Mutual Fund investment in India is a pick up. Mutual funds are collective investment schemes that clubs money from investors and invest in securities like stocks and money market instruments. For investment in Mutual Fund, there are a number of mutual funds in the country, both domestic as well as international players.
One of the most important reasons why mutual fund investment is preferred investment tool in India is because they offer the investors the ability to easily invest in complex markets. According to a survey, mutual fund investment in India constituted around 40 per cent of stock investment plan in 2007. But these are certainly bad times even for mutual fund investors. The worst sufferers in the present market are those funds that have investment portfolios of small and mid-cap stocks. Moreover, tax-saving mutual funds too have performed badly with Principal Personal Tax saver witnessing losses of 80 per cent from its high.
Investors looking for impressive returns from mutual fund investment in India are also disappointed by balanced funds (having equity exposure of around 65-75%). Balanced funds invest both in stocks and fixed income securities as per the prescribed proportion in their offer documents. For the four-month period (July-October), there has been 30 per cent drop in values of average balanced funds.
(Market News India)
Mutual Fund News update from Nishit Doshi (9824021680) a leading MF Advisor based in Ahmedabad. Gujarat.
Friday, November 21, 2008
More Choice for Mutual Fund Investors
The competition for Indian mutual fund companies is likely to hot up. In addition to battling a weak market, Indian mutual fund companies have to deal with a influx of new players. Though the markets remain weak, there is no dearth of players seeking to have a pie of the Indian financial sector. Recently, the market regulator gave in-principle approval to seven players to set up mutual funds in India, including Edelweiss, Goldman Sachs and Indiabulls.
Yes, but it would be tough ride for the new comers. Though the Indian investors are more and more looking at equities through the MF route, the new comers will have a longer time to make profit, particularly when the growth rate of the industry is decelerating. According to Association of Mutual Fund Industry, a trade body,the growth in asset under management has fallen to 30 per cent in the first quarter of the fiscal, a sharp fallfrom the 50%-plus rates in the previous years.
The new players have to pay a higher distribution cost to push their products in a crowded industry. Besides, as the average fund size decreases, the new players will not have the scale to spread the cost. Have the new players not given these concerns a thought? Or, are they just following the crowd? It could be guessed that some new players would concentrate only on particular market niches. This would mean more choices for the retail investors and more specialized players to look at when looking at a particular asset class.
(Market News India)
Yes, but it would be tough ride for the new comers. Though the Indian investors are more and more looking at equities through the MF route, the new comers will have a longer time to make profit, particularly when the growth rate of the industry is decelerating. According to Association of Mutual Fund Industry, a trade body,the growth in asset under management has fallen to 30 per cent in the first quarter of the fiscal, a sharp fallfrom the 50%-plus rates in the previous years.
The new players have to pay a higher distribution cost to push their products in a crowded industry. Besides, as the average fund size decreases, the new players will not have the scale to spread the cost. Have the new players not given these concerns a thought? Or, are they just following the crowd? It could be guessed that some new players would concentrate only on particular market niches. This would mean more choices for the retail investors and more specialized players to look at when looking at a particular asset class.
(Market News India)
Aegon, Religare end mutual fund tieup
Mumbai: A month after getting the Securities and Exchange Board of India’s (Sebi’s) nod to launch an asset management company, Dutch financial services major Aegon and Religare Enterprises have decided to part ways.
A joint statement said that Aegon will assume control of Religare Aegon Mutual Fund, a 50:50 joint venture. Lotus India Mutual Fund, which was acquired by Religare Aegon two weeks ago, will be Religare’s asset management business in India.
Though the two partners have decided to end their relationship in the mutual fund venture, there will be no change in the shareholding of Aegon Religare Life Insurance at the moment. While Religare Enterprises holds a 44 per cent stake, Bennett, Coleman has 30 per cent and Aegon the balance 26 per cent.
Sources familiar with the development said that the two partners decided to part ways on the grounds that the recent acquisition of UK-based brokerage firm Hichens Harrison by Religare Capital Markets may result in a conflict with Aegon’s existing businesses in Europe.
According to sources, the recent Religare Aegon move to acquire the ailing asset management business of Lotus India Mutual Fund may have also contributed to the split. The deal was pushed by the Indian partner, and Aegon was kept out of the picture, they added.
The sources said Aegon felt that the acquisition of Lotus will hamper its plan to launch an offshore fund in India as Fullerton, the promoters of Lotus India Asset Management Company, already runs a Rs 85-crore offshore fund called Fullerton Sabre Lotus India fund.
Religare is promoted by Malvinder Singh and Shivinder Singh, the promoters of Ranbaxy who sold their stake in the pharmaceutical company to Daiichi Sankyo.
In 2006, Religare and Aegon formed a joint venture for asset management business in India. Around a month ago, the Securities & Exchange Board of India gave a licence to the asset management company. Religare Aegon currently awaits Sebi’s nod for three funds, which includes an equity fund, a liquid fund and a debt fund.
Through the Lotus acquisition, which is awaiting regulatory approval, Religare Aegon would have got access to six equity funds and a host of debt funds with combined assets under management of Rs 5,458 crore.
The fresh proposal is subject to regulatory approval.
The 100-odd Religare Aegon Mutual Fund employees are expected to be given the option to join either Aegon or continue with Religare for the funds acquired from Lotus. The top management, however, may not join Aegon.
Source: Business Standard
A joint statement said that Aegon will assume control of Religare Aegon Mutual Fund, a 50:50 joint venture. Lotus India Mutual Fund, which was acquired by Religare Aegon two weeks ago, will be Religare’s asset management business in India.
Though the two partners have decided to end their relationship in the mutual fund venture, there will be no change in the shareholding of Aegon Religare Life Insurance at the moment. While Religare Enterprises holds a 44 per cent stake, Bennett, Coleman has 30 per cent and Aegon the balance 26 per cent.
Sources familiar with the development said that the two partners decided to part ways on the grounds that the recent acquisition of UK-based brokerage firm Hichens Harrison by Religare Capital Markets may result in a conflict with Aegon’s existing businesses in Europe.
According to sources, the recent Religare Aegon move to acquire the ailing asset management business of Lotus India Mutual Fund may have also contributed to the split. The deal was pushed by the Indian partner, and Aegon was kept out of the picture, they added.
The sources said Aegon felt that the acquisition of Lotus will hamper its plan to launch an offshore fund in India as Fullerton, the promoters of Lotus India Asset Management Company, already runs a Rs 85-crore offshore fund called Fullerton Sabre Lotus India fund.
Religare is promoted by Malvinder Singh and Shivinder Singh, the promoters of Ranbaxy who sold their stake in the pharmaceutical company to Daiichi Sankyo.
In 2006, Religare and Aegon formed a joint venture for asset management business in India. Around a month ago, the Securities & Exchange Board of India gave a licence to the asset management company. Religare Aegon currently awaits Sebi’s nod for three funds, which includes an equity fund, a liquid fund and a debt fund.
Through the Lotus acquisition, which is awaiting regulatory approval, Religare Aegon would have got access to six equity funds and a host of debt funds with combined assets under management of Rs 5,458 crore.
The fresh proposal is subject to regulatory approval.
The 100-odd Religare Aegon Mutual Fund employees are expected to be given the option to join either Aegon or continue with Religare for the funds acquired from Lotus. The top management, however, may not join Aegon.
Source: Business Standard
Friday, November 14, 2008
Fidelity MF files paper for European Dynamic Growth Fund
Fidelity Mutual Fund (MF) has filed papers with Securities and Exchange Board Of India for Fidelity European Dynamic Growth Fund, an open ended fund of fund scheme.
Objective
Fidelity European Dynamic Growth Fund will invest primarily in Fidelity Funds -European Dynamic Growth (IND) Fund, an offshore fund launched by Fidelity Funds (an open ended investment company incorporated in Luxembourg) and similar to an Indian mutual fund scheme.
The investment objective of Fidelity Funds - European Dynamic Growth (IND) Fund is to aim to achieve long-term capital growth, principally through investment in an actively managed portfolio of companies that have their head office or exercise a predominant part of their activity in Europe.
What is Inside?
The scheme offers growth option and dividend option. The dividend option shall have payout and reinvestment facility.
The minimum application amount is Rs 5,000 and Rs 1,000 thereafter.
The scheme will offer for redemption/switch-out of units at monthly intervals at NAV based prices.
The scheme charges an entry load of 2.25% and a exit load of 1% if reedemed within 6 months from the date of allotment or Purchase.
Asset Allocation
The scheme aims at investing 80% to 100% in shares / units of the underlying scheme / foreign securities and 0% to 20% in money market instruments and / or liquid / cash schemes of mutual funds registered with SEBI.
Investment Strategy
The scheme will invest in the underlying scheme which in turn will invest principally in an actively managed portfolio of companies that have their head office or exercise a predominant part of their activity in Europe and the underlying scheme will typically have a bias towards medium sized companies with a market capitalisation of between Euro 1 and 10 billion.
Performance and Management
The performance of the scheme will be measured against MSCI Europe Index and the fund manager is Leng Ng.
(source:myiris)
Objective
Fidelity European Dynamic Growth Fund will invest primarily in Fidelity Funds -European Dynamic Growth (IND) Fund, an offshore fund launched by Fidelity Funds (an open ended investment company incorporated in Luxembourg) and similar to an Indian mutual fund scheme.
The investment objective of Fidelity Funds - European Dynamic Growth (IND) Fund is to aim to achieve long-term capital growth, principally through investment in an actively managed portfolio of companies that have their head office or exercise a predominant part of their activity in Europe.
What is Inside?
The scheme offers growth option and dividend option. The dividend option shall have payout and reinvestment facility.
The minimum application amount is Rs 5,000 and Rs 1,000 thereafter.
The scheme will offer for redemption/switch-out of units at monthly intervals at NAV based prices.
The scheme charges an entry load of 2.25% and a exit load of 1% if reedemed within 6 months from the date of allotment or Purchase.
Asset Allocation
The scheme aims at investing 80% to 100% in shares / units of the underlying scheme / foreign securities and 0% to 20% in money market instruments and / or liquid / cash schemes of mutual funds registered with SEBI.
Investment Strategy
The scheme will invest in the underlying scheme which in turn will invest principally in an actively managed portfolio of companies that have their head office or exercise a predominant part of their activity in Europe and the underlying scheme will typically have a bias towards medium sized companies with a market capitalisation of between Euro 1 and 10 billion.
Performance and Management
The performance of the scheme will be measured against MSCI Europe Index and the fund manager is Leng Ng.
(source:myiris)
Wednesday, October 15, 2008
RBI boosts liquidity for mutual funds
By Saikat Chatterjee and Surojit Gupta
MUMBAI/NEW DELHI (Reuters) - India pumped liquidity into its markets and took measures aimed at helping its $106 billion mutual-funds industry on Tuesday as its rupee and stocks rallied after governments worldwide moved to restore confidence in the financial sector.
Reserve Bank of India (RBI) governor said after meeting the finance minister in New Delhi the market situation was under control but he could not comment on what more measures might come.
India's financial markets were badly shaken last week as the global financial crisis spread, with stocks falling almost 16 percent, the rupee hitting a record low and overnight lending rates leaping to 23 percent.
The RBI cut the amount of funds banks must keep in reserve on Saturday, releasing more than $12 billion into the banking system, and on Tuesday it injected $13 billion via its daily overnight money market operations and introduced a temporary funding window for mutual funds.
"We have reviewed the entire situation and we believe everything is under control," RBI Governor Duvvuri Subbarao told reporters after meeting the finance minister, adding the liquidity situation was comfortable.
He later met the prime minister along with the finance minister but did not make comment further.
The RBI conducted a special 15-day repo auction on Tuesday to meet the liquidity needs of mutual funds, whose investors have pulled money out to pay tax bills and due to the global financial markets turmoil.
In the auction, which was to banks specifically for lending on to funds, saw only 35 billion rupees ($730 million) taken up against 200 billion rupees on offer.
"People did not have much time to participate at the auction and did not understand it completely and hence the low numbers," said Ashish Nigam, head of fixed income at Religare AEGON Asset Management Company.
The fund industry said the move was a welcome option, however. The central bank also relaxed rules for mutual funds on using illiquid certificates of deposit issued by banks, of which the funds have been big buyers this year, as collateral.
