Mutual Fund India

Time to check health of your portfolio

noreply@blogger.com (allmutualfund) — Thu, 18 Oct 2018 05:00:00 +0000

This is the best time to rebuild existing portfolio by unlearn what we have learn about financial market and once again learn what is financial market all about and make new portfolio accordingly.

By this weekend gives you best portfolio which i had given in 2008 which had delivered amazing return.

https://indian-mutualfund.blogspot.com/2008/11/suggested-portfolio-as-per-current.html

EPFO’s equity turn: what it means for you

noreply@blogger.com (allmutualfund) — Sun, 09 Aug 2015 02:01:00 +0000

While stocks exposure may increase returns, current limit of up to 5% is too small to have a significant effect

The Employees’ Provident Fund Organization (EPFO) has started investing in the stock market through the exchange-traded fund (ETF) route from Thursday.

An ETF is a basket of securities that tracks the stock prices of the companies on an underlying index, and is traded on the exchanges. Being a passive fund, it not only comes with a much lower expense ratio but also obviates the fund manager risk.

The labour ministry has allowed for 5-15% of Employees’ Provident Fund (EPF) money to be invested in equities. But, to begin with, EPFO has decided to take an exposure of up to 5% of the incremental corpus through ETFs. “We have decided to take it slow and see how it goes. So, we will start with an investment of up to 5% of the incremental corpus in ETFs,” said K.K. Jalan, central provident fund commissioner, EPFO. The Organisation will allocate `5,000 crore by March 2016 in ETF and could increase it to as much as `7,000-8,000 crore, said Jalan.

For now, the Organisation will invest in two schemes of SBI Mutual Fund—SBI-ETF Nifty and SBI Sensex ETF. Jalan said that out of the total investable corpus in equity asset class through ETFs, 75% will go into SBI-ETF Nifty and the remaining 25% in SBI Sensex ETF.

“SBI is our sole banker, so we have decided to go ahead with SBI Mutual Fund for now. Also, we didn’t have time to come out with a tender and spend another year finalizing the asset management company. In future, though, we will consider looking at others as well,” he added.

Before understanding what an equity exposure would mean to the money that you invest in your EPF account, let’s start with a quick look at how EPF works.

How EPF works

Every month, a salaried individual contributes 12% of her salary in the EPF account and the employer matches the contribution. A part of the employer’s contribution goes to the Employees’ Pension Scheme. The contributions made to EPF then compound at a rate declared by the EPFO every year. Currently, the rate of interest on your EPF money is 8.75% p.a.

Contribution by the employee up to `1.5 lakh qualify for a tax deduction under section 80C of the Income-tax Act, 1961. A deduction reduces your taxable income. The interest that your fund accumulates along with the contributions made are tax-free on withdrawal if you withdraw the money after five years of continuous service.

In terms of withdrawing your money, the rules allow EPF withdrawal only at the time of retirement, medical contingency or an unemployment period of two months. Given that EPF has exempt-exempt-exempt treatment of taxation—which means that your contribution and interest are both tax-free—it’s one of the top recommendations by financial planners for a person’s debt investment portfolio.

It is with the aim to improve returns further that EPFO has decided to enter the stock market. “If we remain invested in fixed income alone, then the interest rate is likely to remain subdued and see further downward trend in coming years. If we hadn’t changed our investment philosophy, then it would be difficult to give good rate of returns to subscribers. So, it was considered appropriate to a bring change in the methods of management of funds cautiously and carefully” said Bandaru Dattatreya, Minister of State for Labour and Employment (independent charge).

With equity investments the expectation is that EPF will offer a meaningful real rate of return. “There is no proper social security net for an Indian household. So, they end up putting their money in bank FDs (fixed deposits). In a way this is good for banks but does not do much for the savers,” said Arundhati Bhattacharya, chairperson, State Bank of India. “When inflation is high, bank interest can’t keep pace and doesn’t beat inflation. Hence, despite saving, savers lose money. If you take a longer-term view, equity gives superior returns,” she added.

Equity support for EPF

Currently, EPF invests largely in government securities with the help of five fund managers, namely SBI, ICICI Securities Primary Dealership Ltd, HSBC Asset Management (India) Pvt. Ltd, Reliance Mutual Fund and UTI Asset Management Co. Ltd.

“Currently, we invest around 65% in government securities and the remaining in public sector and private sector bonds. In private sector bonds, our exposure is less than 5%. Since our portfolio is held to maturity, the role of fund managers is not much and so the fund management is very less, of around 0.00005%, which is deducted from the fund,” said Jalan.

Considering that even the equity investments will be managed passively, there will not be a fund manager, but even ETFs come with an expense ratio that will be borne by the investor.

“SBI Mutual Fund has given us a discount on the expense ratio as we will pay only 0.07%. The expense ratio will be deducted from the fund value,” said Jalan. Given that mutual funds are not allowed to offer differential pricing, this discount benefits even individual retail investors.

“We are already seeing the spill-off as the race to the bottom has begun. Reliance and ICICI Pru mutual funds have reduced their expense ratios from 0.5% to 0.03% on their Sensex and Nifty ETFs in the hope to get a share of the EPF money. For retail investors, this is certainly good news as it will reduce tracking error of the funds,” said Manoj Nagpal, chief executive officer, Outlook Asia Pvt. Ltd.

Returns kicker missing

What will equity investment mean for your EPF money? It’s too early to say, feel most financial planners. “This move will help create a buzz around EPFO and people may start watching this asset class. However, we don’t expect interest rates to improve as of now since the exposure (to equity) is very small and won’t have such a big effect on the overall investments,” said Surya Bhatia, a Delhi-based financial planner.

Others agree that the 5% limit imposed is very small. “The amount that will be exposed to ETF is minuscule. It is difficult to say if it will give better returns since it is only 5% of the overall corpus,” said Suresh Sadagopan, a Mumbai-based financial planner. This means that you may not really see a significant improvement in your returns.

“Investing 5% of the incremental corpus may mean that the returns improve by about 10 basis points. For equities to have a significant impact, they (EPFO) will need to increase the investment to 10-12% of the incremental corpus,” added Nagpal. One basis point is one-hundredth of a percentage point.

However, unlike mutual fund investments, which show the net asset value (NAV) of your investment on any given day to help you track the performance of the fund, the EPF money going into ETFs will for now continue with the same system of declaring a rate of interest on your overall portfolio.

EPFO declares a rate of interest at the beginning of the year, which is the rate at which your money will compound for the year. In future, this rate will also reflect the returns made from the equity market, and EPFO is working towards making the system more transparent. “We are studying the various pension systems around the world and will come with an accounting methodology soon. In some cases, a part of equity returns are distributed whereas a part is kept as reserves which can be dipped into if the markets turn volatile. We are looking at various ways and should be able to finalize soon,” said Jalan.

For the stock markets, too, the move is good news as it will bring in long-term money, which lends to stability.

“Given that EPFO will invest in equities on a regular basis, it’s like having an SIP (systematic investment plan). The current SIP book is about `2,000 crore and I see this book doubling with EPF money in the coming years. This will reduce volatility,” said Nagpal.

For you, the good news is that EPF has finally entered the stock market and as contributions begin to increase over the long term, it may mean better returns on your investments.

Source: http://www.livemint.com/Money/nYf04GWyTbEYtdY3EPkNVK/EPFOs-equity-turn-what-it-means-for-you.html

EPFO makes stock market debut today

noreply@blogger.com (allmutualfund) — Sun, 09 Aug 2015 01:56:00 +0000

India’s pension fund will invest R410 cr each month during FY16 through ETF route

As India’s retirement fund body gets ready to invest in the stock markets starting Thursday, the Street is optimistic and believes the institution’s entry will have multiple benefits for the Indian equity markets.

The government on Thursday will officially announce the Employment Provident Fund Organisation (EPFO)-investment into equity markets through an exchange traded fund (ETF). The fund will be managed by SBI AMC. In the initial stages, the EPFO will invest about R410 crore or 5% of its incremental deposits each month during fiscal 2016, making EPFO the second largest domestic institutional investor after LIC.

Experts opined that EPFO’s entry will bring quality long-term money into Indian equities. More importantly, it will bring better balance to equity markets at the time of foreign fund outflows.

Milind Barve, MD, HDFC AMC views the entry of EPFO as a great opportunity for the markets as it would get access to funds of close to R1 lakh crore per year based on 10-15% investment of its corpus.

“It is potentially a great opportunity… Although initially the money would come through the ETF route because actively maintained funds are not yet permitted to manage EPFO money, it will increase the amount of funds allocated to equity markets through mutual funds and most importantly, it will be high quality investment as it will come for the long term,” Barve told FE.

The equity ETFs market in India is at a nascent stage with total assets of other ETFs at R7,322 crore as on June 2015, data from the Association of Mutual Funds of India (Amfi) showed.

Nilesh Shah, MD, Kotak AMC foresees a ‘tsunami’ coming into financial markets from domestic investors, anticipating about R2 lakh crore of money over a long-term period. “The DII flows will consolidate further in the coming months as pensions funds arrive in equity markets. The pension funds have not invested even a single rupee into equities, and now they have been allowed to invest anywhere between 5% to 15%. Globally, pension funds are the biggest owners of equity markets. It will benefit both the markets and the pensioners,” Shah told FE.

The Central Board of Trustees’ headed by the labour minister Bandaru Dattatreya had decided in March to start investments in stock market. However, it was assured to the trustees in the meeting that being cautious about the volatile nature of stock market and with no prior experience of such investments, EPFO will start with investing in ETF during the current fiscal.

In the present scenario, the EPFO has received an average monthly incremental deposits of R8,200 crore during this financial year so far. By the end of twelve months of investing, EPFO will invest close to R5,000 crore in equity ETFs out of its total annual investible fund of R6.5 lakh crore. An ETF is a security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange.

Source: http://www.financialexpress.com/article/markets/indian-markets/epfo-makes-stock-market-debut-today/114423/

India on marathon path; markets don't need steroids: Uday Kotak

noreply@blogger.com (allmutualfund) — Tue, 02 Jun 2015 03:43:00 +0000

Confident that India is on a 'marathon' growth path, eminent banker Uday Kotak has said that the markets should not look for any 'steroids' even as he warned against excessive debt exposure of the corporates.

