Prior to joining Principal AMC, R Srinivasan worked as a fund manager with Imperial Investment Advisors. Srinivasan has degrees in commerce and financial management. He has been managing Principal Tax Savings and Principal Personal Tax Saver since July 2005.
Do you see a market crash in the near future?
We don't have any opinion on the short-term levels of the market. From what we see, euphoria exists in certain segments of the market and extreme pessimism in others. Standard deviation of expectations and valuations are quite high and this will provide an opportunity for bottom-up stock selectors to generate decent alpha over a longer period.
What is the strategic and tactical orientation of your fund?
Being an ELSS product, the fund has a clear mandate for long-term investment. Hence, the portfolio strategy is essentially bottom-up with a focus on less visible stocks with a high-return potential. We look for positive fundamental change and/or attractive valuations. Though short-term risks, as defined by relative liquidity and volatility, tend to be higher in such a strategy, our objective is to drive alpha creation through our ability and willingness to adopt a longer term perspective. We also hold a good bit of preferred large caps to reduce benchmark risks.
Which are your top sector preferences?
Capital Goods
Financials
(by valueresearch)
Mutual Fund News update from Nishit Doshi (9824021680) a leading MF Advisor based in Ahmedabad. Gujarat.
Thursday, December 13, 2007
A Difference of Style
Superficial appearances aside, Birla Equity Plan and Franklin India Taxshield differ substantially in their investing strategy
The fact that we are comparing Franklin India Taxshield and Birla Equity Plan indicates that they do have some commonalities. So let's get those out of the way first. Both are four-star, diversified equity, tax saving funds that have been around for more than eight years.
Interestingly, both had fund manager changes this year. Anand Radhakrishnan took over Franklin India Taxshield in April 2007 and Sanjay Chawla took over the reins of Birla Equity Plan in September this year.
They even tend to own the same number of stocks. This year, Birla Equity Plan averaged at around 34 stocks every month, while the equivalent number for Franklin India Taxshield is 37. And, coincidentally, both funds have been showing an increase in the number of stocks held in August and September where the number in the portfolio has wavered between 41 and 44.
Both shirk debt. While Franklin India Taxshield steers clear totally, Birla Equity Plan held a portion in debt twice this year: June (11.97 per cent) and March (10.14 per cent). Yet, they are blatant when it comes to holding cash. This year, the average cash holding was 6.29 per cent (Franklin India Taxshield) and 7.84 per cent (Birla Equity Plan). But averages don't always give the correct picture. The actual cash allocation of Birla Equity Plan, has fluctuated from 0.46 per cent to 15.52 per cent.
But below this superficial appearance of being similar, lies style and strategy that makes them as different as chalk and cheese.
Birla Equity Plan is an awfully bold choice. One look at the sector allocation will tell you that the fund manager is a daring contrarian. His top two sectors are Technology (16.73 per cent) and Automobiles (14.58 per cent). In fact, the automobile exposure has increased from 10.87 per cent (April 2007) to 14.58 per cent (September 2007). Ditto for technology which rose from 12.74 per cent (April 2007) to 16.73 per cent (September 2007). But in case you feel that he has lost touch with reality, consider this. In the top 10 holdings, just two are automobile stocks: Maruti Udyog and Goodyear India Ltd. And it also includes companies like Bharti Airtel, Reliance Communications and Tata Power. The remaining five fall under the categories of Basic/Engineering, Metals, Construction, Energy and Diversified. Short and sweet: He deftly goes against the herd without putting his neck on the block.
On the other hand, Franklin India Taxshield began reducing its automobile holdings from 12.83 per cent (February 2007) to 4.94 per cent (September 2007) and its technology holdings from 18.26 per cent to 12.54 per cent during the same period. It has taken the well beaten path of Financial Services (27.10 per cent) and Basic/ Engineering (15.17 per cent).
But don't misinterpret this as a lack of conviction. He will wager bigger bets than his counterpart in Birla Equity Plan. So his top 10 stocks command 26.08 per cent of the portfolio but the same in Birla Equity Plan is at 21.70 per cent. Also, his allocation to the top three sectors is more at 54.81 per cent as against 42.45 per cent in Birla Equity Plan.