Mutual funds would normally sell bank debt on the money market to raise cash to meet redemptions.
But India's money markets have been hit by the global financial crisis, which has wrecked banks across the United States and Europe and made lenders around the world wary of dealing with each other.
Furthermore, redemptions rose in September when customers pulled a net 456.6 billion rupees out, much higher than a net outflow of just 90 million rupees in August, according to the Association of Mutual Funds of India (AMFI).
STOCKS, CURRENCY RALLY
Subbarao spoke after markets closed. But they mostly reacted positively to the steps, with the partially convertible rupee closing up 0.4 percent at 48.04/06 per dollar and the main share index ended up 1.5 percent, building on a 7.4 percent gain the previous session.
Overnight cash rates eased to 8.75/9.00 percent from Monday's 9.75/10.00 percent, straddling the central bank's main lending rate of 9.0 percent and indicating cash conditions were easing.
Finance Minister Palaniappan Chidambaram also welcomed the move.
"The chairman of the Indian Banking Association is in touch with the banks as well as the fund industry to decide on an appropriate rate at which banks will onlend to the funds," Chidambaram said in a statement.
Senior fund executives told Reuters on Sunday on condition of anonymity that mutual funds had asked the central bank to lend them short-term cash via a repurchase facility after the global financial crisis froze India's money markets.
India's mutual funds managed 4.8 trillion rupees of funds at end-September, the equivalent of about 10 percent of the country's gross domestic product, according to data from AMFI.
They also cornered 7.7 percent of household savings in 2007/08, according to the central bank.
(Additional reporting by Nishant Kumar in Singapore, V. Ramakrishnan in MUMBAI and Manoj Kumar in NEW DELHI)
(yahoo india news)
MUMBAI/NEW DELHI (Reuters) - India pumped liquidity into its markets and took measures aimed at helping its $106 billion mutual-funds industry on Tuesday as its rupee and stocks rallied after governments worldwide moved to restore confidence in the financial sector.
Reserve Bank of India (RBI) governor said after meeting the finance minister in New Delhi the market situation was under control but he could not comment on what more measures might come.
India's financial markets were badly shaken last week as the global financial crisis spread, with stocks falling almost 16 percent, the rupee hitting a record low and overnight lending rates leaping to 23 percent.
The RBI cut the amount of funds banks must keep in reserve on Saturday, releasing more than $12 billion into the banking system, and on Tuesday it injected $13 billion via its daily overnight money market operations and introduced a temporary funding window for mutual funds.
"We have reviewed the entire situation and we believe everything is under control," RBI Governor Duvvuri Subbarao told reporters after meeting the finance minister, adding the liquidity situation was comfortable.
He later met the prime minister along with the finance minister but did not make comment further.
The RBI conducted a special 15-day repo auction on Tuesday to meet the liquidity needs of mutual funds, whose investors have pulled money out to pay tax bills and due to the global financial markets turmoil.
In the auction, which was to banks specifically for lending on to funds, saw only 35 billion rupees ($730 million) taken up against 200 billion rupees on offer.
"People did not have much time to participate at the auction and did not understand it completely and hence the low numbers," said Ashish Nigam, head of fixed income at Religare AEGON Asset Management Company.
The fund industry said the move was a welcome option, however. The central bank also relaxed rules for mutual funds on using illiquid certificates of deposit issued by banks, of which the funds have been big buyers this year, as collateral.
Mutual funds would normally sell bank debt on the money market to raise cash to meet redemptions.
But India's money markets have been hit by the global financial crisis, which has wrecked banks across the United States and Europe and made lenders around the world wary of dealing with each other.
Furthermore, redemptions rose in September when customers pulled a net 456.6 billion rupees out, much higher than a net outflow of just 90 million rupees in August, according to the Association of Mutual Funds of India (AMFI).
STOCKS, CURRENCY RALLY
Subbarao spoke after markets closed. But they mostly reacted positively to the steps, with the partially convertible rupee closing up 0.4 percent at 48.04/06 per dollar and the main share index ended up 1.5 percent, building on a 7.4 percent gain the previous session.
Overnight cash rates eased to 8.75/9.00 percent from Monday's 9.75/10.00 percent, straddling the central bank's main lending rate of 9.0 percent and indicating cash conditions were easing.
Finance Minister Palaniappan Chidambaram also welcomed the move.
"The chairman of the Indian Banking Association is in touch with the banks as well as the fund industry to decide on an appropriate rate at which banks will onlend to the funds," Chidambaram said in a statement.
Senior fund executives told Reuters on Sunday on condition of anonymity that mutual funds had asked the central bank to lend them short-term cash via a repurchase facility after the global financial crisis froze India's money markets.
India's mutual funds managed 4.8 trillion rupees of funds at end-September, the equivalent of about 10 percent of the country's gross domestic product, according to data from AMFI.
They also cornered 7.7 percent of household savings in 2007/08, according to the central bank.
(Additional reporting by Nishant Kumar in Singapore, V. Ramakrishnan in MUMBAI and Manoj Kumar in NEW DELHI)
(yahoo india news)
Friday, October 3, 2008
Onus on AMC trustees to enforce MF code
MUMBAI: Capital market regulator SEBI plans to frame regulations for mutual fund distributors in a manner that the onus will be on trustees of ass
et management companies to ensure that norms are enforced. SEBI has taken this view since the trustees are the first level regulators of the industry at the fund level.
SEBI has already held one round of meeting with mutual fund trustees on this issue. Another meeting is likely to be held shortly to discuss this issue further.
“It is high time distributors are regulated, it has been one of our major concerns for sometime,” said a SEBI official, who was present at the meeting.
“The AMCs are regulated..but then the distributors who are violating all code of conducts are not regulated,” he added.
At present, there are no regulations for the distribution industry. However, distributors of financial products have to pass the AMFI or the IRDA exam and get themselves registered in order to sell any financial product. As per industry estimates, there are more than 45,000 mutual fund distributors in the country.
As part of its efforts to safeguard the interest of retail investors, SEBI had ruled that new schemes launched by mutual funds should be called New Fund Offerings (NFOs) and not initial public offerings (IPOs), which seemed to suggest an offering of shares rather than a mutual fund scheme.
The regulator had also changed the fee structure and accounting norms of the industry so that retail investors were not shortchanged.
“We may have to frame a new code of conduct on compliance for distributors,” the SEBI official said.
Financial sector regulators are aware of the fact that there has always been mis-selling of financial products such as mutual funds, insurance, equities, fixed income and deposits happening in the country. In recent times, the situation has been exacerbated, due to the boom in financial markets.
In other developed markets such as in the US, the Securities Exchange Commission (SEC) doesn’t regulate distributors but the NASD (National Association of Securities Dealers), which is a SRO (self-regulatory organisation) does. In India, the tradition of a SRO is yet to evolve. SEBI has held discussions in the past with trade bodies in the country to become a SRO, which is next on its agenda.
According to sources, SEBI will be initiating dialogues with IRDA and RBI officials on strengthening this mechanism as there is a need for co-ordination between financial sector regulators. Market players say 30% of the mutual fund distribution is done by banks, which comes under RBI’s jurisdiction.
A case in point is the recent issue on mutual funds offering insurance cover, which SEBI took up with the government and IRDA as it was felt that the Life Insurance Council had taken a unilateral decision on it.
(Source: Economic Times)
et management companies to ensure that norms are enforced. SEBI has taken this view since the trustees are the first level regulators of the industry at the fund level.
SEBI has already held one round of meeting with mutual fund trustees on this issue. Another meeting is likely to be held shortly to discuss this issue further.
“It is high time distributors are regulated, it has been one of our major concerns for sometime,” said a SEBI official, who was present at the meeting.
“The AMCs are regulated..but then the distributors who are violating all code of conducts are not regulated,” he added.
At present, there are no regulations for the distribution industry. However, distributors of financial products have to pass the AMFI or the IRDA exam and get themselves registered in order to sell any financial product. As per industry estimates, there are more than 45,000 mutual fund distributors in the country.
As part of its efforts to safeguard the interest of retail investors, SEBI had ruled that new schemes launched by mutual funds should be called New Fund Offerings (NFOs) and not initial public offerings (IPOs), which seemed to suggest an offering of shares rather than a mutual fund scheme.
The regulator had also changed the fee structure and accounting norms of the industry so that retail investors were not shortchanged.
“We may have to frame a new code of conduct on compliance for distributors,” the SEBI official said.
Financial sector regulators are aware of the fact that there has always been mis-selling of financial products such as mutual funds, insurance, equities, fixed income and deposits happening in the country. In recent times, the situation has been exacerbated, due to the boom in financial markets.
In other developed markets such as in the US, the Securities Exchange Commission (SEC) doesn’t regulate distributors but the NASD (National Association of Securities Dealers), which is a SRO (self-regulatory organisation) does. In India, the tradition of a SRO is yet to evolve. SEBI has held discussions in the past with trade bodies in the country to become a SRO, which is next on its agenda.
According to sources, SEBI will be initiating dialogues with IRDA and RBI officials on strengthening this mechanism as there is a need for co-ordination between financial sector regulators. Market players say 30% of the mutual fund distribution is done by banks, which comes under RBI’s jurisdiction.
A case in point is the recent issue on mutual funds offering insurance cover, which SEBI took up with the government and IRDA as it was felt that the Life Insurance Council had taken a unilateral decision on it.
(Source: Economic Times)
Dividend yield funds perform better than Sensex, Nifty
MUMBAI: As the market brings in fall in share prices, returns and sentiments, there are funds that haven't much borne the brunt of the massive dip. These are dividend yield funds.
At a time when the Sensex has fallen to more than 27 per cent in one year, these funds have fallen not more than 21 per cent on an average.
Says Manish Bhandari, fund manager, ING Dividend Yield Fund, "The foremost strategy that has worked for dividend yield funds is selecting stock and constructing portfolio of stocks having dividend yield of more than Nifty, and being true to the mandate of investing in dividend yield stocks only."
Of all the six funds having exposure to dividend yield stocks, ING Dividend Yield Fund has emerged as the less-destroyed fund in terms of returns, with only 15 per cent fall in its returns for one-year period.
Adds Bhandari of ING Dividend Yield Fund, "Our value-investing approach in stock selection has helped us to deliver superior returns, which have beaten the index by more than 10% in one-year time frame. We wouldn't invest in momentum or high P/E stocks."
(Source:Economic times)
At a time when the Sensex has fallen to more than 27 per cent in one year, these funds have fallen not more than 21 per cent on an average.
Says Manish Bhandari, fund manager, ING Dividend Yield Fund, "The foremost strategy that has worked for dividend yield funds is selecting stock and constructing portfolio of stocks having dividend yield of more than Nifty, and being true to the mandate of investing in dividend yield stocks only."
Of all the six funds having exposure to dividend yield stocks, ING Dividend Yield Fund has emerged as the less-destroyed fund in terms of returns, with only 15 per cent fall in its returns for one-year period.
Adds Bhandari of ING Dividend Yield Fund, "Our value-investing approach in stock selection has helped us to deliver superior returns, which have beaten the index by more than 10% in one-year time frame. We wouldn't invest in momentum or high P/E stocks."
(Source:Economic times)
Mutual funds assets fall 3 pc in Sept
NEW DELHI: The mutual fund industry witnessed nearly 3 per cent drop in its assets under management in September, led by country's top fund house
Reliance MF, which lost over Rs 2,122 crore during the period.
The combined average assets under management (AUM) of the 35 fund houses in the country dropped to Rs 5,29,121.76 crore at the end of September, compared with Rs 5,44,173.96 crore in August, according to the data released by the Association of Mutual Funds in India.
Analysts believe the bearish sentiment in the market and the credit crisis in the global market have taken a toll on the assets of mutual funds, even as investors have turned their attention fixed maturity plans and liquid schemes.
Reliance MF registered the biggest drop of over Rs 2,122 crore or 2.39 per cent in its average AUM in September. However, Reliance MF continues to be the top fund house with assets valued Rs 86,494.46 crore at the end of the month.
Further, HDFC MF, which tripped ICICI Prudential MF to grab the second notch last month, retained the ranking with an AUM of Rs 51,998.28 crore, while ICICI's AUM fell 6.25 per cent to Rs 49,772.48 crore.
While HDFC MF's AUM declined from Rs 53,858.63 crore, ICICI Prudential MF's assets dropped from Rs 53,092.78 crore.