Kotak also said that it has been an "euphoric phase" since the Narendra Modi-led NDA government came into power a year ago, while there is perception emerging now that expectations were ahead of reality.

"This perception stems from excessive exuberance, which needs to be moderated. However, in reality, I am confident that growth will be steady, stable and upwards.

"I am convinced that the India Marathon story is already playing out. The watchers of the Indian economy as well as the markets should not look for steroids," the Kotak Mahindra bank chief said.

Kotak also said that one of the biggest challenges today was the history of excessive leverage by India Inc.

"This has slowed down parts of the Indian banking system. As these events unfold and unravel, I sincerely hope that it does not create any accidents and challenge the capacity of the financial system in supporting the growth of the Indian economy," Kotak said in his annual letter to the shareholders of Kotak Mahindra Bank.

Elaborating on his views about the first year of the Modi government, Kotak said, "While the euphoria may have faded, the country has made progress. India's macroeconomic signals have become stronger and stable. Crucial parameters such as current account deficit, fiscal deficit and levels of inflation have improved."

Listing out the possible challenges for the India growth story, Kotak said, "It is unlikely to be a great snapshot, but certainly will make for a wonderful movie.

"India is poised to witness stable and sustainable growth in the long term."

On banking sector, Kotak said that public sector banks currently account for about 70 per cent of the savings and deposits, while private sector banks account for the rest.

"With new issues challenging the banking system, it is time for us to ponder how we structure the future of Indian banking. I believe that over the next 10 years the ratio will be equitable between public and private sector banks."

Kotak said this presents "significant challenges and opportunities" for Kotak group and it needs to "build an institution that has the capacity to defy gravity" and create a 'Bigger, Bolder, Better Kotak'.

He said that the group has already taken steps in that direction, including with the mega merger of ING Vysya Bank with Kotak Mahindra Bank that has created a combined entity with total employee base of over 40,000 and the combined consolidated balance sheet of around Rs 2 lakh crore.

Other strategic decisions include acquisition of domestic schemes of PineBridge Mutual Fund and a 15 per cent stake in India's largest commodity exchange - MCX, Kotak said.

"Fourth, we are foraying into the general insurance business, which will be a 100 per cent subsidiary of the Bank.

"And finally, we have agreed to invest up to 20 per cent in a proposed payments bank by Airtel M Commerce Services Limited - an area where we see immense potential."

Kotak said that the different arms of the group have shown healthy growth and its asset quality has been "top notch, riding on low gross NPAs and net NPAs, and lowest restructured assets in the Indian banking sector".

"We expect our fee income from foreign exchange business, equities, brokerage, or distribution of products in the mutual fund space to grow further, as we build our franchise. We are also emerging stronger on account of our robust liabilities and assets.

"Further, we have deepened and widened our customer base, which is growing steadily. With the merger of ING Vysya Bank, our national footprint has grown. Our brand campaign 'Kona Kona Kotak' signifies our expanded reach across hundreds of towns and cities of the country.

"As I evaluate our 'Concentrated India, Diversified Financial Services' business model, I am excited about all segments of our business," he said.

Kotak said he also sees tremendous growth potential in the capital markets and investment banking businesses, while other promising businesses are life insurance and asset management.

"I see a turnaround in both the businesses as we leverage the additional distribution network. There is also some traction in our alternate asset businesses.

"Therefore, banking and financing, capital markets and investment banking, life insurance and asset management give us a complete menu of diversified financial services, which we believe will help us leapfrog to significantly higher growth rates in the coming years.

"I am a great believer in creating long-term shareholder value... If you look at the Kotak story, an investor who invested Rs 1 lakh in Kotak in November 1985 - when we just started the company, would today have a shareholding worth over Rs 1,100 crore," he said.

"The journey has been enjoyable so far and I am looking forward to an even more exciting time in the context of India's Marathon story. I am confident that brand India and the potential that it promises will provide us the platform to build an institution of global repute, size and stature," Kotak said.

Source: http://economictimes.indiatimes.com/markets/stocks/news/india-on-marathon-path-markets-dont-need-steroids-uday-kotak/articleshow/47489253.cms

Mutual fund industry body AMFI scouts for a new CEO

noreply@blogger.com (allmutualfund) — Sat, 30 May 2015 05:38:00 +0000

Mutual fund industry body AMFI has begun the search for a new chief executive and set up a three-member committee to find a successor to the current CEO H N Sinor.

Sinor's term ends in September. He had joined AMFI in 2010 as its CEO after A P Kurian's retirement.

Sinor was re-appointed as the CEO earlier this year after his term ended in December 2014.

The next CEO will be selected in the next Annual General Meeting (AGM) of Association of Mutual Funds of India (AMFI), which is expected in September, official sources said.

The search panel comprises of AMFI chairman Sundeep Sikka, who is also managing director and chief executive of Reliance MF, HDFC MF managing director Milind Barve and Birla Sun Life MF chief executive A Balasubramanian.

The ideal candidate to fill the top post at AMFI would be a person having decades of experience in the financial markets.

During Sinor's tenure, the mutual fund industry has dealt with sweeping regulatory changes.

Among the initiatives taken during his term, AMFI has put a one per cent cap on upfront commission paid to distributors and initiated investor awareness campaign.

Sinor is a former ICICI Bank executive and chief executive of the Indian Banks' Association.

AMFI, which is the industry association of mutual funds, interacts with market regulator Sebi regarding mutual fund related issues and also represents the industry to government, RBI and other organisations. It also serves as a self- regulatory body for mutual funds.

Source: http://timesofindia.indiatimes.com/business/mf-simplified/mf-news/Mutual-fund-industry-body-AMFI-scouts-for-a-new-CEO/articleshowhsbc/47456770.cms

BofA-ML retains December Sensex target at 33,000

noreply@blogger.com (allmutualfund) — Wed, 27 May 2015 04:32:00 +0000

American brokerage Bank of America-Merrill Lynch (BofA-ML) on Monday retained its Sensex target at 33,000 by December, but said in the medium term, the Dalal Street will see more volatility.

“We continue to maintain our December Sensex target of 33,000 points. But near-term the markets will remain subdued and range bound with a negative bias, as quarterly earnings are low and more earnings downgrades are likely over the medium term,” BofA-ML analyst Jyotivardhan Jaipuria said in note.

“Also, the India versus GEM premium is near all-time at 35% the GE averages,” Jaipuria said. The markets are likely to witness another quarter of weak growth in the ongoing earnings season. Mirroring the previous quarter when aggregate Sensex profit fell 1% year-on, profit growth is once again going to be subdued at 1%, he said, adding he sees more earnings downgrades for the next few months before stabilising and earnings upgrades may not start until next year.

On a top-down basis, we expect 2015-16 consensus growth estimates of 18% to get downgraded to 12-13% growth, he added. However, he noted that foreign institutional investors (FIIs) have the all-time high overweight on the domestic market. This is on the back of nine consecutive quarters of positive FII inflows.

Strong FII inflows have resulted in all-time high foreign ownership for the markets at about 28%. While GEM funds have a 12.8% weight on the country against the index weight of 7.7%, which is a massive 510 bps OW.

Noting that the Sensex has rich valuations, he said post-2014 polls, the markets re-rated and have been trading at 16 times one-year forward PE. And despite the recent bloodbath, the valuations are still a 10% premium to long term averages. Also, in the GEM context it is currently at a 35% premium to GEM, he said.

On the Modi government’s first year reforms report card, Jaipuria said slow and steady reforms were anticipated and the reported loss of faith in the Modi regime to accelerate reforms is partly due to unrealistic expectations. “Returns last year were led by re-rating, but returns this year would be led by earnings. With earnings being sluggish, the markets would give a flat to slightly negative return for the majority part of the year and the YTD return has been negative 1.5%.

“We see earnings improving only late 2015 and the market returns being back-ended with a flat to slightly phase in Q2 and Q3 of 2015,” Jaipuria noted. He attributed three reasons for the present investor jittery-sluggish recovery, the minimum alternate tax (MAT) controversy and delay in getting the new land law in place. The economy continues to be sluggish and earnings growth in the December quarter was the weakest in 20 quarters and the current quarter is unlikely to be different, he said, adding the dispute on MAT has reignited fears of harsh taxation rules.

On the new land law, he said this underlines difficulty in reform legislation. Investors have been keenly watching the progress of the new land acquisition bill and are hoping the government can quickly pass the Bill through a joint session of Parliament.

He also warned that investors could be disappointed if the land acquisition bill and the goods and services tax bill are not passed in the Budget session, Jaipuria said, adding the chances of these Bills getting House nod look distant.

Source: http://www.livemint.com/Money/hBHnH7dvge8FKWZnKIM7ZL/BofAML-retains-December-Sensex-target-at-33000.html

Mutual funds slow down pumping money in stocks in May

noreply@blogger.com (allmutualfund) — Wed, 27 May 2015 04:29:00 +0000

Mutual fund managers have reduced their pace of buying this month, amid sharp rise in volatility. After pumping in more than Rs 9,000 crore in Indian stocks in April, fund managers have bought shares worth around Rs 3,300 crore so far this month. The drop in investment pace, industry players, say is a tactical call and not a directional one. They add that it is a continuation of "buy on dips" strategy.

Thus far this month, in the 16 trading sessions, equity fund managers have net invested about Rs 3,300 crore, which is nearly a third of what the previous month witnessed. Compared to the immediate previous month, the quantum of net investment is low but is in line with the average monthly investments ever since the Narendra Modi-led BJP government took office in New Delhi last year.

The investment figure in last month was unusually high after the market had come off nearly 10 per cent from the highs.

According to fund managers, it is a tactical call and should not be read as directional. It has come at a time when corrections in the key indices appear to have been arrested to some extent. Rather, the benchmark indices are showing some resilience and are up about two per cent compared with April-end. In the recent past too, fund managers had reduced their buying spree whenever markets moved up.

G Pradeepkumar, CEO of Union KBC Mutual Fund, says, "Since the start of the current rally, fund managers have been aggressively buying on dips. Last month, when markets witnessed corrections, we have been buyers. Further, strong inflows in the equity segment also fuelled investments."