Though Birla Equity Plan has been seeing a consistent rise in its assets from Rs 99.84 crore (February 2007) to Rs 151.87 crore (September 2007), it is still a small offering that makes it suitable to dabble in small-caps. And this it has done. Its mid- and small-cap stocks account for almost 60 per cent of the portfolio.
Naturally, this difference in investing style has a direct bearing on the type of investors they attract. Franklin India Taxshield is a more conservative, large-cap offering that targets the investor who wants peace of mind. Birla Equity Plan is an aggressive fund with a mid-cap tilt and a contrarian bent. It will go after those who don't mind a bumpy ride.
Anand Radhakrishnan took over Franklin India Taxshield in April 2007 and has managed to pull the fund out of its three-star ranking to a four-star one. Historically, this one has been more of a middle-of-the-road performer. You should not expect a glamorous outperformance here.
However, its appeal lies in the fact that it tends to fall by less than the category average during a slump. This was evident recently too. In the March quarter, when the category average return was negative at (-)6.45 per cent, this one fell less at (-)4.39 per cent. In the case of Birla Equity Plan, expect surprises, both good and bad. Let's take the June 2006 quarter. The category lost 15.35 per cent. Birla Equity Plan fell harder at 16.28 per cent. Franklin India Taxshield was lesser hit at (-)13.65 per cent. But in the very next quarter of September 2006, Birla Tax Plan delivered 21.09 per cent as against the category average of just 14.95 per cent while Franklin India Taxshield was at 14.08 per cent.
Birla Equity Plan shuffles its portfolio often. In the past 13 months (September 2006 to September 2007), just seven stocks have been constant in the portfolio. But the same figure for Franklin India Taxshield is 13 stocks. In the identical period, Franklin India Taxshield held 20 stocks for just one month while Birla Equity Plan held 23 during this time.
While Birla Equity Plan is known for its aggressive portfolio churning, swift moves and strategically timed entry and exit into opportunistic sectors, right now Franklin India Taxshield is delivering better returns with its exposure to Basic/Engineering and Financial Services.
But we reiterate our stand that investors should never make a decision based solely on short-term returns. The performance must always be looked at in conjunction with the investing style of the fund manager.
Go with the one you feel most comfortable with.
The fact that we are comparing Franklin India Taxshield and Birla Equity Plan indicates that they do have some commonalities. So let's get those out of the way first. Both are four-star, diversified equity, tax saving funds that have been around for more than eight years.
Interestingly, both had fund manager changes this year. Anand Radhakrishnan took over Franklin India Taxshield in April 2007 and Sanjay Chawla took over the reins of Birla Equity Plan in September this year.
They even tend to own the same number of stocks. This year, Birla Equity Plan averaged at around 34 stocks every month, while the equivalent number for Franklin India Taxshield is 37. And, coincidentally, both funds have been showing an increase in the number of stocks held in August and September where the number in the portfolio has wavered between 41 and 44.
Both shirk debt. While Franklin India Taxshield steers clear totally, Birla Equity Plan held a portion in debt twice this year: June (11.97 per cent) and March (10.14 per cent). Yet, they are blatant when it comes to holding cash. This year, the average cash holding was 6.29 per cent (Franklin India Taxshield) and 7.84 per cent (Birla Equity Plan). But averages don't always give the correct picture. The actual cash allocation of Birla Equity Plan, has fluctuated from 0.46 per cent to 15.52 per cent.
But below this superficial appearance of being similar, lies style and strategy that makes them as different as chalk and cheese.
Birla Equity Plan is an awfully bold choice. One look at the sector allocation will tell you that the fund manager is a daring contrarian. His top two sectors are Technology (16.73 per cent) and Automobiles (14.58 per cent). In fact, the automobile exposure has increased from 10.87 per cent (April 2007) to 14.58 per cent (September 2007). Ditto for technology which rose from 12.74 per cent (April 2007) to 16.73 per cent (September 2007). But in case you feel that he has lost touch with reality, consider this. In the top 10 holdings, just two are automobile stocks: Maruti Udyog and Goodyear India Ltd. And it also includes companies like Bharti Airtel, Reliance Communications and Tata Power. The remaining five fall under the categories of Basic/Engineering, Metals, Construction, Energy and Diversified. Short and sweet: He deftly goes against the herd without putting his neck on the block.