UTI MF continued its fall in the average AUM, which was Rs 44,623.18 crore at the end of September, down 5 per cent from August's figure of Rs 46,947.32 crore.
Besides, AUM of Franklin Templeton MF rose marginally to Rs 28,356 crore in September, against Rs 27,715.32 crore in the previous month.
Meanwhile, about 11 fund houses managed to increase their AUM in September which include -- ABN Amro MF, Taurus MF, Sahara MF, Deutsche MF, Benchmark among others.
(Source:Economic times)
Reliance MF, which lost over Rs 2,122 crore during the period.
The combined average assets under management (AUM) of the 35 fund houses in the country dropped to Rs 5,29,121.76 crore at the end of September, compared with Rs 5,44,173.96 crore in August, according to the data released by the Association of Mutual Funds in India.
Analysts believe the bearish sentiment in the market and the credit crisis in the global market have taken a toll on the assets of mutual funds, even as investors have turned their attention fixed maturity plans and liquid schemes.
Reliance MF registered the biggest drop of over Rs 2,122 crore or 2.39 per cent in its average AUM in September. However, Reliance MF continues to be the top fund house with assets valued Rs 86,494.46 crore at the end of the month.
Further, HDFC MF, which tripped ICICI Prudential MF to grab the second notch last month, retained the ranking with an AUM of Rs 51,998.28 crore, while ICICI's AUM fell 6.25 per cent to Rs 49,772.48 crore.
While HDFC MF's AUM declined from Rs 53,858.63 crore, ICICI Prudential MF's assets dropped from Rs 53,092.78 crore.
UTI MF continued its fall in the average AUM, which was Rs 44,623.18 crore at the end of September, down 5 per cent from August's figure of Rs 46,947.32 crore.
Besides, AUM of Franklin Templeton MF rose marginally to Rs 28,356 crore in September, against Rs 27,715.32 crore in the previous month.
Meanwhile, about 11 fund houses managed to increase their AUM in September which include -- ABN Amro MF, Taurus MF, Sahara MF, Deutsche MF, Benchmark among others.
(Source:Economic times)
Thursday, October 2, 2008
Bank of India joins Mutual Fund league
The bank would hold a majority stake in the proposed subsidiary and has appointed Ernst & Young as consultant to facilitate the process
Mumbai: Leading public sector lender, Bank of India (BoI), is set to enter the mutual funds business and is mulling setting up a separate subsidiary for the business.
The bank would hold a majority stake in the proposed subsidiary and has appointed Ernst & Young as consultant to facilitate the process, a senior BOI official said.
The mutual funds partner is expected to be finalised from a clutch of leading global players by October, the official said.
"We will shortlist around nine to ten players from a list of around 20 leading players to establish a JV partnership. This process would be completed within the next 10-15 days and the final partner chosen in about two months," the official told PTI here.
Last month, BoI had invited Expressions of Interest (EoIs) from consultants for its MF business and has now zeroed in on Ernst & Young from among four to five aspirants, the official said.
The consultant would assist the bank in formulating its business strategies including identifying a 'suitable' partner, the official said.
Though the official declined to divulge the names of the foreign players BoI is in talks with, Spanish mutual funds major, BBVA, is understood to be in talks with the bank. Officials from BBVA declined to comment on the matter.
After finalising its partner, BoI would approach the Reserve Bank of India for the necessary regulatory approvals, the official said. Meanwhile, the life insurance joint venture of Bank of India, Union Bank of India and Japanese firm Dai-ichi, in which BoI holds a 51 per cent stake, is expected to get operational by Q3 FY 09, officials from the banks said. The JV--Star Union Dai-ichi Life Insurance--will use its combined branch strength of nearly 5,000 for the distribution of insurance products. The JV will also utilise its trained staff to sell the insurance products.
Several state-owned lenders including State Bank and Bank of Baroda are already active in the mutual funds space, either through their wholly-owned subsidiaries or joint venture tie-ups with foreign companies.
State Bank has tied-up with French major, Societe Generale Asset Management, which manages over USD 500 billion assets worldwide.
Similarly, Canara Bank has entered into a JV with Netherlands-based Robeco Groep NV. Robeco had acquired a 49 per cent stake in Canbank Investment Management Services last year. As on July 31, the JV has total assets under management of Rs 4,532.6 crore.
Union Bank of India is also readying itself to roll-out mutual funds in the next three to six months. The bank recently entered into an agreement with Belgium-based KBC Asset Management NV. UBI holds a 51 per cent stake in the company while KBC the balance 49 per cent.
© Copyright 2008 PTI. All rights reserved.
(source:MSN)
Mumbai: Leading public sector lender, Bank of India (BoI), is set to enter the mutual funds business and is mulling setting up a separate subsidiary for the business.
The bank would hold a majority stake in the proposed subsidiary and has appointed Ernst & Young as consultant to facilitate the process, a senior BOI official said.
The mutual funds partner is expected to be finalised from a clutch of leading global players by October, the official said.
"We will shortlist around nine to ten players from a list of around 20 leading players to establish a JV partnership. This process would be completed within the next 10-15 days and the final partner chosen in about two months," the official told PTI here.
Last month, BoI had invited Expressions of Interest (EoIs) from consultants for its MF business and has now zeroed in on Ernst & Young from among four to five aspirants, the official said.
The consultant would assist the bank in formulating its business strategies including identifying a 'suitable' partner, the official said.
Though the official declined to divulge the names of the foreign players BoI is in talks with, Spanish mutual funds major, BBVA, is understood to be in talks with the bank. Officials from BBVA declined to comment on the matter.
After finalising its partner, BoI would approach the Reserve Bank of India for the necessary regulatory approvals, the official said. Meanwhile, the life insurance joint venture of Bank of India, Union Bank of India and Japanese firm Dai-ichi, in which BoI holds a 51 per cent stake, is expected to get operational by Q3 FY 09, officials from the banks said. The JV--Star Union Dai-ichi Life Insurance--will use its combined branch strength of nearly 5,000 for the distribution of insurance products. The JV will also utilise its trained staff to sell the insurance products.
Several state-owned lenders including State Bank and Bank of Baroda are already active in the mutual funds space, either through their wholly-owned subsidiaries or joint venture tie-ups with foreign companies.
State Bank has tied-up with French major, Societe Generale Asset Management, which manages over USD 500 billion assets worldwide.
Similarly, Canara Bank has entered into a JV with Netherlands-based Robeco Groep NV. Robeco had acquired a 49 per cent stake in Canbank Investment Management Services last year. As on July 31, the JV has total assets under management of Rs 4,532.6 crore.
Union Bank of India is also readying itself to roll-out mutual funds in the next three to six months. The bank recently entered into an agreement with Belgium-based KBC Asset Management NV. UBI holds a 51 per cent stake in the company while KBC the balance 49 per cent.
© Copyright 2008 PTI. All rights reserved.
(source:MSN)
Mutual fund sector to grow at 30-35 percent
Kolkata: The mutual fund sector will see a compounded annual growth rate of 30-35 percent in the next three to five years, an official said Monday.
"The mutual fund sector will see a huge growth in the coming three to five years to the tune of 30 to 35 percent. This will happen due to easing of regulations on mutual funds," Birla Sun Life Asset Management Company (BSLAMC) Chief Executive Officer Anil Kumar told reporters here.
He said the company grew at 89 percent last fiscal compared to an industry growth of 60 percent.
Kumar, who was present at the launch of his company's first commodity fund, said BSLAMC grew at 14 percent in the first quarter of the current fiscal against an industry growth rate of six percent.
The company plans to almost double its offices to 200 by the end of this fiscal. Currently, BSLAMC has 110 offices in the country, he added.
Christened Birla Sun Life Commodity Equity Fund, the new product is an open-ended commodity equities fund meant to offer investors long-term capital growth by investing in securities of domestic and overseas commodity companies.
"We see commodities and investments to commodity equities as essential and not an alternate investment class. Commodity is the second largest asset class in terms of investments after foreign currency," Kumar said. Investments to the commodity equity fund can be done in sectors like metals, agriculture and multi-commodities.
Source: Indo-Asian News Service
"The mutual fund sector will see a huge growth in the coming three to five years to the tune of 30 to 35 percent. This will happen due to easing of regulations on mutual funds," Birla Sun Life Asset Management Company (BSLAMC) Chief Executive Officer Anil Kumar told reporters here.
He said the company grew at 89 percent last fiscal compared to an industry growth of 60 percent.
Kumar, who was present at the launch of his company's first commodity fund, said BSLAMC grew at 14 percent in the first quarter of the current fiscal against an industry growth rate of six percent.
The company plans to almost double its offices to 200 by the end of this fiscal. Currently, BSLAMC has 110 offices in the country, he added.
Christened Birla Sun Life Commodity Equity Fund, the new product is an open-ended commodity equities fund meant to offer investors long-term capital growth by investing in securities of domestic and overseas commodity companies.
"We see commodities and investments to commodity equities as essential and not an alternate investment class. Commodity is the second largest asset class in terms of investments after foreign currency," Kumar said. Investments to the commodity equity fund can be done in sectors like metals, agriculture and multi-commodities.
Source: Indo-Asian News Service
Mutual funds are for investment sake
And insurance schemes are best treated as safety nets.
There were some announcements recently by the Life Insurance Council, a lobbying body formed by life insurance companies. Broadly, these announcements appeared to say two things: that the terminology of unit-linked insurance plans (Ulips) would be made uniform and that insurance companies would refuse to underwrite insurance-linked schemes issued by mutual fund companies.
Behind these announcements is the ongoing struggle between life insurance companies and mutual funds.
Mutual funds and life insurance are two distinct products, one intended as a savings vehicle and the other a safety net. However, this distinction has blurred over the last few years. Indeed, one gets a feeling the life insurance companies are also in the business of running mutual funds, categorised somewhat differently as unit-linked insurance plans (Ulips).
Ulips have a mix of characteristics of both insurance and mutual fund schemes.
Crucially, however, the mutual fund aspect of Ulips is regulated by the government under a very different set of rules compared with the real mutual funds.
From the investors’ point of view, the biggest difference between the two categories pertains to how much of his money is actually used for his insurance and his savings and how much is taken away to pay commissions to agents and towards the insurance company’s expenses. The second big difference is in the quality of the information he is given about his investments.
Mutual funds deduct less than 2.5% as the agent’s commission. And as per current norms, there is no deduction if investors don’t use an agent and go directly to a fund company.
(soucre: DNA Money )
There were some announcements recently by the Life Insurance Council, a lobbying body formed by life insurance companies. Broadly, these announcements appeared to say two things: that the terminology of unit-linked insurance plans (Ulips) would be made uniform and that insurance companies would refuse to underwrite insurance-linked schemes issued by mutual fund companies.
Behind these announcements is the ongoing struggle between life insurance companies and mutual funds.
Mutual funds and life insurance are two distinct products, one intended as a savings vehicle and the other a safety net. However, this distinction has blurred over the last few years. Indeed, one gets a feeling the life insurance companies are also in the business of running mutual funds, categorised somewhat differently as unit-linked insurance plans (Ulips).
Ulips have a mix of characteristics of both insurance and mutual fund schemes.
Crucially, however, the mutual fund aspect of Ulips is regulated by the government under a very different set of rules compared with the real mutual funds.
From the investors’ point of view, the biggest difference between the two categories pertains to how much of his money is actually used for his insurance and his savings and how much is taken away to pay commissions to agents and towards the insurance company’s expenses. The second big difference is in the quality of the information he is given about his investments.
Mutual funds deduct less than 2.5% as the agent’s commission. And as per current norms, there is no deduction if investors don’t use an agent and go directly to a fund company.
(soucre: DNA Money )
More Choice for Mutual Fund Investors
The competition for Indian mutual fund companies is likely to hot up. In addition to battling a weak market, Indian mutual fund companies have to deal with a influx of new players. Though the markets remain weak, there is no dearth of players seeking to have a pie of the Indian financial sector. Recently, the market regulator gave in-principle approval to seven players to set up mutual funds in India, including Edelweiss, Goldman Sachs and Indiabulls.
Yes, but it would be tough ride for the new comers. Though the Indian investors are more and more looking at equities through the MF route, the new comers will have a longer time to make profit, particularly when the growth rate of the industry is decelerating. According to Association of Mutual Fund Industry, a trade body,the growth in asset under management has fallen to 30 per cent in the first quarter of the fiscal, a sharp fallfrom the 50%-plus rates in the previous years.