Another possible reason for the slowdown in investments could be relatively less robust inflows in equities from investors. Sector executives say reduction in inflows cannot be ruled out in May. Rajiv Shastri, managing director & CEO of Peerless Mutual Fund, says, "Slowdown in inflows could be a possibility. When situation looks a little uncertain, investors tend to hold back their investments."

The Reserve Bank of India (RBI)'s next policy review on June 2 is also being eyed by fund managers as the next decisive trigger. According to them, it is to be seen how the RBI moves as there appears to be visible pressure from the government for an imminent rate cut.

In FY15, the total net investments by fund managers were to the tune of about Rs 41,000 crore, the highest in sector's history with net inflows for the year at Rs 71,000 crore.

Nearly 10 per cent correction in stock indices post the Union Budget against the recent peaks were taken as big opportunities by the fund managers to pick stocks. Even investors increased investments during the March-April period, which were as high as Rs 19,000 crore.

Currently, the industry has over 400 equity-oriented schemes managing assets worth Rs 3.45 lakh crore.

Source: http://www.business-standard.com/article/markets/mutual-funds-slow-down-pumping-money-in-stocks-in-may-115052601188_1.html

Indian funds have beaten Warren Buffett in returns, says Nilesh Shah

noreply@blogger.com (allmutualfund) — Tue, 26 May 2015 03:30:00 +0000

Indian investors are still in reverse track, Nilesh Shah tells ET Wealth. The good news is a more mature set of investors has entered the market in recent years.

A recent report says most actively managed mutual funds underperformed their benchmarks in the past five years. What are your observations?

Nilesh Shah: There's a saying that if you torture data enough, it will confess to everything. The SPIVA report is nothing but torturing of data. They have failed to appreciate that the worst performing Indian mutual fund outperformed Warren Buffett in dollar terms by over four times in the past 17 years. They also failed to appreciate that Indian equity fund managers outperformed the benchmark indices by double the margin by which Buffett outperformed indices in past 17 years. So we are outperforming the God himself, but you are torturing data to represent something that is untrue. All I can say is, please don't denigrate us and represent data to get sensational headlines.

You think all mutual funds have done their job well?

Nilesh Shah: As a mutual fund house, our job is to ensure that we take proper care of our clients' money. This could be in terms of outperforming the benchmark indices of the respective schemes. Fund managers are also human. They also make errors. If they keep on repeating those errors, there is cause for concern. In 2000, a lot of fund managers went wrong in picking companies. In 2008, a lot of us went wrong on the valuations. But at least the mistake of picking the wrong companies was avoided.

Equity funds have given good returns in the past 10-15 years. Why are investors still staying away?

Nilesh Shah: Indian investors were 45% owners of Indian equity in the early 1990s. Today, they own only 9-10%. While the market cap of Indian companies has soared, the Indian public has just sold off its stake. There are lots of Indian companies run by excellent entrepreneurs and managers. These people work hard but the fruits of their hard work are enjoyed more in Singapore, Hong Kong, London and New York, rather than in Ahmedabad, Bengaluru, Mumbai and Delhi. Indian companies are progressing but Indian investors are still in reverse track. If Indian investors had not sold off, HDFC and other great companies would still be Indian-owned.

Some portion of the EPF corpus will now be invested in stocks. What do you think of the development?

Nilesh Shah: It is a positive move. The investment philosophy followed by the EPFO for the past several decades has led to poor returns for investors. There are millions of subscribers who have been contributing to it for the past 15-20 years. By not investing in equities, they have remained poor. Imagine how much richer they could have been if some portion of their PF balance was allocated to equities 15-20 years ago.

Do you think equity fund investors in India have matured in the past 10-15 years?

Nilesh Shah: On one hand, there are investors who are happy with a reasonable return that beats the broader market. On the other hand there are investors who want to double their money in a very short time. They think that since fund managers appear on TV and other media, they are gurus. If a fund manager could predict with certainty where the market was headed, why would he work? A fund manager is not a wizard, he doesn't have a magic wand like Harry Potter. However, a more mature set of investors is now emerging. They are not too upset when markets don't do well. They understand that the downturn is transitional and try to gain from it by buying more at low prices. A growing number of investors is also realising the benefits of regular and longterm investing. There are 78 lakh SIP investors in funds today. We pray they continue and reap benefits of systematic investments in equities.

Source: http://economictimes.indiatimes.com/opinion/interviews/indian-funds-have-beaten-warren-buffett-in-returns-says-nilesh-shah/articleshow/47395888.cms

Don't switch out of debt funds

noreply@blogger.com (allmutualfund) — Tue, 26 May 2015 03:25:00 +0000

We have been recommending the long-dated debt fund strategy for some time now. While it has generated handsome returns in the past, conditions are not rosy for investors who got in only in the last three months. Income funds have generated absolute returns of only 0.97% in the last three months while the average longand medium-term gilt fund has lost money .

So what went wrong? After falling for more than 18 months, the 10-year yield remained almost flat the last three months before starting to inch up in the last few days. The 10-year yield is now placed at 7.87%, 22 bps higher than the recent low of 7.65% on 2 February . To find out where the yield is headed, we need to take a look at the factors that contributed to its recent spurt.

First, the spurt in crude prices from its recent lows has raised doubts about the low inflationary situation in India.Brent crude is at $69 per barrel, a more than 40% jump from its January low.However, experts think this spurt is temporary. "What is happening on crude is a technical bounce," says Rajeev Radhakrishnan, Head, Fixed Income, SBI Mutual Fund. This is because there is no reduction in supply by OPEC. "Crude should stabilise between $60 and $70. If prices go above $70, shale producers who shut down production may come back," says Radhakrishnan.

Food inflation is another worrying factor. A below average monsoon is predicted too. However, experts remain unfazed. "The corelation between monsoon and inflation is low," says R. Sivakumar, Head of Fixed Income, Axis Mutual Fund. "Food inflation is due to the increase in minimum support price and the government has made only a very small increase this time," he adds.

The CPI-based inflation, which the RBI uses, is still above 5%. However, the WPI-based inflation is in the negative zone for the last five months and should help bring down the CPI-based inflation.Growth not picking up as expected is another reason for a benign CPI-based inflation. "We are growing well below our potential rates. With enough spare capacity , manufacturer's pricing power is low and this should help inflation to shift lower," says Radhakrishnan. That would mean the RBI's CPI-based inflation target of 6% by January 2016 will be achieved. "Inflation should be close to 5% in the next year," says Sivakumar.

The weakness in the rupee is another factor holding the RBI's hand. The dollar has been appreciating over the last few months due to US rate hike fears and has already reached `64.05. Though RBI wanted a small depreciation in the rupee due to inflation differential, it would not like a sudden crash. Another factor irking RBI is the behaviour of banks, which have not passed on the benefits of the last 50 bps cuts to custom ers. However, the banks have started passing on some benefits. With more banks participating, RBI may restart rate cutting soon. "The next rate cut from RBI may happen before June 30," says Kumar.

The spike in 10-year yield can also be linked to technical factors in the market. RBI is about to issue new 10-year papers, so existing investors are getting out of current ones. "The yield on the existing 10-year paper is high because of the illiquidity premium and the yields on new papers are usually 15 bps lower than the old papers," says Indranil Pan, Economist, Kotak Economic Research. With the FII limit on government securities reached, there is no additional FII inflow here. Any increase in limit will result in fresh bout of buying and bring the yield down again.

Experts are of the view that the 10year yield will come down in a year."The current yield of 7.95% is an aberration and should come down to 7.25% in 5-6 months," says Kumar. Sivakumar and Radhakrishnan agree.

Stick with long duration: Investing in long duration funds is the best strategy to make money from a fall in interest rate. The price of bonds and yield are inversely co-related and bond prices move up when yields go down.Existing investors should stick with long duration funds instead of shifting.They can also consider putting in fresh money into this segment. However, note that the current yield is below 8%."Only investors with long-term holding period and strong views can make money this year," says Pan. "There will be short-term volatilities in long duration funds and instead of selling, they should hold on," says Vidya Bala, Head, Mutual Fund Research, FundsIndia.

Gilt or income: "Income funds are better for retail investors, as gilt funds are for those who have specific views on gilt yields," says Sivakumar. The advantage of income funds is that they can get the benefit of the higher yield in corporate debt papers also. Income fund managers usually invest in corporate debt when the difference between the gilt yields and AAA rated corporate bonds are high and get back to gilt then the yield difference is low. Pure gilt fund investors, who time the gilt yield cycle correctly, may also have to deal with higher taxation. The Indian gilt yield cycles takes 18-24 months. Since the minimum holding period for long-term capital gain for debt funds has been increased to 36 months, active investors who exit before three years will have to pay short-term capital gains tax.

Short-term for stability: Investors who seek stability can go for short-term income funds. Here the returns come through the accrual method. These funds have generated decent returns in the past year. However, short-term rates are expected to fall. A better option are dynamic funds, where the fund manager takes the call on maturity based on his reading of interest rate movements.

Source: http://timesofindia.indiatimes.com/business/india-business/Dont-switch-out-of-debt-funds/articleshow/47410775.cms

Time To Tank Up

noreply@blogger.com (allmutualfund) — Tue, 26 May 2015 03:21:00 +0000

"Investors are switching to equity and debt funds to cash in on the stock market rally".

Adarsh Shamdasani, 35, general manager at a Mumbai-based export company, invested only in gold and fi xed deposits to build her wealth. She did dabble in equities and debt mutual funds a few years ago, but was quick to retract. "Gold and fi xed deposits have been the safest investment options for me and I have stuck to them," she says. However, of late, Shamdasani has been toying with the idea of making her debut as a 'serious' investor, given the improving macroeconomic conditions and the subsequent rally in the stock market. "With reducing interest rates, equity and debt mutual funds seem to be a more attractive option," she quips.

Shamdasani is not alone. An increasing number of Indian investors are trying to make the best of the stock market rally. This is evident from the fl ow of Rs 62,500 crore in equity mutual funds between March 2014 and February 2015. The value of assets held by individual investors in mutual funds increased to Rs 5.52 lakh crore in February 2015 from Rs 3.93 lakh crore in the past one year. Says S. Naren, CIO, ICICI Prudential AMC: "The spur in economic activity and poor performance of other asset classes, such as real estate and gold, in the recent past have contributed to it."

