Benchmark Mutual Fund has filed an offer document with Securities and Exchange Board of India (SEBI) to launch Hang Seng Benchmark Exchange Traded Scheme (Hang Seng BeES), an open-ended, exchange listed, index scheme tracking Hang Seng Index. The new fund offer (NFO) price for the scheme is Rs 10 per unit.
The investment objective of the scheme is to provide returns that, before expenses, closely correspond to the total returns of securities as represented by Hang Seng Index of Hang Seng Data Services Limited, by investing in the securities in the same proportion as in the Index.
The scheme offers only growth option.
The scheme will invest 90-100% in securities constituting Hang Seng Index and 0-10% in money market instruments, g-secs, bonds, debentures and cash at call. The exposure to the derivatives would be undertaken, when no equity shares of the constituents of the Index are available or equity shares are insufficient to take exposure in the constituents of the Index and would be restricted to 10% of the net assets of the scheme. The scheme shall also invest in derivatives traded on overseas exchanges only for hedging and portfolio balancing. The scheme shall invest in units of mutual fund scheme / overseas exchange traded funds based on Hang Seng Index upto 10% of the net assets of the Scheme. The margin paid for the derivative instruments will form part of the “Money Market Instruments, G-Secs, Bonds, Debentures, Debt instruments and cash at call” as mentioned in the asset allocation pattern.
The scheme will charge neither entry nor exit load.
Investors can invest under the scheme with a minimum investment amount of Rs. 10,000 (Rupees Ten Thousand only) and in multiples of Re.1 thereafter.
The scheme seeks to collect a minimum target amount of Rs. 1 crore during the NFO period.
The scheme's performance will be benchmarked against Hang Seng Index.
Vishal Jain will be the fund managers for Hang Seng Benchmark Exchange Traded Scheme
Monday, August 17, 2009
Friday, August 14, 2009
JP Morgan AMC Launches Investment Confidence Index
The J P Morgan Asset Managament-Valuenotes Investment Confidence Index, which will be published on a quarterly basis, captures the confidence of retail investors.
JPMorgan Asset Management India Pvt. Ltd. (JPMAMIPL) today announced the launch of the first Investment Confidence Index in India in association with ValueNotes. The J.P. Morgan Asset Management – ValueNotes Investment Confidence Index (ICI), which will be published on a quarterly basis, captures the confidence of retail investors, corporate investors and financial advisors on the Indian economic and investment environment. The findings of the inaugural survey show that the Indian financial community currently holds a cautiously optimistic view towards their local market.
ValueNotes, an independent market research company, was commissioned by J.P. Morgan Asset Management to conduct the survey. The ICI was developed by interviewing a random sample of retail investors (with a wallet size in excess of Rs 200,000), corporate investors and financial advisors. The survey took place in July 2009 in eight cities across India: Delhi/NCR, Mumbai, Kolkata, Chennai, Ahmedabad, Bengaluru, Hyderabad and Pune.
The key objective of the ICI is to quantify confidence in the investment environment among investors and advisors. The survey also attempts to study investment behaviour and sentiment based on key factors such as the improvement in the Indian and global economic environment, general investment atmosphere, expectation of growth in investment portfolios and others. Going forward, the ICI will map and analyse the short term and long term changes in investment behaviour and outlook every quarter, from an investor and distributor standpoint.
The J.P. Morgan Asset Management – Valuenotes Investment Confidence Index score is derived from responses to the following questions posed to all target segments:
1)The likelihood of the Indian economic situation improving from current levels in the next six months.
2)The likelihood of an improvement in the general investment market environment and atmosphere from current levels in the coming six months.
3)The possibility of the global economic environment improving from current levels in the coming six months.
4)The likelihood of the BSE Sensex increasing in the next six months.
5)The prospect of your / your clients’ investment portfolio appreciating in the coming six months.
6)Expected increase or decrease in the amount of investment and/or increase in mutual fund inflows in the coming six months.
Responses to these 6 questions also form the basis for arriving at the Retail Investor Confidence Index, Corporate Confidence Index and the Advisor Confidence Index which are sub-indices of the Investment Confidence Index. At any given point, the indices can move from ‘0’ to ‘200’, with ‘0’ depicting the most negative outlook; ‘200’ depicting full and absolute confidence and ‘100’ showing a neutral position.