The new players have to pay a higher distribution cost to push their products in a crowded industry. Besides, as the averagefund size decreases, the new players will not have the scale to spread the cost. Have the new players not given these concerns a thought? Or, are they just following the crowd?
It could be guessed that some new players would concentrate only on particular market niches. This would mean more choices for the retail investors and more specialized players to look at when looking at a particular asset class.
(Blog at WordPress.com.)
Yes, but it would be tough ride for the new comers. Though the Indian investors are more and more looking at equities through the MF route, the new comers will have a longer time to make profit, particularly when the growth rate of the industry is decelerating. According to Association of Mutual Fund Industry, a trade body,the growth in asset under management has fallen to 30 per cent in the first quarter of the fiscal, a sharp fallfrom the 50%-plus rates in the previous years.
The new players have to pay a higher distribution cost to push their products in a crowded industry. Besides, as the averagefund size decreases, the new players will not have the scale to spread the cost. Have the new players not given these concerns a thought? Or, are they just following the crowd?
It could be guessed that some new players would concentrate only on particular market niches. This would mean more choices for the retail investors and more specialized players to look at when looking at a particular asset class.
(Blog at WordPress.com.)
India's mutual funds face profit squeeze - HSBC
MUMBAI, Sept 15 (Reuters) - India's funds industry may see profits drop in 2008/09 as volatile stocks make selling equity funds tough, limiting the ability of domestic fund houses to attract fresh investors, a top executive at HSBC (HSBA.L: Quote, Profile, Research) said.
Vikramaaditya, chief executive of HSBC's Indian mutual fund unit, said costs continued to rise as the industry invested in expanding reach as well as to attract and retain scarce talent.
"This year will be largely difficult for the industry as a whole," he told Reuters on Monday.
"I do not think any player in the industry would be excluded from that and would not have the impact," said Vikramaaditya, who joined the firm in July from HSBC's securities services unit.
Dazzled by a five-year bull run in which stocks rose six-fold, Indian investors piled up equity funds, helping assets quadruple to 5.5 trillion rupees by December 2007.
But, a plunge in shares this year by a third has seen high-margin equity assets slump by a fourth and the industry's assets down about 1 percent, hurting industry-wide profitability.
"Revenues are under pressure. Costs are still growing," said Vikramaaditya, a sports enthusiast who also likes to travel and try out new cuisines, adding most of the flows were coming in lower-margin fixed income funds.
Stock funds saw first net outflows of about 630 million rupees in 11 months in August. Low-margin close-ended debt funds cornered 90 percent of the industry's total inflows of about 196 billion rupees during the month, data from the Association of Mutual Funds in India showed.
Consultancy firm McKinsey & Company estimates profitability of large and medium-sized funds in India was about 23 basis points (bps) of assets under management last year.
Factoring in the shift to lower-margin products, it estimates profitability could drop to below 15 bps this year.
While existing players will take a hit on profitability, new players would have to redefine their payback period, he said.
"They might have to look at longer gestation periods before they start making profits," said Vikramaaditya.
HSBC India fund unit has seen average monthly assets grow marginally to 169 billion rupees in the six months to August as compared to a 4 percent decline in the industry's assets. (Reporting by Nishant Kumar; editing by )
(source:Reuters India)
Vikramaaditya, chief executive of HSBC's Indian mutual fund unit, said costs continued to rise as the industry invested in expanding reach as well as to attract and retain scarce talent.
"This year will be largely difficult for the industry as a whole," he told Reuters on Monday.
"I do not think any player in the industry would be excluded from that and would not have the impact," said Vikramaaditya, who joined the firm in July from HSBC's securities services unit.
Dazzled by a five-year bull run in which stocks rose six-fold, Indian investors piled up equity funds, helping assets quadruple to 5.5 trillion rupees by December 2007.
But, a plunge in shares this year by a third has seen high-margin equity assets slump by a fourth and the industry's assets down about 1 percent, hurting industry-wide profitability.
"Revenues are under pressure. Costs are still growing," said Vikramaaditya, a sports enthusiast who also likes to travel and try out new cuisines, adding most of the flows were coming in lower-margin fixed income funds.
Stock funds saw first net outflows of about 630 million rupees in 11 months in August. Low-margin close-ended debt funds cornered 90 percent of the industry's total inflows of about 196 billion rupees during the month, data from the Association of Mutual Funds in India showed.
Consultancy firm McKinsey & Company estimates profitability of large and medium-sized funds in India was about 23 basis points (bps) of assets under management last year.
Factoring in the shift to lower-margin products, it estimates profitability could drop to below 15 bps this year.
While existing players will take a hit on profitability, new players would have to redefine their payback period, he said.
"They might have to look at longer gestation periods before they start making profits," said Vikramaaditya.
HSBC India fund unit has seen average monthly assets grow marginally to 169 billion rupees in the six months to August as compared to a 4 percent decline in the industry's assets. (Reporting by Nishant Kumar; editing by )
(source:Reuters India)
Tuesday, September 30, 2008
Short & Long-term Tax Implications
What are the tax implications for SIP investment? If I start the SIP on January 1, 2007, and continue it for a year, can I sell all the units at the end of the year (January 2008)?
—Shailesh
You can sell the units when you want. But you will be taxed if you do not hold them for at least a year. The SIP is nothing but a regular investment at defined periodicity. Hence, each installment of your SIP investment in an equity fund will be liable for short-term capital gains tax if not held for a minimum period of 12 months. So the units bought in February will be exempt from tax only if you sell it 12 months after February. And so on and so forth. You have to hold the units one year from the date you bought them, not from the date you started the SIP.
(Source: Value Research)
—Shailesh
You can sell the units when you want. But you will be taxed if you do not hold them for at least a year. The SIP is nothing but a regular investment at defined periodicity. Hence, each installment of your SIP investment in an equity fund will be liable for short-term capital gains tax if not held for a minimum period of 12 months. So the units bought in February will be exempt from tax only if you sell it 12 months after February. And so on and so forth. You have to hold the units one year from the date you bought them, not from the date you started the SIP.
(Source: Value Research)
Switch to an ELSS Fund
Please advise whether investment switched from an ordinary equity fund to ELSS fund would be eligible for computing deductions under section 80C of that year? -Arvind Chandorkar
Yes, you can take 80C benefit in same financial year by switching from equity fund to ELSS fund. But if your tenure of investment in equity fund is less than a year then you have to pay short term capital gains tax while you switch.
(Source: Value Research)
Yes, you can take 80C benefit in same financial year by switching from equity fund to ELSS fund. But if your tenure of investment in equity fund is less than a year then you have to pay short term capital gains tax while you switch.
(Source: Value Research)
Equity Speciality Funds Equity Speciality Funds
Is the DSPML World Gold Fund an Equity Fund or a Debt fund? On your site it is classified as an Equity specialty fund, but I am told that for tax calculations it is considered as a debt fund. Could you kindly clarify the same for me that what are the tax implications for this fund?
-Dr. Deepak S Ray
Yes, the tax treatment for this fund is same as debt fund because more than 65 percent of the fund corpus is invested in stocks of foreign companies. Long-term capital gain tax is zero only in the case of equity funds. Equity funds are defined as those which invest more than 65 per cent of their assets in Indian companies. Any fund not fulfilling this criterion will be subjected to the rules of debt fund.
DSPML World Gold fund is an equity based fund of funds mutual fund scheme. A large portion of this fund is invested in overseas mutual fund schemes, which in turn invest in stocks related to gold mining companies.
(Source: Value Research)
-Dr. Deepak S Ray
Yes, the tax treatment for this fund is same as debt fund because more than 65 percent of the fund corpus is invested in stocks of foreign companies. Long-term capital gain tax is zero only in the case of equity funds. Equity funds are defined as those which invest more than 65 per cent of their assets in Indian companies. Any fund not fulfilling this criterion will be subjected to the rules of debt fund.
DSPML World Gold fund is an equity based fund of funds mutual fund scheme. A large portion of this fund is invested in overseas mutual fund schemes, which in turn invest in stocks related to gold mining companies.
(Source: Value Research)
Taxation on MIPs
I would like to know about the tax treatment for MIPs? Are their returns treated as dividends or as capital gains?
—Shailesh Rawat.
Tax treatment of returns from Monthly Income Plans (MIPs) depends on the way you derive them. If you opt for dividend plan, then like all debt funds, MIPs are liable for Dividend Distribution Tax (DDT) which is 12.5 per cent for debt funds.
If you choose the growth plan, all gains will be treated as short-term or long-term depending on your period of holding. Any short-term gain (less than 1-year holding) from debt funds is added to your income. Long-term gain from MIPs is taxed at 10 per cent without indexation or 20 per cent with indexation, whichever is lower.
Deriving gain from an MIPs Growth option through Systematic Withdrawal Plan (SWP) could be more tax efficient than dividend plan. SWP is redemption of units worth predefined amount and periodicity. Besides, you will also have a greater control on your cash inflows.
(Source: Value Research)
—Shailesh Rawat.
Tax treatment of returns from Monthly Income Plans (MIPs) depends on the way you derive them. If you opt for dividend plan, then like all debt funds, MIPs are liable for Dividend Distribution Tax (DDT) which is 12.5 per cent for debt funds.
If you choose the growth plan, all gains will be treated as short-term or long-term depending on your period of holding. Any short-term gain (less than 1-year holding) from debt funds is added to your income. Long-term gain from MIPs is taxed at 10 per cent without indexation or 20 per cent with indexation, whichever is lower.
Deriving gain from an MIPs Growth option through Systematic Withdrawal Plan (SWP) could be more tax efficient than dividend plan. SWP is redemption of units worth predefined amount and periodicity. Besides, you will also have a greater control on your cash inflows.
(Source: Value Research)
Exit Load on ELSS
I had bought Reliance Mutual Fund ELSS on 13-10-2005. Now, on completion of 3 years I have to withdraw it. Can you please suggest me how should I go ahead with this and will the amount have an exit load? Will the profit be taxable?
—Sanjay Patil
Equity Linked Saving Schemes contains a 3-year lock-in period after which you can withdraw your money from the fund without paying any exit load. Since it is an equity fund held for more than a year, your profits are exempt from tax.
(Source: Value Research)
—Sanjay Patil
Equity Linked Saving Schemes contains a 3-year lock-in period after which you can withdraw your money from the fund without paying any exit load. Since it is an equity fund held for more than a year, your profits are exempt from tax.
(Source: Value Research)
Monday, September 29, 2008
Should people buy insurance product mixed with SIP plans offered by Birla Sun Life and Reliance Mutual Fund?
It is an attractive thing. You are getting a term cover for free. The product or the term cover for free is offered by two fund families, which offer a reasonable range of good equity funds. So, if one has to get into equities steadily over time then these fund companies offer a good choice. It comes for free so get it and you do not have to put a lot of money upfront to buy it. So, getting a meaningful thing for free is a good idea and people should consider it. But, I do not think it’s a missed opportunity because the term cover which you get even when it comes to an end, you are not at a significant loss because term cover for a lot of people comes as a cheap avenue but not too many investors go for it. Anyway you will get a substitute for a very low cost. For somebody who is getting this benefit, it is almost like getting something worth Rs 2,500 per annum for free.
If I were to choose two funds, I would choose Birla Sun Life Equity and Reliance Growth. Reliance despite having too many equity funds, the choice of good equity fund is getting limited.
(Source: value research)
If I were to choose two funds, I would choose Birla Sun Life Equity and Reliance Growth. Reliance despite having too many equity funds, the choice of good equity fund is getting limited.
(Source: value research)
What would be your view on Tata Indo Global Infra Fund, NFO for the investors?
Investors should exit this fund for a different reason. Infrastructure is not an opportune thing to stick around with because of the phase of market we are into. It always helps to diversify. Many of these funds are invested all over the world. Some of the markets and themes might still work. So, for most investors the only mantra to follow is ‘diversify’ and global diversification could be helpful. It is a fund, which invests only 35% of its money through a fund or a fund vehicle. But the rationale to get out of this fund is that it is an infrastructure fund. It is theme, which is unlikely to work with India or elsewhere in the immediate future.
(Source: value research)
(Source: value research)
On what parameters should one select a fund?