After years of stupor, the Indian stock market rally saw the Bombay Stock Exchange (BSE Index) rise by 27 per cent after the NDA government came to power at the Centre with full majority. While equity funds have done even better with the category average returns ranging from 35 per cent to 75 per cent, debt mutual funds also gave 25 per cent returns, compared to gold funds losing nine per cent during the period.

MARKET RALLY TO CONTINUE

Naren feels equities will continue to do well. "The government's reforms initiatives have set the stage for a virtuous economic cycle which will boost corporate earnings," he says.

Market valuations are a factor of earnings growth, hence current valuations may seem high due to poor earnings growth in the corporate sector. Profi t growth for 2014/15, for instance, collapsed to 4-5 per cent, which is lower than the average of the last four to fi ve years. Even though the stock market is trading at about 17 times one year forward earnings, which may appear expensive prima-facie, given the historical average of 14 to 15 times, in the current scenario, the valuations are not expensive," says Pankaj Pandey, Head of Research, ICICI Direct. During the peak of 2008, markets were trading at 18-20 times one-year forward multiples, leaving enough room for expansion.

Going forward, a pickup in earnings growth will depend on the speed with which government reforms are implemented and capital expenditure is undertaken. Naren says the Indian economy is in a much better shape, since current account has been improving, infl ation is on a downtrend, forex reserves are much higher and growth impulses are picking up. The actions taken by the government is likely to start refl ecting in corporate earnings over the next three to four quarters, with a consensus among market experts at 16-20 per cent profi t growth for 2016/17.

According to I.V. Subramaniam, Managing Director and Chief Investment Offi cer, Quantum Advisors, investors entering the market now must be wary and invest with a longterm orientation as there is risk of near-term underperformance. "If one does not have the skill set to analyse stocks, avoid direct investments. Instead, use the mutual fund route and do not get carried away by near-term favourites," he adds.

Mid-cap funds, for instance, have given over 70 per cent returns in the last one year, which can be attributed to the fact that these funds take incremental risk by investing in high-beta stocks, which allow multi-fold returns. It is diffi cult for large-caps to mimic mid-cap funds. The other factor driving mid- and small-cap stocks is the enhanced liquidity. Typically, liquidity drives mid-cap stocks more easily than large-caps. However, during a bear phase, these stocks fall steeper than large-caps.

According to Subramaniam, investors should maintain their core portfolio into large-cap funds, while mid- and small-caps should form a smaller portion of their portfolio. Further, with mid-caps running up twice as much, easy stock picking is behind us. Hence, choosing a fund wisely is more imperative now than before. Investors should look at fund performance through various cycles and its performance vis-a-vis its benchmark. Unlike large-cap funds, which make alpha from sector selection (for example, being overweight on the banking or pharmaceutical sectors, etc.), mid-cap funds make alpha on the basis of stock selection. Therefore, while choosing a fund it is critical to see who is the fund manager and how his performance has been over the years.

Says Vinit Sambre, Fund Manager, DSP BlackRock: "Retail investors should incrementally look at allocating higher share to equities as it is likely to outperform all other asset classes in the next 3-5 years." The other advice will be to follow strict discipline in terms of equity investments and avoid low- quality traps. Investor participation in stock market usually increases as valuations rise, which should not be the case. "It may be prudent to add funds in the balanced, dynamic or asset allocation category as they seek to increase allocation to equity when the markets are cheap, and book profi ts in equities when markets are rising, thereby, reducing volatility and boosting returns," says Naren.

SECTOR PREFERENCE

Pandey of ICICI Securities is bullish on domestic sectors such as automobiles, cement, capital goods and banks. According to him, defensive sectors such as FMCG, pharma and IT could perform in line with the broader market. He maintains his December 2015 Sensex and Nifty target of 32,500 and 9,750, respectively. Ridham Desai, Managing Director and Head of Research at Morgan Stanley, estimates a 24 per cent CAGR in Sensex earnings in the coming two years compared with 17 per cent estimated by the bottom-up consensus. He is overweight on private sector banks, industrials, discretionary consumption and technology. Naren believes highly leveraged segments are likely to do well considering a 50 basis point cut. It will reduce the interest burden of leveraged companies. Many highly leveraged companies did badly relative to the rest of the market, and some of them are wellpoised to make the most of the lower interest rate cycle.

Debt-ridden companies may not necessarily have the best fi nancials or the best balance sheets now and, therefore, it would require intensive research to narrow down to specifi c companies. "Financials is another area that looks quite promising.

Public sector banks require capital and, over time, lower interest rates should benefi t banks as it will improve growth and reduce nonperforming assets. A combination of lower interest rates, lower NPAs and capital infusion are extremely positive for the fi nancial sector," adds Naren. Visibility on capex revival through increased government spending and addressing issues of fi nancing infrastructure projects could also benefi t certain sectors in the infrastructure space.

TRENDS IN INCOME MUTUAL FUNDS

Fixed income, too, offers good investment opportunity. According to Pandey, outlook for the bond market turned positive in 2014 on the back of attractive levels of government security (g-sec) yields after continuous sell-off and improving macroeconomic data. The sharp fall in consumer prive index (CPI) infl ation coupled with favourable global and domestic macroenvironment, such as softening global commodity prices, a stable rupee, and comfortable fi scal and current account defi cit, have led to increased expectations from market participants about rate cuts by the Reserve Bank of India. Increased and sustained foreign infl ows in the Indian debt market also improved market sentiments, leading to increased domestic participation in income funds and g-sec funds.

What is likely to decide the income trajectory from here on is the CPI or retail infl ation, which is the key driver for interest rates to ease. According to Rahul Goswami, Chief Investment Offi cer, Debt, ICICI Prudential AMC, interest rates are likely to decline by another 50 bps over the course of this year. The 10-year g-sec yield is currently hovering at 7.75 per cent and could fall to seven per cent mark in about a year, making debt attractive. Falling interest rates and yields are good news for bond investors as interest rates and bond prices share an inverse relationship: any fall in rates and yields lead to an appreciation in bond prices, and vice versa.

Says Santosh Kamath, Managing Director, Local Asset Management, Fixed Income, Franklin Templeton Investments, India: "Debt mutual funds offer an attractive alternative to traditional savings instruments due to their return potential and tax advantages. Some of the other key benefi ts of mutual funds are professional management, diversifi cation and easy access to liquidity at a fraction of the cost of buying debt instruments individually to build such a portfolio.

Source: http://businesstoday.intoday.in/story/investors-eye-equity-debt-funds-benefit-from-stocks-rally/1/219657.html

Volatility counts while picking equity mutual fund schemes

noreply@blogger.com (allmutualfund) — Tue, 26 May 2015 03:08:00 +0000

One of the best investment options is to invest in mutual funds. Mutual funds investments through SIP provide good returns in the long run. However, when you are investing in equity funds, you should look at volatility (risk) factor. What is this volatility factor in Equity fund? In this article, I would provide some insights about volatility in equity fund and how an investor can understand it in simple terms.

Why it is important for an investor to look at volatility in equity fund?

Stock market reached peak in the last 1.5 years. You may not see such peaks every year. Foreign investors are pumping money into the Indian stock markets. Small cap stocks and mid cap stocks are zooming like anything. We see some market corrections now and then. In such case, it may be a risk in investing in stock markets at this point of time. If you are investing in equity funds now, you do not know whether you would get good returns in future. Investors generally look at the high returns track record and invest in such funds. Many investors look for higher returns rather than ranking and the volatility of the fund. Exceptional gains in short term period would hide the poor performance of the fund.

Hence, you should understand volatility risk in equity funds to have a better picture of your equity fund investments.

How to measure it?

Mutual fund volatility risk can be measured by various ways like Alpha, Beta, R-Squared, Standard Deviation and Sharpe Ratio. However, it is difficult to understand for normal investors to go through the formula and check for each and every scheme. I would tell you how to measure volatility of equity fund in simple terms.

Large cap equity fund – volatility is somewhat moderate

Mid-cap equity fund – volatility is generally high

Small-cap equity fund – volatility would be very high

As an example, if you are investing in a good small cap fund, when markets are rising, returns from such a small cap fund would be higher than a large cap benchmark such as SENSEX or NIFTY. Similarly, when markets are falling, small cap funds would tend to fall at faster speed than the benchmark indices.

Then, how should we invest in equity funds?

There are few factors you should consider while investing in equity funds.

Invest more in large cap funds than in mid-cap or small cap funds especially during peaks.

During rising markets, mid-cap and small cap funds tend to do better.

Choose funds that have done well in bear markets too.

Look for consistent performers rather than short period upswing.

Avoid funds which came in last 3 years. Performance in various market cycles is not yet known.

Do profit booking for mid-cap/small cap funds during market peaks as they tend more volatility during market corrections.

Source: http://www.moneycontrol.com/news/mf-experts/volatility-counts-while-picking-equity-mutual-fund-schemes_1391051.html

Debt funds may be better than tax-free bonds

noreply@blogger.com (allmutualfund) — Thu, 14 May 2015 12:00:00 +0000

Public sector undertakings such as Indian Railway Finance Corporation and National Highways Authority of India will soon come out with their tax-free bonds. The biggest advantage for investors is that the interest earned from these bonds is entirely tax-free. But the disadvantage is that these bonds lack liquidity. While investors can sell them through exchanges since they are listed bonds, it becomes difficult to do so as they are not traded frequently.

One way to get around this is to invest in an active bond, say an income fund, that invests in the taxable bonds of the same PSUs. This way you are assured of the same credit quality and higher yields. Yields on taxable bonds can be about 100 basis points higher than tax-free bonds.

"For us it does not make sense to buy tax-free bonds because then where can we sell the bonds? On the other hand investing in the taxable bonds of the same PSUs makes sense as yields are higher. This is a strategy we have been following for our debt funds for some time now. And if you remain invested for three years, you will get benefit of indexation,'' says Namdev Chougule, Executive Director, Head-Fixed Income, J P Morgan Asset Management.

For instance, J P Morgan has non-convertible debentures of PSUs like Power Finance Corporation, Rural Electrification Corporation, Airports Authority of India, IRFC, Power Grid Corporation of India, etc. All of these are companies also issue tax-free bonds.

