined and patient investing in equity funds would create wealth in the long term.

Investors have not made any serious money over the last few years. Why should they continue investing in mutual funds?

Mutual funds offer a range of risk-return investment options in equity/ hybrid/ fixed-income securities. Investment in hybrid and fixed income funds have done well over the last five years. Owing to a combination of local and global factors equity funds have not performed. Medium term equity fund performance depends on performance of the economy and that of individual companies. But the engines of consumption, global business opportunities and financial intermediation are continuing to drive growth in their respective sectors. My sense is that the Indian economy will continue to grow at a rate significantly above that of other comparable economies. This will create medium term value for patient systematic investors.

There are 44 fund houses and 4,400 schemes. Do you agree that there is scope of merger of schemes, both in debt and equity mutual funds?

As any industry evolves, new entrants come in and launch a range of products to service their target investors. Some succeed in meeting investors expectations, others don’t and this has been the trend in the mutual fund industry as well. Over a period of time, the products in any industry get rationalised and the unsuccessful products fade away. In our view this is already happening in our industry. The good news is the meritocratic nature of competition and product selection by distributors and investors. This leads to natural selection and effective consolidation of products.

Do you agree there are not enough options available as far as investing in equity is concerned? Why isn’t there have been product innovation in India?

I feel that significant innovation has happened in India in the stock markets and mutual funds with evolving world class backbone for facilitating trades in our markets and similarly almost all instruments in the cash and forward markets are available here. Equity mutual funds offer a range of options namely, large-cap/ mid-cap/ hybrid/ thematic/ price-earning based etc. For the maturity stage of our market appropriate innovation has taken place. However, certain new products in the area of REITs, ETFs and hedge funds etc. will become popular in India in the future.

Source: http://www.indianexpress.com/news/there-is-value-for-the-patient-investors/971856/0

Consider these factors while picking a fund

Several people are convinced about using equity mutual funds as a preferred tool to invest, but they hit a roadblock when it comes to selecting the right fund. Some are promising, but new; others are established, but floundering. The advisers who clamour for trail commissions should be asked to demonstrate proven capability to select good funds for investors. We are not there yet primarily due to limited regulation on what advisers should do and how they earn their income. Investors end up buying funds based on past performance, which may not be repeated, as the fund houses themselves point out.

The focus for the investor should be on selection from the peer group, which these lists enable. A fund's performance may fall along with the markets in which it invests. Even the best equity fund may not post a positive return when the equity market return is negative. The decision at this point is an asset allocation decision-whether to remain in equity or not. It should not be confused with the fund selection decision, which is about choosing the right fund among peers that may be impacted by the market too.

First, there are funds for which you don't need to take a view; in case of others , your view matters. For example, if you buy a diversified equity fund investing in both large- and mid-caps , you leave it to the fund manager to take a view on the segment that will work well, and allocate accordingly. If you buy a fund that focuses on the mid-cap segment, you are going for a diversified portfolio, but are implementing a view on how midcaps will perform. Make sure you understand where you need to have a view and where the fund manager can do it for you.

Second, ensure you invest in the best. The simplest way to choose a good fund is to use its performance ranking. If your fund is 8/40, it is a top quartile fund (25% of 40 is 10, so funds up to the rank of 10 are top funds in this category). It is important to stick to funds that are above average, preferably top quartile funds. Check this ranking across time periods. This data is publicly available with fund research agencies such as Value Research . Funds that do not even beat the market index are not worth buying, but those that compete efficiently and stay ahead of the pack most of the time, are the favourites.

Third, do not look for consistency, that is, a fund that is always at the top of the league. In the 25-year history of competition in the mutual fund industry, there is no single fund that has stayed in the top quartile at all times. This is because different strategies work in different kinds of market cycles. Value funds, for example, will slip if the market is driven by growth. Slipping is not an issue, look for corrective action. Check how soon the fund bounced back after slipping . Your fund should stay in the top 50% mostly, not in the bottom 50% for over a year. In your yearly review, knock out the fund if it slipped for four quarters in its ranking.

Let's consider three qualitative factors to look for once you have chosen your fund based on peer ranking. First, the fund should clearly say where it will invest and how. Most fund objectives are hazy and fund managers tend to give themselves too much leeway on how they will generate returns. Without being too restrictive, if the fund says that it will invest in a diversified portfolio of equity shares, across sizes, it is good enough. To the investor, what matters is the manager's ability to select stocks carefully, manage sector exposure, and deliver a return that beats the benchmark index.

Second, the fund should demonstrate the ability to stay honest to its objective. Some funds are termed value-oriented , but most stocks they hold would not qualify . Some funds will tell stories about their ability to pick failing companies and turnaround stocks. These stories do not happen every day, and these funds degenerate to a diversified equity fund with a fancy name. Do not pick funds with vague objectives and strategies; they show erratic performance and corrective action is mixed.

Third, the fund house should have an investment philosophy that permeates most of its products. It is not possible for a fund manager to adopt diametrically opposite approaches to two products managed by the same fund house. If it has both value and growth products, see if the fund managers are different.

Some funds label such differences clearly and are transparent about how they function. In most cases, in order to push a new product, a fund house may come up with a fancy investment style, but not pursue it. Try and understand how the fund house does its job and choose the funds aligned to a stated philosophy . Ensure you buy into a specified, comparable, competitive product that is managed transparently. Review annually and replace laggards. Leaders fight to persist, but laggards always find the climb back tough.

Source: http://timesofindia.indiatimes.com/business/personal-finance/Consider-these-factors-while-picking-a-fund/articleshow/14759114.cms