One should look for the history. If you look at DWS Investment Opportunity on most logical yardsticks, this fund will qualify. This fund has a good history and is evenly spread. It is a diversified fund and has sustained performance on a risk adjusted basis. It has given decent performance; decent return as well. So on those yardsticks; it still qualifies as a good fund.
The problem that the investor could face is reconciling with a 40% loss on a one-time investment. To prevent such situations one should be investing regularly not lump-sum in such investments.
For investing in equity, first checkpoint should be, are you investing for few years? The most important thing is one should not invest at one time and at one go because these kind of situations can arise with equity investments all the time. You see 15-20-25% decline even in a roaring bull market and that could be a test of patience and test of your nerve the moment you invest in equity. To guard that you cannot do anything about the market, the index but you can certainly do something about the way you invest.
Midcap funds are difficult to manage when they become very large. They are constrained by liquidity issues not in a roaring bull market but in a bear phase like this. They certainly face liquidity issues and concerns, which is difficult to address and handle.
(Source: value research)
The problem that the investor could face is reconciling with a 40% loss on a one-time investment. To prevent such situations one should be investing regularly not lump-sum in such investments.
For investing in equity, first checkpoint should be, are you investing for few years? The most important thing is one should not invest at one time and at one go because these kind of situations can arise with equity investments all the time. You see 15-20-25% decline even in a roaring bull market and that could be a test of patience and test of your nerve the moment you invest in equity. To guard that you cannot do anything about the market, the index but you can certainly do something about the way you invest.
Midcap funds are difficult to manage when they become very large. They are constrained by liquidity issues not in a roaring bull market but in a bear phase like this. They certainly face liquidity issues and concerns, which is difficult to address and handle.
(Source: value research)
Ok and what about the DWS Investment Opportunity Fund?
Anybody who invested in January can look with a hindsight that it was a bad timing for any investment made in equity, whether it be a good fund or a bad fund. The good thing is that DWS Investment Opportunity is a good fund, it has fallen as much as most other funds, a little less in fact. If the investor invested at the peak, he/she might be very disappointed. So, it is looking as more disappointing but I will recommend this fund as an investment. The investor should be guided more by needs. If one has to invest more money, one can continue investing more money. If one needs money in four-six months, one should pullout this money because I don’t see a revival of the market in six-months, one-year or one and a half year either.
(Source: value research)
(Source: value research)
Your advice to investors at this point
I would urge most investors to keep away from new fund till they actually mature. Most of the time investors are tempted that here is a big opportunity and they have to participate. The investor should stay clear of relatively new fund till they are at least three-years old. Even three-years is not enough sometimes because you can have a phase when in the three-years, there could be just one phase of the market.
A fund has to go through both phases of the market; the up cycle and the down cycle for an investor to understand. How a fund does for most common investor is important to be known. It is important for a fund to be able to make money in a rising market and a fund is able to better protect money in a falling market. One can’t get to see this in just one-year, six-months, two-years time.
(Source: value research)
A fund has to go through both phases of the market; the up cycle and the down cycle for an investor to understand. How a fund does for most common investor is important to be known. It is important for a fund to be able to make money in a rising market and a fund is able to better protect money in a falling market. One can’t get to see this in just one-year, six-months, two-years time.
(Source: value research)
What is your take on AIG Indian Equity Fund?
AIG Indian Equity Fund has proved to be an average fund so far. It has declined just as much as most other equity funds and participated reasonably in the equity funds. If the investor is getting concerned about the news about AIG, I don’t think there is any concern on that front.
On a standalone basis, if the investor is evaluating the fund it is a one-year fund. It is little premature, one-year time is not enough to take a call on a fund but there is no problem in moving out. Investor can consider moving out to a proven fund with a reasonable and superior history.
(Source: value research)
On a standalone basis, if the investor is evaluating the fund it is a one-year fund. It is little premature, one-year time is not enough to take a call on a fund but there is no problem in moving out. Investor can consider moving out to a proven fund with a reasonable and superior history.
(Source: value research)
Should one shift from Reliance Vision to Reliance Growth?
It will be a worthwhile switch because Reliance Growth is showing no weakness, and moving that money will not be very taxing. I do not think in past one year one will be sitting on any meaningful capital gains. So there is no penalisation, constrain in taking this decision. If market turns around in six months to one year or one and half years time then one will be much better off with Reliance Growth than Reliance Vision.
(Source: value research)
Stay Away From New Funds
At a time when almost all equity funds are giving disappointing returns, Dhirendra Kumar, CEO of Value Research tells what should a Mutual Fund investor do and gives his take on various funds. According to him, an investor should stay away from new funds till they actually mature. "The investor should stay clear of relatively new fund till they are at least three-years old."
(Source: value research)
(Source: value research)
Tuesday, June 3, 2008
Scheme Expenses
My mutual fund investments are mainly in equity schemes. I noticed that when the Sensex moves upwards, many times the NAV of the funds are on the decrease. My basic fear is that the fund manager's fee is eating away potential returns. I see no other reason why the NAV should fall when the Sensex is on a climb. What do you think? Should I continue with my SIP programme or terminate it?—H.P. Goyal
You are right. An equity fund's net asset value (NAV) may decrease even when the Sensex is on the rise. But you are wrong in assuming that this is result of
a high fund management fee.
There are various charges levied by the fund house. The entry and exit load depend on the period of holding and whether you invest through an agent or not. Other charges, which include the annual fund management charge (FMC) and recurring expenses, are incorporated in the daily NAV. So if you invest for a period of six months, you bear the charge for six months and not the whole year.
The mutual fund industry in India is extremely well organized, transparent and regulated. Mutual funds are not allowed to retain some profits and transfer the balance to investors (by increasing the NAV). So be assured that the funds are not over charging you and are efficiently declaring their NAVs on the basis of their daily performance.
Now let's get to why the NAV may decline when the Sensex rises. The Sensex comprises 30 large-cap stocks. So a rise in this index does not imply that all listed stocks have risen. The portfolio of the mutual fund may be totally different from the Sensex basket. It will declare its NAV purely on the basis of the performance of its own stock portfolio on that day. In the recent market crash, there were days when the mid- and small-cap indices crashed despite the Sensex gaining. Naturally, a portfolio laden with mid- and small-cap stocks would see its NAV fall on such days.
Discontinuing the systematic investment plan (SIP) is certainly not advisable. It is perhaps the best way of investing in equity oriented funds. Continue investing and do not worry about these short-term market gyrations.
(by value research)
Thursday, May 22, 2008
Blast from the Past
Hari Mohan, a 45 year old clerk at the MTNL's New Delhi establishment, could not conceal his dismay. “At a time when inflation is at 7.5 per cent, the 6.75 per cent that they are referring to is peanuts,” he says with reference to an article in the newspaper about the bonds issued to investors in lieu of UTI's US-64 schemes unit. Incidentally, the Unit 64 scheme is maturing on May 31, 2008. Hari Mohan is not alone, 83 per cent of 20 million unit holders of the then US-64 schemes stood party to this mass exodus. In April 2003 when the sordid US-64 saga was laid to rest by the then NDA government, it was decided that investors of US-64 be given the option of 6.75 per cent tax-free bonds or liquidation of their holding. Investors holding up to 5,000 units would be offered Rs 12 and for additional holdings they would be offered Rs 10 per unit. “You get paid at the face value for a scheme you held for almost 40 years. So the plan B with tax-free advantage looked lucrative. It was an enforced error,” says Mohan. Rightly said, the tax-free option did look rewarding, then. But it turned out to be one of the most horrendous investment decisions one could have ever made. Consider this - Rs 1 lakh invested (shifted) to the bonds would fetch Rs 1.38 lakh in a span of year (May 31, 2008). Had this amount been invested in other existing schemes of UTI, say UTI Balanced, the amount would have swollen to Rs. 3.43 lakh. Even if you consider the conservative UTI Mahila Unit Scheme, which invests 66 per cent in debt, you would have been sitting on a pile of Rs 2.50 lakh. A little bit of conscious and judiciously decision and the corpus would been a pharaohcious Rs. 11.86 lakh, if invested in Reliance Growth.
(by value research)
(by value research)
In The Pink Of Health
The struggling pharma funds have staged a smart recovery after a lackluster performance for the past few years. The BSE Healthcare Index, that crashed along with the rest of the market in January 2008, has recovered quickly and gained 17.7 per cent in the past three months. In 2005-06, the Equity: Pharma category was the worst performing category in the equity class of mutual funds. The average return of the category in the three-year period (2005-07) stood at 20 per cent, a far cry from the 47.3 per cent return by equity diversified funds. This small category with
five funds has also witnessed a steep fall in assets under management since then. The combined AUM that stood at Rs 623 crore in January 2005 is down 60 per cent to Rs 254 crore, Reliance Pharma alone accounting for Rs 122 crore. Surprisingly, none of the five funds in this category have a large-cap heavy portfolio.
However, in the three month period ended May 2, 2008, the pharma category of mutual funds bounced back. In the period, the average return of pharma funds stood at 10.28 per cent, at a time when almost all equity categories posted negative returns. Reliance Pharma, the category topper for the past two years could not manage to retain its position. Magnum Pharma took very concentrated bets with 48 per cent of the portfolio in just two stocks. As a result, it could not capitalise on the surge in the sector and was the only one to post negative returns.
Fund
Return (%)*
UTI Pharma & Healthcare
16.35
JM Healthcare Sector
15.18
Franklin Pharma
13.92
Reliance Pharma
6.35
Magnum Pharma
-0.4
Category Average
10.28
*February 2- May 2, 2008
The robust numbers declared by various pharma companies helped the sector rally. For instance, Ranbaxy Laboratories, the second largest aggregated holding of these funds, reported a 60 per cent growth in its PAT over 2007-08. Smaller players like Glenmark Pharma reported a 188 per cent rise in profits on a y-o-y basis.
Stocks
Return (%)*
Glenmark Pharmaceuticals
39.82
Ranbaxy Laboratories
33.87
Sun Pharmaceutical Industries
28.98
Glaxosmithkline Pharmaceuticals
25.60
Biocon
23.66
*February 2- May 2, 2008
(by valueresearch)
five funds has also witnessed a steep fall in assets under management since then. The combined AUM that stood at Rs 623 crore in January 2005 is down 60 per cent to Rs 254 crore, Reliance Pharma alone accounting for Rs 122 crore. Surprisingly, none of the five funds in this category have a large-cap heavy portfolio.
However, in the three month period ended May 2, 2008, the pharma category of mutual funds bounced back. In the period, the average return of pharma funds stood at 10.28 per cent, at a time when almost all equity categories posted negative returns. Reliance Pharma, the category topper for the past two years could not manage to retain its position. Magnum Pharma took very concentrated bets with 48 per cent of the portfolio in just two stocks. As a result, it could not capitalise on the surge in the sector and was the only one to post negative returns.
Fund
Return (%)*
UTI Pharma & Healthcare
16.35
JM Healthcare Sector
15.18
Franklin Pharma
13.92
Reliance Pharma
6.35
Magnum Pharma
-0.4
Category Average
10.28
*February 2- May 2, 2008
The robust numbers declared by various pharma companies helped the sector rally. For instance, Ranbaxy Laboratories, the second largest aggregated holding of these funds, reported a 60 per cent growth in its PAT over 2007-08. Smaller players like Glenmark Pharma reported a 188 per cent rise in profits on a y-o-y basis.