The trade-off is between the higher returns generated by the mutual fund and the post-tax benefits of tax -free bonds, says Sudip Bandyopadhyay, MD and CEO, of Destimoney Securities. "Even in a debt fund it is possible to reduce the tax by opting for the growth option and holding your investment for three years. But it will attract long-term capital gains after three years. However, the clincher for mutual funds is the liquidity. Investors can sell at any point of time. In case of tax-free bonds they are stuck with the bonds if they can't find buyers,'' he says.

Besides with interest rates going down and bond prices going up, both mutual funds and tax-free bonds will give the benefit of capital appreciation. So savvy investors can consider the mutual fund route, he adds.

Those investing in mutual fund will have to keep in mind intermediation costs and other expenses, which can eat into the gains, points out Jyoteesh ‎EVP & Head Marketing, Distribution & Product at HDFC Securities. "If you invest directly in tax-free bonds it is transparent and you know what you are investing in. But in case of mutual funds often investors don't know what kind of papers the fund is investing in,'' he says.

Currently, there is a lot of demand for tax-free bonds in the secondary market, he adds.

Tax-free bonds are usually issued for long term periods of 10-20 years and are preferred by High Networth Investors, who do not want to pay tax. This time around experts feel that a lot of money from equity gains could flow into tax-free bonds as and when they hit the markets.

If you sell tax-free bonds before maturity, the capital gains will be taxed. So, investors will have to hold them till maturity to get the tax benefit.

Source: http://www.business-standard.com/article/pf/debt-funds-may-be-better-than-tax-free-bonds-115051400720_1.html

5 Reasons Why Sensex Fell Over 550 Points

noreply@blogger.com (allmutualfund) — Wed, 13 May 2015 03:14:00 +0000

Indian stock markets fell sharply on Tuesday, with the BSE Sensex plunging 506 points to 27,000. The broader Nifty slipped 134 points and the rupee corrected over 0.5 per cent to 64.24. The decline in stock markets comes after two days of gains which saw the Sensex gaining over 900 points.

Here are the latest developments:

1) The Sensex, which rose 908 points in the last two trading sessions, succumbed to profit-booking. Analysts say the gains seen in the last two trading sessions were a mere technical pullback. Technical analyst Anil Manghnani told NDTV that the Nifty has stiff resistance around 8,300-8,310 levels.

2) The crucial bills such as Goods and Service Tax amendment bill and the land acquisition bill, which were supposed to be passed in the ongoing session of Parliament, got stuck in the Rajya Sabha. A K Prabhakar, an independent market analyst, said that it seems the government is compromising on these bills by referring them to the Select Committee of Parliament, and hence delaying the much talked about economic reforms as promised by the NDA government.

3) Correction in other Asian markets is also having its toll on the Indian markets. On Tuesday, most of the stock markets in Asia were trading with a negative bias and overnight, the Wall Street also edged lower as investors fretted about Greece's precarious financial condition and slowing growth in China while energy stocks fell on weaker oil prices.

4) The rupee, which rose to a high of 63.85 against US dollar on Monday, again slipped back to a low of 64.27, taking it closer to its yearly low of 64.28 hence raising worries that foreign portfolio outflows may create a vicious cycle between rupee and domestic shares, fund managers said.

5) FIIs or foreign institutional investors being net sellers: Despite gains in the equity markets in the last two trading sessions, FIIs were net sellers in the equity markets to the tune of Rs 270 crore in the last two trading sessions. And in the last 17 trading sessions, they have sold shares worth over $2 billion or nearly Rs 14,000 crore.

Source: http://profit.ndtv.com/news/market/article-5-reasons-why-sensex-fell-over-550-points-762409

Returns of mutual fund equity schemes turn negative

noreply@blogger.com (allmutualfund) — Wed, 13 May 2015 03:11:00 +0000

In the past 1 month, as key indices lost 5%, equity schemes' NAV fell 5-10%

The performance of several equity mutual funds (MF) has taken a severe beating. Most equity scheme categories have witnessed a fall anywhere between five and 10 per cent in their net asset values (NAVs) in the past two months.

These schemes have been among the top losers this year, under-performing other asset classes such as gold, liquid, debt and arbitrage funds. Thematic funds — pharma, technology, infrastructure and FMCG — are the worst performers, as NAV of these categories have nose-dived 6-10 per cent. Amid these categories, there are several individual funds, which have under-performed the category average returns.

For instance, the average return in technology funds for the last one month stood in the negative territory at 7.56 per cent; however, SBI IT Fund gave a negative return of 8.21 per cent. Similarly, in infrastructure fund category, the average negative return is 6.66 per cent; NAVs of funds like SBI Infrastructure and HDFC Infrastructure funds are down over eight per cent.

Rajiv Shastri, CEO & MD of Peerless Mutual Fund, says, “Since the underlying asset class, in this case stock markets, had a tough time; it is natural for equity schemes to see dip in NAVs. Markets have been quite volatile and are trading around 8-10 per cent down against recent peaks. It should not be taken as a deterrent by investors, they should keep investing.” S Naren, CIO, ICICI Prudential AMC, said, “We continue to believe that correction is an opportunity to invest. This phase does not affect the long-term compelling case for Indian equities with a moderated return expectation. 2015 is the year for investing in equities with a horizon of three years and more.”

As on 30 April, there are over 400 equity related schemes offered by the mutual fund industry managing an asset of Rs 3.45 lakh crore.

Source: http://www.business-standard.com/article/markets/returns-of-mutual-fund-equity-schemes-turn-negative-115051201046_1.html

International funds will gain from weak rupee

noreply@blogger.com (allmutualfund) — Wed, 13 May 2015 03:09:00 +0000

While they are a good hedge for expenses like children's education on foreign soil, limit your exposure

Investors of international equity funds, especially those that invest in US equity markets, have seen an increase in returns over the past few months, due to the weakness in the rupee. According to data from Value Research, in the past three months, the category average returns of international funds has been 7.96 per cent – the top performer.

The fortunes of these funds have turned around in the recent depreciation of the rupee by 1.5 per cent against the dollar since the beginning of December. And with the US Federal Reserve likely to increase interest rates, it is expected that foreign investors will sell investments in emerging markets, including India. This outflow of funds, if it happens, will put further pressure on the rupee.

According to Vidya Bala, head of Mutual Research at FundsIndia.com, the decision to invest in international equity funds should not be based on currency movement. It should be based on the need to diversify your portfolio and hedge your portfolio by investing in markets that have low co-relation with Indian markets. “Investors look to gain from currency movements by investing in international funds. But that involves high risk. The right way is to bet on currency itself, and not the market. Because, by doing so, you may end up taking a wrong call on both the market and currency,” she says.

Raghavendra Nath, managing director, Ladderup Wealth Management, also says that currency depreciation is not a reason to invest in international funds at all. That is only a myopic view. “International funds will reduce the risk of your portfolio and improve the predictability of your returns. One should look at international funds purely from risk diversification perspective. Depreciation will only add to returns,” he says.

The US market is currently doing well and will definitely give better returns in the near term, as it will not be as volatile as the Indian equity market. But over a longer term, Indian equities will give better returns. So, one can look at international funds, provided they have sufficient exposure to Indian equities.

Indian equity markets are relatively more volatile, even though they offer higher returns. As a hedge against the volatility, it is advisable to invest a part of your portfolio in markets that have low volatility and low risk, even if prospects of returns are lesser than Indian equities.

“Developed markets like the US and Europe offer this hedge as they demonstrate different risk characteristics from India. Investing in these markets will give your portfolio the required diversification,” says Supreet Bhan, executive director, head (retail sales) at J P Morgan Asset Management.

European equities look positive because earnings have gone up and companies have created efficiencies by cutting costs. Besides, with the European Central Bank starting its quantitative easing, liquidity will continue to be comfortable, which will support equities, Bhan adds.

International funds also allow investors to invest in dollar assets. So, if you have goals such as children's higher studies or foreign trip, you can hedge against currency depreciation by investing in international funds.

Source: http://www.business-standard.com/article/pf/international-funds-will-gain-from-weak-rupee-115051200197_1.html

Should you worry about the market's current volatility?

noreply@blogger.com (allmutualfund) — Wed, 13 May 2015 03:06:00 +0000

The stock market has been volatile. Should one follow the dictum: Sell in May and go away?

Indices tumbled during the week but picked up on Friday. In the midst of such volatility, investors tend to question whether or not it is the right time to get into the market or out of it. But frankly, they are asking the wrong question.

Such questions are based on the presumption that they can enter the market and exit at the right time. Let’s get this straight, this is much easier said than done. Look back at your own track record. You may be boasting about the fact that you did not invest in 2007 when the market was on a roll. But did you enter the market a couple of years before that when it was at a low? Did you buy stocks immediately after the dot com crash? In 2008, when stocks were available at dirt cheap valuations, did you buy?

That’s the double-edged sword of market timing – it’s not just about skipping the market highs; should you miss a crash, you miss riding the recovery that follows.

Not too long ago, in October 2014, volatility hit the Indian market begging an answer to the same questions raised today. The reason at that time was more global - a likely recession is Europe, compounded by slow economic growth in the U.S., fear over the spread of Ebola, and geopolitical hazards. VIX (Chicago Board Options Exchange’s index of volatility) hit its highest level since late 2011 and the India VIX Index also jumped. But we got through that phase.

Don’t forget the hit that stock markets across the globe took in 2011. Financial Times reported that global stock market capitalisation dropped 12% that year. The Indian market did not escape unscathed. The Sensex ended the year at 15,454. By April 2, 2012 it moved to 17,478 only to drop to 16,546 by May 8, 2012. Yet the annualised 3-year Sensex returns (as on May 8, 2015) are 17.88%

The point is that if you ignore market upheavals and stay the course, you end up making money.

If you want to be successful in the stock market, stick to your guns and don’t deviate from your investment plan. A successful investor is not one who accurately predicts the direction of the markets. To do so you would have to either be an astrologer with a very high success rate or God; chances are that you are neither. Stick to basics, which means you need to ignore the distractions and the desire to give way to your emotions and behave rationally.

I had started off by saying that investors are asking the wrong questions. What are the right ones?