On the other hand, Franklin India Taxshield began reducing its automobile holdings from 12.83 per cent (February 2007) to 4.94 per cent (September 2007) and its technology holdings from 18.26 per cent to 12.54 per cent during the same period. It has taken the well beaten path of Financial Services (27.10 per cent) and Basic/ Engineering (15.17 per cent).
But don't misinterpret this as a lack of conviction. He will wager bigger bets than his counterpart in Birla Equity Plan. So his top 10 stocks command 26.08 per cent of the portfolio but the same in Birla Equity Plan is at 21.70 per cent. Also, his allocation to the top three sectors is more at 54.81 per cent as against 42.45 per cent in Birla Equity Plan.
Though Birla Equity Plan has been seeing a consistent rise in its assets from Rs 99.84 crore (February 2007) to Rs 151.87 crore (September 2007), it is still a small offering that makes it suitable to dabble in small-caps. And this it has done. Its mid- and small-cap stocks account for almost 60 per cent of the portfolio.
Naturally, this difference in investing style has a direct bearing on the type of investors they attract. Franklin India Taxshield is a more conservative, large-cap offering that targets the investor who wants peace of mind. Birla Equity Plan is an aggressive fund with a mid-cap tilt and a contrarian bent. It will go after those who don't mind a bumpy ride.
Anand Radhakrishnan took over Franklin India Taxshield in April 2007 and has managed to pull the fund out of its three-star ranking to a four-star one. Historically, this one has been more of a middle-of-the-road performer. You should not expect a glamorous outperformance here.
However, its appeal lies in the fact that it tends to fall by less than the category average during a slump. This was evident recently too. In the March quarter, when the category average return was negative at (-)6.45 per cent, this one fell less at (-)4.39 per cent. In the case of Birla Equity Plan, expect surprises, both good and bad. Let's take the June 2006 quarter. The category lost 15.35 per cent. Birla Equity Plan fell harder at 16.28 per cent. Franklin India Taxshield was lesser hit at (-)13.65 per cent. But in the very next quarter of September 2006, Birla Tax Plan delivered 21.09 per cent as against the category average of just 14.95 per cent while Franklin India Taxshield was at 14.08 per cent.
Birla Equity Plan shuffles its portfolio often. In the past 13 months (September 2006 to September 2007), just seven stocks have been constant in the portfolio. But the same figure for Franklin India Taxshield is 13 stocks. In the identical period, Franklin India Taxshield held 20 stocks for just one month while Birla Equity Plan held 23 during this time.
While Birla Equity Plan is known for its aggressive portfolio churning, swift moves and strategically timed entry and exit into opportunistic sectors, right now Franklin India Taxshield is delivering better returns with its exposure to Basic/Engineering and Financial Services.
But we reiterate our stand that investors should never make a decision based solely on short-term returns. The performance must always be looked at in conjunction with the investing style of the fund manager.
Go with the one you feel most comfortable with.
(by valueresearch)
Dip May Be Buying Opportunity
Kulkarni's experience in the mutual fund industry began with UTI Mutual Fund where he worked as a fund manager from April 1991 to June 2005. Following UTI, he worked in DWS and Tata AMC before joining HDFC Mutual Fund in November 2006. In his current profile, the fund manger looks after the much respected HDFC Tax Saver apart from several other funds. Kulkarni is a B.Tech from IIT (Mumbai) and has a PGDM from IIT (Bangalore).
Do you see a market crash in the near future?
Predicting the market is always difficult. After rising almost vertically since September 18, 2007, the market may consolidate a bit at these levels. But a big market crash is difficult to forsee. Fundamentals of the Indian economy remain strong and investment interest is so high that any decline in the market could be taken up as a huge buying opportunity by both, FIIs and domestic investors.
What is the strategic and tactical orientation of your fund?
Strategically, the fund is overweight on the engineering sector which will be a key beneficiary of the ongoing capex and investment in infrastructure in the country. The power / energy sector will also benefit from ongoing investments and the perennial deficit situation in the power sector. Tactically, cash levels in the fund are somewhat higher than usual at around 5 per cent to take advantage of stock specific corrections.