Stocks
Return (%)*
Glenmark Pharmaceuticals
39.82
Ranbaxy Laboratories
33.87
Sun Pharmaceutical Industries
28.98
Glaxosmithkline Pharmaceuticals
25.60
Biocon
23.66
*February 2- May 2, 2008
(by valueresearch)
Biggest of them All
Three months after its launch in January 2008, Reliance Natural Resources Fund has emerged as the India's largest equity fund with assets under management (AUM) of Rs 5,589 crore (April 2008). The fund overtook ICICI Prudential Infrastructure Fund which topped the charts in March with an AUM of Rs 5,390 crore. It was not too long ago that the AUM of Reliance Mutual Fund touched Rs 1 lakh crore. In January 2008, when most investors refrained from investing and fund houses had a tough time mobilising funds,Reliance Natural Resources managed to collect a whopping Rs 5,660 crore. It was the second largest collection by an equity mutual fund; the top place occupied by another Reliance family member - Reliance Equity, which mobilised Rs 5,790 crore in 2006. The equity funds from the Reliance stable do not hesitate from taking aggressive cash calls. This fund is no exception as the fund currently maintains extremely high cash levels. Though the cash component decreased in April to 53 per cent from March levels of 62 per cent, the fund manager is still waiting for the right opportunity to invest in stock markets. The fund's AUM has eroded by Rs 71 crore since launch but the high cash strategy helped the fund protect the downside. The fund posted a positive return of 0.5 per cent since February 26, 2008 (first NAV date), at a time when the average return of the equity diversified funds has been (-) 6 per cent (February 26 - May 8, 2008). Looking at the portfolio, various large cap stocks like Reliance Industries , ONGC and ACC have been included. However, the fund is quite keen on diversifying by investing in securities abroad. As per its mandate, the fund can invest up to 35 per cent of its assets in foreign securities. The exposure to such stocks has been increased in a short span and close to 7 per cent of its assets account for such foreign securities. Though the investment in such assets is small, the fund manager has selected companies like Arcelor Mittal (world's largest steel producer) and Freeport McMoRan Copper & Gold (world's largest publicly traded copper company). The fund's maximum international investment is in companies engaged in the global water industry. This investment is through PowerShares Water Resources ETF, a water index based international ETF.
(by valueresearch)
(by valueresearch)
Tuesday, May 20, 2008
50% Dividend in DSPML Top 100 Equity Fund
DSPML Top 100 Equity Fund, has declared dividend at Rs 5 per unit on the face value of Rs 10.
The record date has been fixed as May 23, 2008. This is the seventh payout from the fund since its launch. Prior to this, the fund had declared a 50% dividend in June 2007.
(by valueresearch)
The record date has been fixed as May 23, 2008. This is the seventh payout from the fund since its launch. Prior to this, the fund had declared a 50% dividend in June 2007.
(by valueresearch)
Thursday, May 15, 2008
Dividends in FT India Balanced Fund (FTIBF) and Templeton India Equity Income Fund (TIEIF).
Franklin Templeton Investments is declaring dividends in FT India Balanced Fund (FTIBF) and Templeton India Equity Income Fund (TIEIF).
The details for the same are given below:
FTIBF: Rs.3.00 per unit
TIEIF:Rs.0.70 per unit
Record Date for both dividends:May 21, 2008 (Wednesday)
Ex-dividend NAV Date - May 23, 2008 (Friday)
Book Closure:May 22, 2008 (Thursday)
The details for the same are given below:
FTIBF: Rs.3.00 per unit
TIEIF:Rs.0.70 per unit
Record Date for both dividends:May 21, 2008 (Wednesday)
Ex-dividend NAV Date - May 23, 2008 (Friday)
Book Closure:May 22, 2008 (Thursday)
Bharti AXA's Green Debut
There's a new kid on the mutual fund block and it seems like it's trying to make a unique debut. Bharti AXA is the latest entrant in the Indian mutual fund space and has got some good news for eco-friendly investors. The company has devised a unique eco-friendly plan in which the investors would receive all the communication from the fund company like account statement, portfolio statement, etc through emails or SMS. This eco plan will be available for investors investing up to Rs. 2 lakh.This may turn out to be a win-win situation for both investors and the AMC. Investors won't
have to maintain thick files containing the communiqué from the AMC and the AMC will in turn save on the cost of paper and postage charges. Moreover the savings earned by the AMC through this would be passed on to the investor as 0.25 per cent reduction in the recurring expenses. This means that if an investor invests Rs 1,000 per month through SIP for 5 years, he can save upto Rs 500, considering a conservative rate of return of 10 per cent per annum. This may not seem much for an investment of Rs 60,000, but if one wants to go green, this is better than nothing.
(by valueresearch)
have to maintain thick files containing the communiqué from the AMC and the AMC will in turn save on the cost of paper and postage charges. Moreover the savings earned by the AMC through this would be passed on to the investor as 0.25 per cent reduction in the recurring expenses. This means that if an investor invests Rs 1,000 per month through SIP for 5 years, he can save upto Rs 500, considering a conservative rate of return of 10 per cent per annum. This may not seem much for an investment of Rs 60,000, but if one wants to go green, this is better than nothing.
(by valueresearch)
Does Size Matter?
Most mutual fund investors are not bothered by the size of the fund they invest in. In fact, few of them are even aware that funds have a characteristic called size, or that fund size refers to the amount of money that a mutual fund scheme is managing. The few who are aware of this are generally of the opinion that larger is better. I suppose the logic is that if a fund has been given a lot of money to manage then this proves that the fund must be good.Is this true? Not quite. While fund size does matter, it matters for a very different reason. Large equity funds are
difficult to manage in many situations, as the recent travails of India's largest equity fund are in the process of demonstrating. Reliance Natural Resources Fund was launched in January 2008. To be precise, the new fund offer (NFO) opened on January 1, 2008 and closed on 30th January. Thus, it caught the peak (and the tail-end) of the stock markets' bull run. Such was the hype of the times that it collected a huge Rs 5,660 crore during the NFO itself. I rather think that the fund was also helped by the similarity between its name and that of the company Reliance Natural Resources Limited, which is also from the ADA group. This company's stock price went through the roof between September and January.
Anyhow, Reliance Natural Resources Fund was extremely lucky in its timing. It collected a huge amount of money but when the time came to deploy the money, the markets had already crashed. As a result, this fund has not actually deployed a majority of that money. In March, 62 per cent of that huge corpus was being held uninvested instead of being deployed in stocks. In April, this percentage had declined a bit was still at a high 52 per cent. These high cash levels have helped protect this fund from losses while the stock markets were declining. If the timing had been a little different and the fund had deployed the money before the crash, then its investors would have been in a sorry state indeed.However, from now on, a combination of huge size and hesitant markets is going to be a problem. Not deploying the money for long would lead to poor performance if the markets go up but deploying it would lead to poor performance if the markets go up. Sure, this problem exists for all equity funds currently. Nonetheless, when a large high profile fund is hovering at the edge of the psychologically important NAV level of Rs 10, then it's especially acute. As all fund managers and fund marketing men know, it's far worse for your NAV to fall from Rs 10 to Rs 9 than (for example) it is to fall from Rs 20 to Rs 18, even though the investors' losses are the same in both cases. I imagine that having a single digit NAV would rather diminish the bragging rights bestowed by running India's largest equity fund.The big-is-good marketing message is also often extended to fund companies. Fund distributors flogging funds from the larger fund companies like Reliance, ICICI Prudential, UTI and HDFC never fail to mention this fact. The logic is supposedly similar to that of individual funds. If the fund company is big, it must be doing something right. While that is true, that 'something' it is doing right could be just marketing. All in all, size matters, but not always. There are a different set of very real problems that are faced by very small funds and fund companies. However, outside the extremes, it is difficult to see any real evidence of size having any effect on performance. As a positive factor, the size of a fund or a fund company is of relevance to its owners, not to its investors.
(by valueresearch)
difficult to manage in many situations, as the recent travails of India's largest equity fund are in the process of demonstrating. Reliance Natural Resources Fund was launched in January 2008. To be precise, the new fund offer (NFO) opened on January 1, 2008 and closed on 30th January. Thus, it caught the peak (and the tail-end) of the stock markets' bull run. Such was the hype of the times that it collected a huge Rs 5,660 crore during the NFO itself. I rather think that the fund was also helped by the similarity between its name and that of the company Reliance Natural Resources Limited, which is also from the ADA group. This company's stock price went through the roof between September and January.
Anyhow, Reliance Natural Resources Fund was extremely lucky in its timing. It collected a huge amount of money but when the time came to deploy the money, the markets had already crashed. As a result, this fund has not actually deployed a majority of that money. In March, 62 per cent of that huge corpus was being held uninvested instead of being deployed in stocks. In April, this percentage had declined a bit was still at a high 52 per cent. These high cash levels have helped protect this fund from losses while the stock markets were declining. If the timing had been a little different and the fund had deployed the money before the crash, then its investors would have been in a sorry state indeed.However, from now on, a combination of huge size and hesitant markets is going to be a problem. Not deploying the money for long would lead to poor performance if the markets go up but deploying it would lead to poor performance if the markets go up. Sure, this problem exists for all equity funds currently. Nonetheless, when a large high profile fund is hovering at the edge of the psychologically important NAV level of Rs 10, then it's especially acute. As all fund managers and fund marketing men know, it's far worse for your NAV to fall from Rs 10 to Rs 9 than (for example) it is to fall from Rs 20 to Rs 18, even though the investors' losses are the same in both cases. I imagine that having a single digit NAV would rather diminish the bragging rights bestowed by running India's largest equity fund.The big-is-good marketing message is also often extended to fund companies. Fund distributors flogging funds from the larger fund companies like Reliance, ICICI Prudential, UTI and HDFC never fail to mention this fact. The logic is supposedly similar to that of individual funds. If the fund company is big, it must be doing something right. While that is true, that 'something' it is doing right could be just marketing. All in all, size matters, but not always. There are a different set of very real problems that are faced by very small funds and fund companies. However, outside the extremes, it is difficult to see any real evidence of size having any effect on performance. As a positive factor, the size of a fund or a fund company is of relevance to its owners, not to its investors.
(by valueresearch)
Sunday, April 13, 2008
Invest in Existing Funds
Seeing the market condition, should I invest in a new fund or in an existing fund?
- Raj, Aurangabad
It is always advisable to invest in existing funds which have a good performance history. Invest in well rated funds on a monthly basis via SIP. SIP technique will help you average the cost in the long run.
If I invest online in mutual funds, will the units be allotted at same time at current price? If not then when and at wat price?
-Sanjeev
If you invest in mutual funds via the fund house website or through some online broker, you should take note of the cut off time that the site specifies. If you transact before the cut off time you would get units as per same day's NAV. Else you would get the NAV of the next business day.
What is the future of Reliance Growth fund for long time?
-Devender
Reliance growth is a five star rated aggressive mid cap fund which has good track record. Invest in the fund with a long term view, if you have a high risk appetite.
I have to invest Rs. 1.3 lakh for 1 year. Please suggest Fund?
-U.R. Singh, SILVASSA
Equity fund investments are not recommended for 1 year time horizon. For such a time span consider a well rated debt fund like Kotak Flexi Debt or ICICI Pru Long Term.
Is it required to have a Demat A/C for Mutual Fund? Which is less risk MF or a SHARES?
No. For investing in mutual funds you do not need a demat account. You need to have a PAN card, a savings account and KYC compliance (for amount above Rs 50000). A mutual fund is less risky than a stock, as in mutual funds your money is invested in various stocks, thereby diversifying the portfolio and reducing the risk.
I want to invest 1 Lac in equity fund. Please tell me some fund's in which it'll be doubled in the shortest term.
Mutual funds have associated market risks and do not give assured returns. To be aggressive opt for some mid cap funds like Reliance Growth, Birla Mid Cap, or Sundaram Select Midcap. These funds are agressive and tend to be more volatile than diversified funds.
How to know about the track record of a mutual fund?
You can know about the track record of a mutual fund by visiting valueresearchonline.com. The site would help you analyse the fund performance and compare it to other funds in a category.
Which is the best open ended fund in which high risk and high return?
If you wish to invest in a high risk mutual fund, go for a mid cap fund. These funds tend to be more aggressive than large cap oriented fund. Some good mid cap funds are Sundaram Select Midcap, Reliance Growth and Birla Midcap.
I have invested in Franklin Bluechip fund - Rs 10000 for 3yrs. Is it a good fund or not?
Franklin Bluechip is a three star rated large cap oriented fund. Off late the fund has been an average performer and there are better funds in which you can invest like Reliance Vision, Sundaram Select Focus or HDFC Top 200.
I have invested Rs 60,000 in LIC ULIP for tax saving under section 80C.How is the performance of the fund. Should I continue for next year?
One should avoid investing in ULIPs due as they have high associated charges. These charges would eat up your returns in the long run. For the performance of the fund contact the company or visit the companies website.
(by value research)
- Raj, Aurangabad
It is always advisable to invest in existing funds which have a good performance history. Invest in well rated funds on a monthly basis via SIP. SIP technique will help you average the cost in the long run.
If I invest online in mutual funds, will the units be allotted at same time at current price? If not then when and at wat price?