The right questions should pertain to your portfolio. Are there any funds whose volatility is giving you heartburn? Then you could consider eventually dropping them from your portfolio. Have you reached your goals? For instance, if you were saving in an equity fund towards the downpayment of a house and you need to make the purchase soon, it would make sense to move that money out of equity now. Or, is it that you have a better alternative investment in mind? Do you want to invest in some property that is available for a song? Then you could consider offloading your stocks to finance this investment. Base your decisions on your goals and capability for risk. Not on the volatility of the market.

On a lighter note, the entire saying is "Sell in May and go away, don't come back till St Ledger Day" and its origins are not Wall Street, but London. Summer sporting events were considered major events and the St. Leger Stakes was the oldest of England’s five horse racing classics and the last to be run in the year. The rick folk who traded were distracted with the social events and volumes would plummet in the summer months, leaving share prices flat, falling or at least volatile.

The reasons for volatility now are very different, though an abbreviated version of the phrase is still thrown around.

Source:http://www.morningstar.in/posts/33006/should-you-worry-about-the-markets-current-volatility.aspx

Equity Markets – Correcting… What should you do??

noreply@blogger.com (allmutualfund) — Tue, 12 May 2015 03:18:00 +0000

· Oil Prices
Oil prices have risen about 35-40% from the low levels seen in the recent past. Currently at 65 Dollars per Barrel.
India has benefited disproportionately from the sharp fundamental fall in crude prices. Crude price has fallen from ~110 in the FY 14 to ~65 now. India's crude import bill for FY 14 was 165 Billion USD. The sharp fall has helped the economy save nearly 50 Billion USD. The budgeted subsidy bill for petroleum has been reduced by Rs. 30K Crs. Further, with the fuel reforms, the pressure on Government from increasing crude prices is far lower. India will be easily able to manage the current oil prices (or even a marginally higher levels from now). In addition, the fundamental outlook for crude is for the prices to remain muted. Therefore, the recent hike in the prices is not a major concern.

· Rupee
Rupee has depreciated to 64 levels against the Dollar - lowest in 20 Months
However, despite the recent depreciation, Rupee is one of the Best among EM currencies. Rupee has lost just 1.86% in the current year, as against Turkish Lira or Brazilian Real, which have fallen by about 14%. Over the medium term, sustained economic growth will attract capital flows, and help Rupee.

· Bond Yields

10 Year G-Sec Yields inching closer to 8%

The movement in gilt yields is in line with sharp sell-off in the global bonds. US 10 year Yield went up to 2.24% before retracing to 2.19%, a sharp increase in the recent past, perhaps on the fear that oil prices could go up further. Our view is that India is one of the few countries in the world, which could afford to cut interest rates meaningfully - Current over-night rates are 250 bps above CPI inflation. Rates across the yield curve far higher. The Central Bank is targeting a real rate of 1.5-2%, leaving enough headroom to cut rates. Continuing fiscal prudence, disinflationary trends and benign liquidity scenario are expected to result in lowering of interest rates.

· Fund Flows

FII outflow in the recent past.

FIIs have pulled out nearly Rs. 4000 Crs in May so far. However, FIIs have been consistently investing into India over the longer term. Since 2009, they have invested 120 Billion USD, an average of 20 Bn USD per year. They have been net sellers only in 2008-2009 during the global crisis when they had sold 10.4 Bn USD. With the fundamental outlook for India remaining strong, we expect FII flows to be robust. In addition to FII flows, Domestic Flows will also help. Mutual Funds, for instance, invested 6.6 Bn USD in 2014.

· Flows to other countries

Countries like China, Korea, Taiwan and Japan have been attracting inflows in the recent past
Most investors were heavily underweight in countries like China because their economy was systemically slowing down. However, cheap valuations have started attracting fund flows recently. For instance, since the beginning of August 2014, their markets have gone up by nearly 85%. Some of the recent IPOs have also attracted flows into China. However, over the medium to long term, investors are likely to be guided by fundamentals, and hence we believe India is well-placed to receive flows. In Dollar Terms, Indian equity markets are at the same level as in May 2014, around elections, making it particularly attractive for FIIs

· Sharp run-up in markets

Indian equities had gone up by 55% since Sep 2013 (since Mr. Modi was announced as BJP candidate), before the current correction of 8-10%.
There may be a bit of fatigue and profit-booking in some stocks. However, valuations of Indian equities very attractive. At 19x trailing P/E on low cyclical earnings, and 15x 2 Yr Fwd PE on expectations of decent turnaround in earnings, the valuations are quite attractive. Market Cap / GDP at 75% low in absolute and relative terms.

· Concerns on MAT

Uncertainty around MAT may also be playing on the minds of investors
It has been clarified in the Budget that MAT will not be applicable from Apr 1, 2015. However, the claim from past transactions and the uncertainty about the applicability has spooked the FIIs. The amount involved is expected to be small - the amount that is being mentioned are anywhere between Rs. 500 - Rs. 5000 Crs. Stay has been granted to Aberdeen, one of the largest FII investors. Government is also setting up a committee to resolve the issue at the earliest. We believe the issue will be addressed very soon.

· Earning Growth

Subdued earnings growth

Corporate India’s growth was subdued because no meaningful investment was made in the past – average capex from 2012-2014 has been 1.75%. In addition, the persistently high-interest rate scenario resulted in subdued earnings, despite a reasonably good sales growth (16% CAGR between 2008-2014). We expect this to turn around, and corporate earnings to grow meaningfully on the back of operating leverage and financial leverage.

· Policy Issues

Reforms being implemented

Government is firmly committed to bringing about key reforms and implementing them. GST has been passed in the Lok Sabha, diesel price has been deregulated, gas price revision, targeted subsidy, hiking FDI limit in critical sectors of Railways, Defence and Insurance, etc., to name a few. We are confident that more such reforms will get implemented, benefiting the economy.

Bottom line: India is extremely well-placed for long-term economic growth and to generate attractive equity returns. The current market correction should be used as a good opportunity to increase allocation to equities

Is the India-story intact? Should investors invest into equities now?

Yes, very much!

· The Fundamental Story

o Building blocks in place. Rapid growth round the corner.
§ Financial Inclusion – with almost ~100% of eligible India under UIDAI (Unique Identification Authority of India) to lead to Direct Benefit Transfer (DBT) of all social sector schemes, Banking & Insurance penetration
§ Project Monitoring Group – clearing high impact projects. Almost ~$100bn worth till Dec.’14
§ Goods & Services Tax : The most awaited and ambitious indirect tax reform
§ Power sector reforms : Coal mine auctions, Increase transmission network & substantially reduce distribution losses
§ Railways reforms : Proposes to spend over $100bn over next 5 years to expand & upgrade
§ Large infrastructure projects : Dedicated Freight corridors, River Linking project, Metros
§ Road Sector reforms : Efforts to fast track & execute almost $60bn+ of road projects
§ Make-in-India Initiative : with emphasize on Defence & Electronics manufacturing
§ All-round Business-easy reforms : Establishing National Institution for Transforming India (NITI) , single window clearances, online approval systems, e-tenders – leading to substantial reduction in bureaucracy
§ Digital India : To spend over $15bn over next 5 years; e-governance services across spectrum, in addition to complete urban digitization - to connect over 2.5 lac villages
§ Agriculture reforms : Restructuring Food Corporation of India (FCI), Apicultural Product Market Committee (APMC) reforms, Soil health cards, Farmer insurance, proposal for National Irrigation scheme, Easing supply side bottle necks
§ Housing for all : Aims for housing for all by 2022, Affordable housing mission
§ Ambitious foreign trade policy : to grow exports from $466bn in FY14 to $900bn in 2020

o Subsidy savings and innovative revenues give Government financial muscle to spend on the economy.
§ Coal and spectrum auctions have been highly successful (Auction and allotment of 67 blocks has unlocked over $55bn ( 335k crs ) for states / Telecom spectrum auctions raised $17.6bn - Over 1 lac cr )
§ Disinvestments : CY15 targeting to raise Rs. 55k crs i.e $9bn (Several other big ticket disinvestments in pipeline – Hind. Zinc, Specified Undertaking of The Unit Trust of India (SUUTI), Coal India, ONGC etc with cumulative potential of $20bn+ )
§ Banks allowed to raise funding for infrastructure with minimum SLR / CRR requirement
§ Fuel Reforms has reduced the budgeted fuel subsidy bill by Rs. 30,000 Crs, a drop of 50%
§ Rationalized subsidies and trimmed wasteful expenditure like Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA). LPG subsidy through Direct Transfer. In the long-term (>3 years), subsidy rationalization could result in savings of $5 Bn+
§ GST implementation will result in improved tax collection, and is expected to add to the GDP growth

o Huge investments totaling Rs. 24 Lakh Crs envisaged
§ Railways to invest over ~600,000 crores over next 5years on expansion & up gradation
§ Digital India - ~1,13,000 crores (Over next 5 yrs)
§ Roads ~5,00,000 crores (Over next 5 yrs)
§ Healthcare (National Health Assurance Mission): ~1,60,000 Crore (Over next 4 yrs)
§ Swacch Bharat Mission : ~2,00,000 crore (Over next 4 yrs)
§ National Rural Housing Mission: ~3,45,000 crores (by 2022, next 7 yrs)
§ Solar ( Renewable Energy ) : ~6,00,000 crore ( In next 7 yrs for 100,000 MW )

These initiatives envisage about Rs. 24 lac crores ($400bn ) of investment, entailing both Govt. & Private , Domestic & Foreign Investors

o Combination of low interest rate and economic recovery will lead to higher profit growth for Indian companies

§ India is one of the few countries in the world, which could afford to cut interest rates meaningfully
· Current over-night rates are 250 bps above CPI inflation. Rates across the yield curve far higher. The Central Bank is targeting a real rate of 1.5-2%, leaving enough headroom to cut rates
· Continuing fiscal prudence, disinflationary trends and benign liquidity scenario are expected to result in lowering of interest rates
§ Corporate India’s growth was subdued because no meaningful investment was made in the past – average capex from 2012-1014 has been 1.75%. In addition, the persistently high-interest rate scenario resulted in subdued earnings, despite a reasonably good sales growth (16% CAGR between 2008-2014)
§ We expect this to turn around, and corporate earnings to grow meaningfully on the back of operating leverage and financial leverage
We believe equity markets would capture the growth in earnings, to provide reasonable returns over the medium to long term.