Which are your top sector preferences?
In this fund:
Engineering: 12.75 per cent
Energy: 12 per cent
Banking: 11.70 per cent
(by valueresearch)
Do you see a market crash in the near future?
Predicting the market is always difficult. After rising almost vertically since September 18, 2007, the market may consolidate a bit at these levels. But a big market crash is difficult to forsee. Fundamentals of the Indian economy remain strong and investment interest is so high that any decline in the market could be taken up as a huge buying opportunity by both, FIIs and domestic investors.
What is the strategic and tactical orientation of your fund?
Strategically, the fund is overweight on the engineering sector which will be a key beneficiary of the ongoing capex and investment in infrastructure in the country. The power / energy sector will also benefit from ongoing investments and the perennial deficit situation in the power sector. Tactically, cash levels in the fund are somewhat higher than usual at around 5 per cent to take advantage of stock specific corrections.
Which are your top sector preferences?
In this fund:
Engineering: 12.75 per cent
Energy: 12 per cent
Banking: 11.70 per cent
(by valueresearch)
Where to Invest ?
Q. I am a house wife and save Rs. 200 per month. Instead of saving this in a bank account, where else can I invest?
- Sonika
A. If you have a PAN card, you can invest in mutual funds using systematic investment plan (SIP) for as low as Rs. 50 (ICICI Prudential)/ Rs. 100 (Reliance Mutual) per month. Choose from well rated funds like like Reliance Vision, Reliance Growth, or ICICI Pru Dynamic.
Q. I have 3 daughters, aged 10, 13 and15 years. I am having Rs. 1 lac. Where to invest? Please advise me.
A. Invest in well diversified and performing equity funds like HDFC Equity, Reliance Vision, Franklin Prima Plus or Birla Frontline Equity. Spread your investment over 6-12 months.
Q. My monthly saving is Rs. 20000. What should be my investment portfolio
- Gopal, Hyderabad
A. You can make a well diversified portfolio of mutual funds with the correct balance of equity and debt, according to your goals. Invest in some large and mid cap funds like Reliance Growth, HDFC Equity, Sundaram Select Midcap and DSP ML Top 100. For debt, invest in Kotak Flexi Debt or ICICI Pru Long Term.
Q. What is the difference between a ULIP and Mutual Fund?
A. A ULIP is a combination of life insurance and mutual funds. After deducting high initial charges, the remaining is invested in stocks as in a mutual fund. ULIPs prove to be costly products due to their various charges.
A mutual fund is a pure investment where you pay the money to a fund house, which in turn is invested in stocks. No life insurance is given but the charges are on the lower side.
- Sonika
A. If you have a PAN card, you can invest in mutual funds using systematic investment plan (SIP) for as low as Rs. 50 (ICICI Prudential)/ Rs. 100 (Reliance Mutual) per month. Choose from well rated funds like like Reliance Vision, Reliance Growth, or ICICI Pru Dynamic.
Q. I have 3 daughters, aged 10, 13 and15 years. I am having Rs. 1 lac. Where to invest? Please advise me.
A. Invest in well diversified and performing equity funds like HDFC Equity, Reliance Vision, Franklin Prima Plus or Birla Frontline Equity. Spread your investment over 6-12 months.
Q. My monthly saving is Rs. 20000. What should be my investment portfolio
- Gopal, Hyderabad
A. You can make a well diversified portfolio of mutual funds with the correct balance of equity and debt, according to your goals. Invest in some large and mid cap funds like Reliance Growth, HDFC Equity, Sundaram Select Midcap and DSP ML Top 100. For debt, invest in Kotak Flexi Debt or ICICI Pru Long Term.
Q. What is the difference between a ULIP and Mutual Fund?
A. A ULIP is a combination of life insurance and mutual funds. After deducting high initial charges, the remaining is invested in stocks as in a mutual fund. ULIPs prove to be costly products due to their various charges.
A mutual fund is a pure investment where you pay the money to a fund house, which in turn is invested in stocks. No life insurance is given but the charges are on the lower side.
Q. What is the difference between growth and dividend options of a fund? Which one is better for growth of my invested money?