-Sanjeev
If you invest in mutual funds via the fund house website or through some online broker, you should take note of the cut off time that the site specifies. If you transact before the cut off time you would get units as per same day's NAV. Else you would get the NAV of the next business day.
What is the future of Reliance Growth fund for long time?
-Devender
Reliance growth is a five star rated aggressive mid cap fund which has good track record. Invest in the fund with a long term view, if you have a high risk appetite.
I have to invest Rs. 1.3 lakh for 1 year. Please suggest Fund?
-U.R. Singh, SILVASSA
Equity fund investments are not recommended for 1 year time horizon. For such a time span consider a well rated debt fund like Kotak Flexi Debt or ICICI Pru Long Term.
Is it required to have a Demat A/C for Mutual Fund? Which is less risk MF or a SHARES?
No. For investing in mutual funds you do not need a demat account. You need to have a PAN card, a savings account and KYC compliance (for amount above Rs 50000). A mutual fund is less risky than a stock, as in mutual funds your money is invested in various stocks, thereby diversifying the portfolio and reducing the risk.
I want to invest 1 Lac in equity fund. Please tell me some fund's in which it'll be doubled in the shortest term.
Mutual funds have associated market risks and do not give assured returns. To be aggressive opt for some mid cap funds like Reliance Growth, Birla Mid Cap, or Sundaram Select Midcap. These funds are agressive and tend to be more volatile than diversified funds.
How to know about the track record of a mutual fund?
You can know about the track record of a mutual fund by visiting valueresearchonline.com. The site would help you analyse the fund performance and compare it to other funds in a category.
Which is the best open ended fund in which high risk and high return?
If you wish to invest in a high risk mutual fund, go for a mid cap fund. These funds tend to be more aggressive than large cap oriented fund. Some good mid cap funds are Sundaram Select Midcap, Reliance Growth and Birla Midcap.
I have invested in Franklin Bluechip fund - Rs 10000 for 3yrs. Is it a good fund or not?
Franklin Bluechip is a three star rated large cap oriented fund. Off late the fund has been an average performer and there are better funds in which you can invest like Reliance Vision, Sundaram Select Focus or HDFC Top 200.
I have invested Rs 60,000 in LIC ULIP for tax saving under section 80C.How is the performance of the fund. Should I continue for next year?
One should avoid investing in ULIPs due as they have high associated charges. These charges would eat up your returns in the long run. For the performance of the fund contact the company or visit the companies website.
(by value research)
No MFs Dedicated To Silver
Which funds trade in silver? Any funds where metals, and oil and gas form the bulk of the portfolio?
-Shivi Kanwar
There are four schemes that invest in physical gold (known as Gold Exchange Traded Funds of ETFs), but none that invest or trade in silver. There is also no specific mutual fund scheme which invests only in metals and oil and gas sector stocks. You can consider SBI Magnum Comma which has been consistently increasing its exposure to the metal sector over the past one year. By December 2007, its investment in the sector stood at over 30 per cent. Its one-year return (as on January 11, 2008) was 77.72 per cent. You can also look at UTI Energy (formerly UTI Petro Fund) and Reliance Diversified Power.
(by valuerresearch)
-Shivi Kanwar
There are four schemes that invest in physical gold (known as Gold Exchange Traded Funds of ETFs), but none that invest or trade in silver. There is also no specific mutual fund scheme which invests only in metals and oil and gas sector stocks. You can consider SBI Magnum Comma which has been consistently increasing its exposure to the metal sector over the past one year. By December 2007, its investment in the sector stood at over 30 per cent. Its one-year return (as on January 11, 2008) was 77.72 per cent. You can also look at UTI Energy (formerly UTI Petro Fund) and Reliance Diversified Power.
(by valuerresearch)
FDs v/s Debt Funds
Why should one opt for a pure debt fund in place of other safer investments like bank FDs? The five star rated debt fund - Kotak Flexi Debt has generated an annual return of 7.28 per cent (as on February 14, 2008) for a three year period, whereas any bank FD would have fetched more than that.
-Rahul Maheshwari
It is true that fixed deposits (FDs) are a safer investment option when compared to debt funds. Debt funds are sensitive to interest rate fluctuations unlike an FD which offers a fixed interest rate for a fixed tenure. But the most important difference between these two is the tax treatment on gains. The interest earned on a fixed deposit is to be added on to your income irrespective of the term of the FD. Further, there is no distinction between short or long term capital gains tax in FDs. This overall reduces the yield of a fixed deposit, especially if you fall in the 30 per cent tax bracket.
What makes debt funds a better choice is the tax treatment on its gains. Just like FDs, if you redeem a debt fund within one year then you need to add the gains to your income (Short term capital gains). In case you redeem the investment after one year (long term capital gains) you can avail the indexation benefit.
(by valueresearch)
-Rahul Maheshwari
It is true that fixed deposits (FDs) are a safer investment option when compared to debt funds. Debt funds are sensitive to interest rate fluctuations unlike an FD which offers a fixed interest rate for a fixed tenure. But the most important difference between these two is the tax treatment on gains. The interest earned on a fixed deposit is to be added on to your income irrespective of the term of the FD. Further, there is no distinction between short or long term capital gains tax in FDs. This overall reduces the yield of a fixed deposit, especially if you fall in the 30 per cent tax bracket.
What makes debt funds a better choice is the tax treatment on its gains. Just like FDs, if you redeem a debt fund within one year then you need to add the gains to your income (Short term capital gains). In case you redeem the investment after one year (long term capital gains) you can avail the indexation benefit.
(by valueresearch)
Friday, April 11, 2008
Investing Through SIPs
Which fund will be best for 'sip'?
Various funds (equity and debt) offer investments via SIP. You can select some well rated equity or debt funds which have done well over years. Some good equity picks can be HDFC Top 200, Birla Frontline Equity, or SBI Magnum Multiplier Plus. For Debt choose from ABN Amro Flexi Debt, Kotak Flexi Debt or ICICI Pru Long Term.
I want to invest Rs 1 lakh for three years. Which mutual funds I should go for, so that I get good return after 3 years (near to double)? Please advise.
-Deepak
Mutual funds have associated market risks and do not offer guaranteed returns. Though you should expect 15-20% per annum, you can opt for well rated mid cap funds if you wish to be aggressive. Some good picks can be Reliance Growth, Sundaram Select Midcap, or Birla Mid Cap.
I am investing Rs.60000 monthly as a sip. How long should I continue to invest to get Rs 1 crore.
-Vivek Manchanda, Lucknow
Assuming an annual return of 20 per cent from equity diversified funds, it would take 7 years for you to achieve your target of Rs 1 crore.
Please suggest me the best funds which can give me 40-50 per cent return after 5 -6 years?
It is tough to predict future returns, but you should select few five or four star rated equity diversified mutual funds for investment. Some good picks can be Reliance Vision, HDFC Top 200, Birla Front Line Equity or Sundaram Select Focus. These funds have been consistent performers in the past.
Investment in Franklin Asian Equity Fund through sip five thousand per month can I continue.
-N.P. Patil
The fund was launched in December 2007 and its too early to evaluate its performance. If you are investing via SIP you should invest in better open ended rated fund which have a good performance history.
I have invested in a ULIP - Birla Sunlife named Gold Plus II. Is this the right decision?
-Arun Shrivastav
ULIPs are not smart investments because of the high charges. These charges eat up your return in the long run. Now that you have invested, it is compulsory to remain invested for 3 years. Check the fund value post 3 years and take a decision.
I wish to invest Rs 2000 each in 10 equity schemes through SIP. Please suggest schemes.
A sip of Rs 20,000 should not be divided into 10 different funds. So many funds would lead to over diversification and would make portfolio management tough. Pick a maximum of 4-5 funds. Some good options can be Kotak 30, HDFC Equity, Sundaram Select Focus or SBI Magnum Multiplier Plus.
Why return of ELSS is lower then diversified equity mutual fund? Suggest some good aggresive & moderte diversified funds.
-Jiten
ELSS Funds are just like any other equity diversified fund with a three year lock-in. The past 1 year return of both categories is around 25%. Some good moderate risk picks can be Magnum Tax Gain, Franklin India Tax Shield or Birla Sunlife Tax Relief 96. ICICI Pru Tax Saver, Sahara Tax Gain, and Principal Tax savings are aggressive funds.
I want to invest Rs 3000 p.m for next 20 year in mutual funds. Please tell which fund will be the best.
SIP is the best technique for investing in equity funds as it helps you average the cost of purchase. Choose from well rated top performers like HDFC Equity, Sundaram Select Focus, Birla Frontline Equity or Kotak 30.
What is the future of UTI India Life Style Fund?
-Bikas
UTI India Life style is a relatively new equity diversified fund. The fund however has fallen less than the category average in the recent crash. Remain invested for some time before evaluating its performance.
Various funds (equity and debt) offer investments via SIP. You can select some well rated equity or debt funds which have done well over years. Some good equity picks can be HDFC Top 200, Birla Frontline Equity, or SBI Magnum Multiplier Plus. For Debt choose from ABN Amro Flexi Debt, Kotak Flexi Debt or ICICI Pru Long Term.
I want to invest Rs 1 lakh for three years. Which mutual funds I should go for, so that I get good return after 3 years (near to double)? Please advise.
-Deepak
Mutual funds have associated market risks and do not offer guaranteed returns. Though you should expect 15-20% per annum, you can opt for well rated mid cap funds if you wish to be aggressive. Some good picks can be Reliance Growth, Sundaram Select Midcap, or Birla Mid Cap.
I am investing Rs.60000 monthly as a sip. How long should I continue to invest to get Rs 1 crore.
-Vivek Manchanda, Lucknow
Assuming an annual return of 20 per cent from equity diversified funds, it would take 7 years for you to achieve your target of Rs 1 crore.
Please suggest me the best funds which can give me 40-50 per cent return after 5 -6 years?
It is tough to predict future returns, but you should select few five or four star rated equity diversified mutual funds for investment. Some good picks can be Reliance Vision, HDFC Top 200, Birla Front Line Equity or Sundaram Select Focus. These funds have been consistent performers in the past.
Investment in Franklin Asian Equity Fund through sip five thousand per month can I continue.
-N.P. Patil
The fund was launched in December 2007 and its too early to evaluate its performance. If you are investing via SIP you should invest in better open ended rated fund which have a good performance history.
I have invested in a ULIP - Birla Sunlife named Gold Plus II. Is this the right decision?
-Arun Shrivastav
ULIPs are not smart investments because of the high charges. These charges eat up your return in the long run. Now that you have invested, it is compulsory to remain invested for 3 years. Check the fund value post 3 years and take a decision.
I wish to invest Rs 2000 each in 10 equity schemes through SIP. Please suggest schemes.
A sip of Rs 20,000 should not be divided into 10 different funds. So many funds would lead to over diversification and would make portfolio management tough. Pick a maximum of 4-5 funds. Some good options can be Kotak 30, HDFC Equity, Sundaram Select Focus or SBI Magnum Multiplier Plus.
Why return of ELSS is lower then diversified equity mutual fund? Suggest some good aggresive & moderte diversified funds.
-Jiten
ELSS Funds are just like any other equity diversified fund with a three year lock-in. The past 1 year return of both categories is around 25%. Some good moderate risk picks can be Magnum Tax Gain, Franklin India Tax Shield or Birla Sunlife Tax Relief 96. ICICI Pru Tax Saver, Sahara Tax Gain, and Principal Tax savings are aggressive funds.
I want to invest Rs 3000 p.m for next 20 year in mutual funds. Please tell which fund will be the best.
SIP is the best technique for investing in equity funds as it helps you average the cost of purchase. Choose from well rated top performers like HDFC Equity, Sundaram Select Focus, Birla Frontline Equity or Kotak 30.
What is the future of UTI India Life Style Fund?
-Bikas
UTI India Life style is a relatively new equity diversified fund. The fund however has fallen less than the category average in the recent crash. Remain invested for some time before evaluating its performance.
What is Active Investment?
While going through the details of Reliance Regular Savings Equity Fund on its website, I noticed that it involves an Active Investment. Can you please clarify what is meant by 'Active Investment'? How is this style different from other styles? Would also like to know if mutual funds are allowed to do intra-day trading or not? I had taken a personal loan of Rs. 7.5 lakh to clear some old family debts. I intend to set up a SWP in one or two mutual funds for the next four years which would supplement me to pay the loan EMIs. Can you suggest two equity mutual fund schemes which may be ideal for this purpose?