· The Valuations story

· Reasonable Valuations – The market has risen ~55% in ~18 months, before this short-term correction. Market is nowhere close to bubble valuations. At 19.5x, based on cyclical low past earnings and given our expectations of structural high RoE & enormous growth potential, it is very reasonable.
o India’s market cap / GDP is ~70%. During the peak of 2008, it was over 100%
o In the previous growth cycle, Earnings became ~3 times in less than 6 years….. Sensex grew 6 times.
o If EPS could grow by 15% till FY 2020, and if we were to assign similar PEs as now, then Sensex would be at 55,000 levels! (~2 times) by 2020
o If EPS actually grows by 20%, Sensex would be nearly at 70,000 levels by 2020!! (~3 times)

· The Sentiment story

Brand India has never been more vibrant and appealing than now, which will augur very well in attracting foreign flows, both FIIs and FDI.
o A total of 16 foreign trips made by the PM (5 of these for multi-lateral meetings like BRICS, G-20, SAARC )
o Barack Obama & China supports India's bid for permanent UNSC seat
o $35bn investment by Japan over 5 years & expertise in high speed trains
o Australia for supplying Nuclear Power fuel - ~500 tns of uranium
o Canada – First visit in 40 years by sitting PM. Agrees to supply 3,000mt of uranium to power Indian atomic reactors
o CXO’s of global corporations for investment in India: Satya Nadella (Microsoft), Indra Nooyi (Pepsico), Mark Zuckerberg & Sheryl Sandberg (Facebook), Jeff Bezos (Amazon)
o $20 billion investment from China

Summary – what should you do??....….

Simple: Add more equities!!

o The India story is strong and intact.

§ Building blocks in place. Rapid growth round the corner.
§ Subsidy savings and innovative revenues give Government financial muscle to spend on the economy.
§ Huge investments totaling Rs. 24 Lakh Crs envisaged.
§ Combination of low interest rate and economic recovery will lead to higher profit growth for Indian companies.

o Valuations are reasonable.

§ 19x on trailing basis and 15x on 2 year fwd basis
§ Market Cap to GDP ~75% low

o Short-term volatility not-withstanding, Indian equities could generate enormous wealth for investors.
§ Even reasonable earnings growth could result in Sensex growing by 2-3 times from the current levels in the next 4 years

o Corrections such as that happening now should be used as opportunities to add more equities.
§ Do not get swayed by short term volatility, nor attempt to time the markets. On the other hand, look at the direction in which we are headed, take confidence from the fact that things are already happening, and invest for the long-term into equities!

Kotak MF buys banks, engg, telecom; sells oil and gas, auto

noreply@blogger.com (allmutualfund) — Tue, 12 May 2015 02:32:00 +0000

Kotak Mahindra Mutual Fund has enhanced its exposure in banking & financial services, engineering & capital goods and telecommunication space. However, it decreased it weightage in the oil and gas, automotive and information technology space.

Bank Of Baroda, ICICI Bank and State Bank of India were top buys, while Jain Irrigation Systems, Reliance Industries and Steel Authority of India were top sells by the fund.

The study of Kotak Mahindra Mutual Fund portfolio for the quarter of January-March 2015 shows that in the banking & financial services, the fund has bought HDFC Bank, Axis Bank, Kotak Mahindra Bank and introduced City Union Bank. However, it sold Federal Bank, ICICI Bank, Bank Of Baroda and exited from SKS Microfinance and Indiabulls Housing Finance.

In the engineering and capital goods segment, it purchased Kirloskar Brothers, Larsen and Toubro and introduced Siemens, KSB Pumps, NBCC, Thermax, Adani Ports, IRB Infra and Swaraj Engines, while it sold Havells India, KEC International, Techno Electric and exited from Kennametal India.

The fund has bought Bharti Airtel, Idea Cellular and introduced Tata Communications in the telecommunication space. Whereas, it sold Reliance Communications and Finolex Cables.

In the oil and gas pack, the fund sold Reliance Industries, Petronet LNG and ONGC. It also exited from Oil India, Chennai Petroleum Corporation and Indian Oil Corporation. However, it bought Cairn India from the same pack.

The fund sold Hero Motocorp, Bosch, Apollo Tyres and exited from Exide Industries in the automotive space, while it bought Tata Motors (DVR), Maruti Suzuki India and TVS Motor Company.

In the information technology pack, it sold Tech Mahindra, TCS and Wipro but purchased HCL Tech, Infosys and Smartlink Network Systems.

Source: http://www.moneycontrol.com/news/mf-analysis/kotak-mf-buys-banks-engg-telecom-sells-oilgas-auto_1374662.html

Will China's IPO Boom Weigh on Troubled Indian Stock Markets?

noreply@blogger.com (allmutualfund) — Tue, 12 May 2015 02:29:00 +0000

Concerns deepen over troubled Indian stock markets as the China's red-hot initial public offering (IPO) heats up further. Foreign investors appear to be preparing to pull out their money from Dalal Street and invest in lucrative IPOs in China.

As many as 20 Chinese companies have lined up to issue IPOs this week amounting to $483.19 billion, intensifying worries of outflows from other countries including India.

Impressive post-listing performance of Chinese IPOs has created frenzy among the investor community. In the past one year, all the IPOs have generated more than 40% returns on listing.

"We have heard from sell-side brokers that some of the selling in India is attributable to the fact that Chinese markets have outperformed India," Nilesh Shah, MD, Kotak Mutual Fund, told The Economic Times.

Recent controversy over Minimum Alternate Tax (MAT) led to high volatility in domestic stock markets in recent trading sessions, as overseas investors aggressively sold their shares.

Foreign investors have sold shares amounting to over $2 billion or nearly ₹14,000 crore in the past 15 trading sessions, NDTV Profit said.

The Chinese securities regulator has been fast accelerating its nod for IPOs in a bid to cool down its skyrocketing stock market performance. Last Friday, the regulator approved a batch of IPOs for the second time in less than a month.

"Regulators have said they would accelerate IPO approvals and we're seeing it happen," Zhang Chen, analyst at Shanghai-based Hongyi Investment, told Reuters.

The Chinese authorities have been initiating many measures to curtail the speculative activity in its equity markets. Despite a sharp decline in recent sessions, the Chinese stocks still trade at multi-year highs, with a gain of 34% so far this year.

The China's Shanghai Composite Index is up 122% since January 2014, supported by increased buying by the retail investors.

Will China's IPOs Attract FIIs in India?

Analysts see limited scope for foreign investors, who have their holding in Indian equities, to participate in the forthcoming $200 billion IPOs in China. The total share holdings of overseas investors in India stand at over $300 billion, so offloading a part of their holdings may offer a little liquidity to subscriber for Chinese IPOs.

There is no evidence of 'any large-scale' selling of shares by foreign institutional investors (FIIs) so far although the Chinese IPO boom has started a few months back. Recent sell-off in Indian stock markets is largely due to uncertainty over retrospective tax and weak corporate earnings, Business Standard reported.

Instead, China IPOs are having an impact on its own markets, with the benchmark index declining by around 10% in recent sessions. Investors are selling their shares to buy IPOs.

However, with the Chinese equity market outperforming India's, many global money managers are reshuffling their portfolios to include Chinese stocks.

Source: http://www.ibtimes.co.in/will-chinas-ipo-boom-weigh-troubled-indian-stock-markets-632032

India fund outflows flag more bond pain amid worst Bric losses

noreply@blogger.com (allmutualfund) — Mon, 11 May 2015 04:57:00 +0000

Local investors are exiting Indian debt funds at the fastest pace since September, a sign of more losses ahead for bonds that are the worst performers among the largest emerging markets this quarter.

Fixed-income funds saw an outflow of Rs.2,500 crore in April, a third straight month of withdrawals, data from Association of Mutual Funds in India (AMFI) show. Investors left just in time to avoid a global bond market rout that saw the benchmark 10-year rupee sovereign yields surge 19 basis points in the last two weeks.

Birla Sun Life Asset Management Co. and Tata Asset Management say returns could worsen further as a rebound in oil prices and a drop in the rupee limit the scope for the Reserve Bank of India (RBI) to cut interest rates. Investors in Indian government notes lost 0.5% this quarter, compared with returns of 7.3% in Russia, 3.5% in Brazil and 1.1% in China securities, JPMorgan Chase and Co. indexes show.

“We may not see the kind of returns expected earlier,” said A. Balasubramanian, chief executive officer (CEO) at Birla Sun Life in Mumbai. “Oil’s reversal can be a source of volatility as far as inflation is concerned. The rates trajectory won’t be the same and markets will adjust to the new indicators on oil and the monsoon.”

The rupee’s drop past the 64 a dollar level on Thursday reduces chances of an interest-rate cut at the central bank’s 2 June meeting, according to Bank of America Merrill Lynch.

‘Equity-like returns’

The 10-year sovereign yield jumped 13 basis points, or 0.13 percentage point, in April, the most since September 2013, as a 21% rally in Brent crude and the weather department’s forecast of below-normal monsoon rains reignited concern about consumer inflation, which eased to 5.17% in March.

Brent prices are key to India’s inflation outlook as the nation imports about 80% of its oil and the commodity’s 49% plunge in the 12 months through March helped slow price gains, paving the way for two interest-rate cuts in 2015.

Fixed-income funds took in Rs.12,200 crore in January, AMFI data show. That’s when RBI governor Raghuram Rajan lowered benchmark borrowing costs for the first time since May 2013. Investors withdrew Rs.11,600 crore in the next three months.

“We saw a lot of traction into the income funds around January as distributors and analysts sold them as ‘get equity-like returns in debt,’ which was too good to be true but some people did bite into the story,” Killol Pandya, a senior debt-fund manager at LIC Nomura Mutual Fund Asset Management Co. in Mumbai, said in a 7 May phone interview. “Expectations were that a lot of rate cuts will happen and they’ll be front-loaded, but that whole sentiment has seen a reversal.”

Monsoon rains

Inflows into so-called gilt funds, which invest solely in sovereign debt, slowed to Rs.1,640 crore in April, the smallest since September, according to AMFI data.

The June-September monsoon season is crucial for Asia’s third-largest economy as agriculture accounts for about 15% of its gross domestic product (GDP). Insufficient rains can potentially hurt crop output and stoke food costs.