- Lakshmikant
A. In the growth scheme, all the profits of the fund are invested back into the scheme. This is reflected in the growth of the scheme's NAV. Under dividend option, profits made by the scheme are distributed in the form of dividends from time to time. Growth option is ideal for long term investors, who do not require money in between.
Q. When is the good time to buy equity funds, and what are the best funds to buy now. I want to invest in equity mutual funds. I have a kid (3 months old) and want to take insurance for him - please suggest which is the good plan to opt for which will good returns for 20 years
- Sridhar
A. There is no good or bad time to invest in funds. Invest in mutual funds with a long term view through a systematic investment plan (SIP). Choose from five or four star rated diversified equity funds like Franklin Prima Plus, HDFC Equity, Sundaram Select Focus, or Reliance Vision. For life insurance, buy a term plan, which is the simplest form of insurance.
Q. I have Rs 30000. In which mutual fund should I invest
- Pintu Rourkela, Orissa
A. Invest in top rated five or four star mutual funds like HDFC Equity, Reliance Vision, or Birla Frontline Equity. Opt for a SIP and avoid one time investment.
Q. I have invested in Lotus India AGILE on 23rd Nov. 2007. Is my investment right or wrong?
- Praffful, kota , Rajasthan
A. It is a new fund which has been introduced recently. Wait for some time now and then evaluate its performance.
Q. Which is better - Bajaj Unit Gain Gold or HDFC Growth Fund. I have a seven year goal target and can invest Rs. 15000 per year.
A. Both of these are different products. Bajaj Unit Gain Gold, is a ULIP plan, which proves to be costlier than a mutual fund scheme like HDFC Growth. It is always advisable not to mix insurance and investment. Opt for a term plan for insurance, and invest the remaining amount in diversified well performing mutual fund like HDFC Growth.
Q. I have Rs. 50000. Please let me know in which mutual fund should I invest?
Manoj, Ghaziabad
A. Invest in five or four star rated, diversified equity funds like Birla Frontline Equity, Sundaram Select Focus, HDFC Equity, Reliance Vision or Franklin Prima Plus. Opt for a systematic investment plan (SIP) and invest the amount over few months.
Q. I want to invest Rs. 5000 in mutual funds. Which fund would be ideal for investing?
Mukesh Aamghe, Nagpur
A. Invest in any of the top rated and well performing equity funds like Sundaram Select Focus, Reliance Vision or Franklin Prima Plus.
Q. I want to invest Rs. 10000. Where can I double this money quickly?
A. There is no quick way to double your money. You should invest in some well diversified equity funds and expect a return of 15-20 per cent annually.
Q. Is it wise to invest in a Max New York ULIP for 5 years?
A. It is better you opt for some well diversified equity mutual funds for investment rather than a ULIP plan. ULIPs are not smart investments and have high associated costs.
Q. I have Rs 35,000. Please advice where to invest.
Sudhir
A. Invest in top rated well diversified equity funds like Sundaram Select Focus, HDFC Equity, Reliance Vision or Franklin Prima Plus.
Q. I would like to know whether investment in ULIP for 5 years is safe or not.
Abid Churu, Rajasthan
A. There is no guarantee of return in a ULIP or a mutual fund. Still, it is advisable to invest in equity diversified mutual funds like HDFC Equity, Reliance Vision, or Birla Frontline Equity and buy a term plan for insurance. Do not mix insurance and investment.
(by value research)
Quarterly FMP launched by DSPML Mutual Fund - closes on 17th Dec.2007
DSPML Mutual Fund launch of DSPML Fixed Maturity Plan - 3 months - Series 2 as per following terms:-
Date of Opening : 12th Dec 2007 (Wednesday)
Date of Closing/Switch in : 17th Dec 2007 (Monday) 3.00 p.m.
High Value Pay in : 18th Dec 2007(Tuesday)
Options : Growth (Default option) and Div Reinvest
Plans : Institutional plan, Regular Plan
Min Application : Rs.1.00 Cr for Institutional Plan, Rs. 25000/- Regular Plan
Entry Load : Nil
Exit Load : 0.50% if redeemed before maturity
Date of maturity : 17th March 2008 (Monday)
Date of payout : 18th March 2008 (Tuesday)
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