-Amit Bhattacharjee
When it comes to investing, there are two styles to it - Active and Passive. Active investing is a strategy in which the fund manager is highly involved in buying and selling of stocks (in case of mutual fund). Here the aim of the manager is to beat the returns generated by the corresponding benchmark or an index.
On the other hand, in the passive style of investment, stocks are bought with a long term perspective. Here the portfolio is not as frequently churned as it is in active investing and the manager does not resort to profit booking based on short term price fluctuations. Indexing is an example of passive form of investing. An index fund invests in same stocks, in the same proportion, as in an index like Sensex or Nifty
Coming to your second query, we would not recommend you to initiate a SWP in equity mutual funds to help you pay your EMIs. If you invest one time in equity funds and then opt for a SWP, you would be assuming high market risk. If your investment value goes down over time and you withdraw funds (via SWP), you are in a way booking losses. So you can approach this in two ways. Firstly, as the interest that you will be paying on the loan would be quite high, it would be a wise decision to clear a part of the loan and save on interest. Secondly, if you wish to go the SWP way, then opt for a pure debt fund like Kotak Flexi Debt or ICICI Prudential Long Term and then opt for a SWP as they are low risk funds.
(by valueresearch)
-Amit Bhattacharjee
When it comes to investing, there are two styles to it - Active and Passive. Active investing is a strategy in which the fund manager is highly involved in buying and selling of stocks (in case of mutual fund). Here the aim of the manager is to beat the returns generated by the corresponding benchmark or an index.
On the other hand, in the passive style of investment, stocks are bought with a long term perspective. Here the portfolio is not as frequently churned as it is in active investing and the manager does not resort to profit booking based on short term price fluctuations. Indexing is an example of passive form of investing. An index fund invests in same stocks, in the same proportion, as in an index like Sensex or Nifty
Coming to your second query, we would not recommend you to initiate a SWP in equity mutual funds to help you pay your EMIs. If you invest one time in equity funds and then opt for a SWP, you would be assuming high market risk. If your investment value goes down over time and you withdraw funds (via SWP), you are in a way booking losses. So you can approach this in two ways. Firstly, as the interest that you will be paying on the loan would be quite high, it would be a wise decision to clear a part of the loan and save on interest. Secondly, if you wish to go the SWP way, then opt for a pure debt fund like Kotak Flexi Debt or ICICI Prudential Long Term and then opt for a SWP as they are low risk funds.
(by valueresearch)
Funds on Liquid Diet!
Once overweight on equities and neutral on cash, mutual funds seem to have reversed that position. Welcome to the new world of cash stash!
As the market continues to yo-yo, fund mangers have decided to play it safe; as it is quite evident from the cash position (percentage of net assets) of the various funds*. A look at the equity portfolios of March 2008 reveals that funds are on a strict liquid diet. This will not only insulate the fund from abrupt fluctuations, as much as possible, but also give the fund managers ample leeway to cherry pick as and when the market throws up great opportunities.
As on March 31, Sundaram BNP Paribas Capex had 30 per cent of its assets in cash, followed by LICMF Growth with 29.47 per cent. The cash position of these two schemes during the peak of bull run (January 2008) was 9 per cent for LICMF Growth and 7 per cent for that of Sundaram BNP Paribas Capex. But in terms of absolute amount of cash holding, the Reliance brigade rules the roost.
As on March 2008, diversified equity funds were sitting on a cash pile of Rs 7,859 crore, as against Rs 4,773 crore in January 2008. A total of 108 funds increased their cash allocation expressed as percentage of net assets, while 33 saw a decline. All in all, cash available with the fund houses in March increased to Rs 7,859 crore (8.64 per cent of the total assets) from Rs 4,773 crore in January (4.46 per cent of total assets).
While sitting on cash protects you - the investor, from a sharp downfall, it also implies that you miss out on sudden upward spurt; a phenomenon which has now become a part and parcel of Indian equity markets.
* We are only referring to the cash positions of diversified equity funds.
(by value research)
As the market continues to yo-yo, fund mangers have decided to play it safe; as it is quite evident from the cash position (percentage of net assets) of the various funds*. A look at the equity portfolios of March 2008 reveals that funds are on a strict liquid diet. This will not only insulate the fund from abrupt fluctuations, as much as possible, but also give the fund managers ample leeway to cherry pick as and when the market throws up great opportunities.
As on March 31, Sundaram BNP Paribas Capex had 30 per cent of its assets in cash, followed by LICMF Growth with 29.47 per cent. The cash position of these two schemes during the peak of bull run (January 2008) was 9 per cent for LICMF Growth and 7 per cent for that of Sundaram BNP Paribas Capex. But in terms of absolute amount of cash holding, the Reliance brigade rules the roost.
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As on March 2008, diversified equity funds were sitting on a cash pile of Rs 7,859 crore, as against Rs 4,773 crore in January 2008. A total of 108 funds increased their cash allocation expressed as percentage of net assets, while 33 saw a decline. All in all, cash available with the fund houses in March increased to Rs 7,859 crore (8.64 per cent of the total assets) from Rs 4,773 crore in January (4.46 per cent of total assets).
While sitting on cash protects you - the investor, from a sharp downfall, it also implies that you miss out on sudden upward spurt; a phenomenon which has now become a part and parcel of Indian equity markets.
* We are only referring to the cash positions of diversified equity funds.
(by value research)
Mission Rs 1 Crore
My net monthly salary is Rs. 28,000. I plan to invest Rs. 8,000 every month through SIPs (Rs. 5,000 in ELSS and Rs. 1,000 each in three equity funds). My target is to build a corpus of Rs. 1 crore after 20 years. Please suggest in regards to the ELSS fund and three equity funds that I should invest in to achieve my goal.
-Ved Prakash Mishra
Congratulations. You are right on track! Assuming that a well rated equity fund would generate 20 per cent annual return in the coming years, your monthly investment of Rs 8,000 would grow to Rs 1.98 Crore in 20 years. However, fund selection would be the key here. Choose a fund which has proven its worth and has a good performance history.
For tax saving funds, choose from well rated funds like Magnum Tax Gain, Birla Sun Life Tax Relief or Sundaram Tax Saver. Amongst diversified equity funds select some large cap oriented funds like Reliance Vision, Sundaram Select Focus or Birla Frontline Equity. Avoid investing in too many funds. You can choose two ELSS funds (Rs 2,500 each) and two equity diversified funds (Rs 1,500 each) to divide your total investment of Rs 8000 per month.
(by value research)
-Ved Prakash Mishra
Congratulations. You are right on track! Assuming that a well rated equity fund would generate 20 per cent annual return in the coming years, your monthly investment of Rs 8,000 would grow to Rs 1.98 Crore in 20 years. However, fund selection would be the key here. Choose a fund which has proven its worth and has a good performance history.
For tax saving funds, choose from well rated funds like Magnum Tax Gain, Birla Sun Life Tax Relief or Sundaram Tax Saver. Amongst diversified equity funds select some large cap oriented funds like Reliance Vision, Sundaram Select Focus or Birla Frontline Equity. Avoid investing in too many funds. You can choose two ELSS funds (Rs 2,500 each) and two equity diversified funds (Rs 1,500 each) to divide your total investment of Rs 8000 per month.
(by value research)
Should Fund Investors Worry?
Recently, we a team of analysts at Value Research did a study to measure exactly how badly has the recent downfall in stock prices hurt stock prices. The results threw up some numbers that may come as a surprise to those focused on the recent crash. The big news is hardly news--equity funds have had a horrendous time in the recent times. In fact, it is a surprise how bad has the recent quarter (January to March) been for equity funds. This three month period has generally been the worst that equity funds have had since this decade began in January 2001. That's impressive, though not in a good way. Funds that we classify in the key 'Diversified Equity' category, which has the largest number of funds (194) as well as the highest investor interest, lost an average of 28.3 per cent in just these three months. This was far worse than the previous worst of the decade, when these funds lost 16.9 per cent in the first three months of 2001.
A comparison with the benchmark indices show up funds in an even worse light. Of the 277 equity funds (which includes diversified equity as well as other categories) that were part of this study, only 35 outperformed their benchmarks while 242 failed to do so. What's worse, of the 35 which beat the benchmark, a mere seven managed to do so by a margin greater than five per cent. At the other end of the scale, as many as 142 funds underperformed their benchmarks by more than five per cent. Of the small number of funds that beat the benchmarks handsomely, a majority are those that also invest abroad. This demonstrates the value of true diversification in bad times. However, even international funds lost investors' money, they just lost less than domestically-focused funds. In the entire list, the sole profit-making exception was DSP Merrill Lynch World Gold Fund, which invests not in gold but in stocks of companies that are part of the global gold mining and refining industry. In any case, the fact of this fund making a profit is of not much practical use since such an exotic fund can only be a small percentage of any real world portfolio. The same is true of international funds as well and not too much should be read in their relative good performance.
While equity funds are in some trouble, the normally staid world of debt funds is also not in great shape. Even though debt fund numbers for the entire quarter look almost normal, the month of March has come as a shock to investors who thought debt was a safe harbour in which to ride out the equity storm. Worsening inflation numbers and the resulting uncertainty on interest rates has seen the average returns of funds in the Medium and Long-term government securities (gilts) category lose 1.1 per cent during March. Even short-term gilt funds, which are supposed to be insulated from interest rate shocks have had a poor month in which they have gained just 0.1 per cent with 6 of the 18 funds in the category making losses.
However, all is not doom and gloom. In my opinion, the good news is that when one looks at a longer period of a year instead of a quarter, fund performance is still very strong and the losses of this quarter have not come even close to wiping out the previous three quarters' gains. Which means that the moral of the story is quite clear. Investors who have invested steadily over a longer period are still fine. Which is just as it should be.
(by valueresearch)
A comparison with the benchmark indices show up funds in an even worse light. Of the 277 equity funds (which includes diversified equity as well as other categories) that were part of this study, only 35 outperformed their benchmarks while 242 failed to do so. What's worse, of the 35 which beat the benchmark, a mere seven managed to do so by a margin greater than five per cent. At the other end of the scale, as many as 142 funds underperformed their benchmarks by more than five per cent. Of the small number of funds that beat the benchmarks handsomely, a majority are those that also invest abroad. This demonstrates the value of true diversification in bad times. However, even international funds lost investors' money, they just lost less than domestically-focused funds. In the entire list, the sole profit-making exception was DSP Merrill Lynch World Gold Fund, which invests not in gold but in stocks of companies that are part of the global gold mining and refining industry. In any case, the fact of this fund making a profit is of not much practical use since such an exotic fund can only be a small percentage of any real world portfolio. The same is true of international funds as well and not too much should be read in their relative good performance.
While equity funds are in some trouble, the normally staid world of debt funds is also not in great shape. Even though debt fund numbers for the entire quarter look almost normal, the month of March has come as a shock to investors who thought debt was a safe harbour in which to ride out the equity storm. Worsening inflation numbers and the resulting uncertainty on interest rates has seen the average returns of funds in the Medium and Long-term government securities (gilts) category lose 1.1 per cent during March. Even short-term gilt funds, which are supposed to be insulated from interest rate shocks have had a poor month in which they have gained just 0.1 per cent with 6 of the 18 funds in the category making losses.
However, all is not doom and gloom. In my opinion, the good news is that when one looks at a longer period of a year instead of a quarter, fund performance is still very strong and the losses of this quarter have not come even close to wiping out the previous three quarters' gains. Which means that the moral of the story is quite clear. Investors who have invested steadily over a longer period are still fine. Which is just as it should be.
(by valueresearch)
Dividends in Franklin Templeton Schemes
Franklin Templeton is declaring the annual dividends in Franklin Templeton Fixed Tenure Fund - Series III (FTFTF - III) and Franklin Templeton Fixed Tenure Fund - Series VIII (FTFTF - VIII).
The details for the same are given below:
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| FTFTF - Series III | : | Rs.0.60 per unit (Gross) | |
| FTFTF - Series VIII | : | Rs.0.40 per unit (Gross) | |
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| Record Date for both dividends | : | April 16, 2008 (Wednesday) | |
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| Ex-dividend NAV Date | : | April 17, 2008 (Thursday) |
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