The RBI will consider factors including the “likely strength” of the monsoon rains before deciding on future actions, Governor Rajan said in the latest policy statement on 7 April when he kept the benchmark repurchase rate unchanged.

“There’s a chance that the June rate cut gets pushed back because of the rebound in oil prices and the rise in global bond yields,” Rajeev Radhakrishnan, Mumbai-based head of fixed income at SBI Funds Management Pvt., a unit of India’s largest lender, said in a 8 May phone interview. “The sudden drop in the rupee will also impact monetary policy. To that extent, investors will position themselves.”

‘Damage done’

LIC Nomura’s Pandya said he doesn’t expect large outflows from debt funds because interest rates are still headed lower, even if less than earlier expected.

“The damage is already done,” Pandya said. “Investors who are risk averse and expect a reasonable rate of return will continue to stay invested in these funds. There is money to be made, just maybe a bit less than before.”

Swap traders are paring bets for easing. The cost to lock in borrowing costs for a year climbed nine basis points in April, data compiled by Bloomberg show. It is unchanged in May.

The rupee slumped 1.5% in April in Asia’s worst performance as foreign inflows into Indian bonds and stocks slowed from previous months. Overseas funds sold a net $494 million of rupee-denominated debt on 7 May, the biggest single-day outflow since 14 January, amid a global selloff.

“The fixed-income segment may not look the same as it did a quarter back,” said Arvind Sethi, the Mumbai-based CEO at Tata Asset, which manages Rs.27,000 crore. “Some of the optimism built in the yields will correct from here on.” Bloomberg

Source: http://www.livemint.com/Money/NntYKKpmjqBmeHSyNknu9M/India-fund-outflows-flag-more-bond-pain-amid-worst-Bric-loss.html

India's mutual funds base to top $325 bn by 2018: Sundeep Sikka

noreply@blogger.com (allmutualfund) — Mon, 11 May 2015 04:31:00 +0000

Riding on the overall positive mood on the Indian economy, the asset base of the mutual fund industry in the country is set to grow faster at 18.6% per annum to top Rs.20 lakh crore ($325 billion) by 2018, says a top industry expert.

"The overall positive environment that we have seen over the past year is giving a big boost to the confidence level of retail investors in India," said Sundeep Sikka, chairman of the Association of Mutual Funds in India (AMFI) that has as members all the 44 such firms registered with the watchdog.

"I think the positive returns in the mutual fund industry, along with the push being provided by the government create both physical and financial assets and will also play a big role in promoting mutual funds," said Sikka, also president and chief executive of Reliance Capital Asset Management (RCAM).

Accordingly, he said, the time for mutual fund asset base to reach the Rs.20 lakh crore figure was being advanced by two years, even as the total number of individual mutual fund folios, which is 4 crore at present, is set to touch 10 crore in the next five years.

Referring to the past fortnight, Sikka said the domestic funds industry were able to counterbalance the exodus of foreign institutional investors. While these overseas funds pulled pout some Rs.8,000 crore from Indian stocks, domestic fund houses were net buyers of Rs.9,500 crore.

"In fact, in the past one year, our mutual funds have been able to provide a counterbalance of over Rs.70,000 crore, thanks to the net investment into equity schemes," he said, adding the decision to allow 15% of provident fund money into equity and similar assets will give a further push.

Giving some more data on the past-year performance of the mutual fund industry in India, Sikka said assets under management rose 31% to Rs.11.8 lakh crore, some 22 lakh new folios were added during the year, and retail funds mobilised at Rs.1.63 lakh crore has seen a three-fold jump.

"The kind of wealth investors have created in the last few years will lead to a situation where more and more new investors will keep coming to the industry. Existing investors will also keep increasing their allocations," said Sikka.

He said companies like Reliance Capital -- a part of the Anil Ambani-led group that has assets worth over Rs.250,000 crore ($40 billion) in its fold -- are also educating people and creating awareness, notably in smaller towns. "This will fetch a lot of first time investors into the industry," he said.

"At present, only 2% of the overall investment money comes to mutual funds."

Sikka was also positive about several developments, all with the potential to fetch more money into the mutual fund market. Flows from: Idle money in banks, from investments otherwise made in company deposits, and amount that goes into gold that has been losing sheen over the past few years.

"Ideally we would like to see every Indian household as a mutual fund investor. In India, where there is little social security, and long term wealth can be created in the capital markets through equity, it is in the interests of investors and the country that money starts moving for capital formation."

Source: http://www.business-standard.com/article/news-ians/india-s-mutual-funds-base-to-top-325-bn-by-2018-rcam-s-sikka-115051000079_1.html

Time to review your portfolio

noreply@blogger.com (allmutualfund) — Tue, 10 Jun 2014 06:31:00 +0000

Today NSE is trading at a trailing PE of 20.80 At this point of time one should start thinking of portfolio balancing if one is not rebalancing over a period of time. Time to step up and call your financial doctor for your portfolio health checkup. Certainly this is the decade to make money like anything. Happy investing!!!

SEBI prevents attempt to mis-sell an investment product

noreply@blogger.com (allmutualfund) — Thu, 11 Apr 2013 05:49:00 +0000

SEBI today prevented an attempt to mis-sell an investment product to an investor in Delhi by a person claiming as agent of mutual funds.

SEBI had received a complaint from an investor (hereinafter referred to as ' complainant') that some unknown persons claiming to be 'agents' and 'brokers' of Mutual Funds and insurance companies have been contacting the complainant saying that the deceased son of the complainant had invested in Mutual Funds and they are maturing in a short while. In order to get the full amount, the complainant must issue a cheque in advance for a new mutual fund scheme or insurance policy failing which the complainant will lose a substantial portion of the maturity amount as broker commission. The 'agent' informed the complainant that the son had made investments in Mutual funds which are about to mature and on maturity the complainant will get only Rs. 5 lacs. However, the 'agent' further stated that if the complainant makes a further investment of Rs.2.5 lacs, the complainant will get maturity proceeds to the tune of Rs.12.5 lacs.

Thereafter, the Investigations Department of SEBI conducted preliminary investigations where it was found that the phone numbers from which the 'agent' had called were in some others' name and the Company was also in a different name. Sensing a clear attempt to defraud, cheat and misappropriate as well as missell financial products, SEBI deputed an official to visit the 'complainant' at the time of the visit of the 'agent'. The assistance of the Economic Offences Wing of the Delhi Police was also taken. On perusal of the forms and after preliminary enquiries, the suspicions were confirmed that indeed there was an organised attempt by several people to defraud and missell and accordingly an FIR to that effect is being lodged with Delhi Police.

It is suspected that the number of victims of such fraudulent attempts could be much higher, which would be revealed in due course after further investigations by Delhi Police and SEBI.

SEBI cautions investors that investors should verify the credentials of people approaching them as agents / employees before making any investment through such agents / employees.

Direct, Indirect or Nothing?

noreply@blogger.com (allmutualfund) — Thu, 11 Apr 2013 05:08:00 +0000

Investing through direct plans of funds makes sense when investors are certain that going through an intermediary offers no value...

Since the beginning of this year, mutual fund investors have had the option of investing in funds directly with the fund companies in special 'direct' plans of all funds. While investors could have invested directly earlier too, there was no advantage in doing so. However, since January 1, SEBI has asked fund companies to create special direct plans in which the commission that would otherwise have been paid to intermediaries goes to the fund's NAV, and thus to investors.

Even though it's early days yet, a handful of investors have started coming in through direct plans. This number could only grow in the future. It appears that compared to corresponding indirect plans, direct ones will have higher returns of the order of 0.4 per cent to 0.7 per cent per year. Over a long period, that does accumulate. During the last decade, the median large cap equity fund had returns of 18.81 per cent a year. That means an investment of Rs 1 lakh would have grown to Rs 5.37 lakh. A direct plan with returns of half a per cent more would have delivered Rs 5.60 lakh.

Investors should maximise value but you have to decide whether over ten years this differential is large enough to forego the services of an intermediary. The answer depends entirely on what services your fund advisor offers you and whether you can substitute them yourself. Ideally, an advisor would be helping you with investment advise as well procedural help. If you don't think these are worth the extra money and you are confident of your do-it-yourself abilities, then you should go direct.

However, I find that the most important service that intermediaries provide is often not given enough importance--many a time, their sales pitch goads you into investing when you may not have done so. The worst investment is often when you don't invest at all and making you invest could be the most valuable service of all.

Source: http://www.valueresearchonline.com/story/h2_storyview.asp?str=22627

Mutual fund products: Sebi issues colour codes, labelling

noreply@blogger.com (allmutualfund) — Wed, 20 Mar 2013 04:39:00 +0000

Market regulator Sebi has issued a guidelines on 'product labelling' with colour coding for mutual funds (MFs), a move that would help investors assess the risk associated with the schemes.

The guidelines would be effective from July 1, 2013, for all existing and forthcoming schemes, Securities and Exchange Board of India (Sebi) said in a circular yesterday.

As per the norms, product labels carrying details about the schemes would be disclosed on the front page of initial offering application forms.

Besides, the labels would have to be placed in common applications forms and advertisements.

The regulator has also decided up on colour codes to indicate the level of risk associated with the product.

A blue colour coded box would indicate low risk, yellow would signify a medium risk, while brown would be represent schemes with high risk, Sebi said.

"In order to address the issue of mis-selling, a committee was set up to examine the system of product labelling that would provide investors an easy understanding of the kind of product/scheme they are investing in and its suitability to them," Sebi said.

Based on the recommendations by the committee, it has been decided that all the mutual funds would 'label' their schemes on certain parameters, it added.

The labels would include details about the nature of schemes "such as to create wealth or provide regular income in an indicative time horizon (short/ medium/ long term)".

Moreover, mutual funds would have to state a brief about the investment objective in a single sentence followed by kind of product in which investor is investing (equity or debt).

As per the guidelines, mutual funds would also have to include a disclaimer that "investors should consult their financial advisers if they are not clear about the suitability of the product".

Sebi said that the product label has to be placed in proximity to the caption of the scheme in the initial offering -- Key Information Memorandum (KIM) and Scheme Information Documents (SIDs) -- and common applications so that they are prominently visible to investors.

Source: http://www.indianexpress.com/news/mutual-fund-products-sebi-issues-colour-codes-labelling/1090399/0