Krishnamurthy Vijayan, Executive Chairman of J.P. Morgan Asset Management said, “We are extremely proud to present the J.P. Morgan Asset Management – ValueNotes Investment Confidence Index to the Indian investment community. Investment sentiment has always been a key focus in our business strategy across the globe. We have been monitoring retail investor sentiment closely within the major markets of Europe and Asia for some time by conducting investor confidence surveys since the early 1990s. The inaugural investor confidence index was launched in the UK, followed by Germany, France and other European countries. In Asia, a similar Investor Confidence Index has been launched by the firm in markets like Hong Kong, Japan and Taiwan and has been well received.”
Arun Jethmalani, Managing Director, ValueNotes commented, “The Indian economic prospects drive confidence across the board. A Government with a strong majority was viewed as the most positive economic signal. The Investment Confidence Index at the end of July 2009 stands at 135.9, arrived by taking an average of the Investor Confidence Index (highest at 138.3), Corporate Confidence Index (136.0) and the Advisor Confidence Index (133.5). A deeper study of the indices throws up a recurring theme across all three categories – consistently high levels of optimism on an improvement in the Indian economic situation. This is contrasted by a marked pessimism or significantly lower confidence on a global economic recovery.”
Key findings:
The recent election results have influenced investment confidence favourably, as investors and advisors alike have voted for a government mandated with a strong majority as the single most positive signal for the Indian economy today.
•48% of retail investors expect their income will increase and they will make additional investments over the next six months.
•Retail investors are more confident about making additional investments (136.4) than their advisors (132.1) expect them to.
•Advisors are significantly more optimistic about portfolio appreciation (146.8) than their retail clients (138.2).
•Among cities – Retail and IFA confidence in Chennai is the highest at 160.2 and 147.3 respectively. In contrast, retail confidence in Hyderabad is lowest at 98.1 and IFA confidence is the lowest in Kolkata at 125.7.
•Retail investor confidence declines as age increases, with the age group 22 to 25 most confident (142.7) and investors aged 55 to 60 the least confident (131.3).
•By occupational status, the salaried employees from the private sector have the maximum confidence at 140.8.
•Retail investor responses indicate that investments in stocks and mutual funds increase with an increase in wallet size. While 37% of retail investors with wallet size between Rs 2 and 5 lakhs invested in stocks and mutual funds over the past 12 months, the figure increased to 79% for investors with wallet size Rs 50 lakhs and above.
•Both investors and advisors expect Sensex to be at 16,000 – 17,000 levels by December 2009. 76% of retail and 88% of advisors expect Sensex to rise from current (survey) levels.
•70% of corporates expect improvement in profits and employment opportunities.
•Half the corporates surveyed believe that the Indian rupee is likely to appreciate in the next six months while 76% of respondents expect interest rates to move upwards.
•36% of corporate respondents expect RBI to intervene in the medium term to reduce liquidity in 6-12 months while 44% believe that the NPAs can be expected to increase.
JPMorgan Asset Management India Pvt. Ltd. (JPMAMIPL) today announced the launch of the first Investment Confidence Index in India in association with ValueNotes. The J.P. Morgan Asset Management – ValueNotes Investment Confidence Index (ICI), which will be published on a quarterly basis, captures the confidence of retail investors, corporate investors and financial advisors on the Indian economic and investment environment. The findings of the inaugural survey show that the Indian financial community currently holds a cautiously optimistic view towards their local market.
ValueNotes, an independent market research company, was commissioned by J.P. Morgan Asset Management to conduct the survey. The ICI was developed by interviewing a random sample of retail investors (with a wallet size in excess of Rs 200,000), corporate investors and financial advisors. The survey took place in July 2009 in eight cities across India: Delhi/NCR, Mumbai, Kolkata, Chennai, Ahmedabad, Bengaluru, Hyderabad and Pune.
The key objective of the ICI is to quantify confidence in the investment environment among investors and advisors. The survey also attempts to study investment behaviour and sentiment based on key factors such as the improvement in the Indian and global economic environment, general investment atmosphere, expectation of growth in investment portfolios and others. Going forward, the ICI will map and analyse the short term and long term changes in investment behaviour and outlook every quarter, from an investor and distributor standpoint.
The J.P. Morgan Asset Management – Valuenotes Investment Confidence Index score is derived from responses to the following questions posed to all target segments:
1)The likelihood of the Indian economic situation improving from current levels in the next six months.
2)The likelihood of an improvement in the general investment market environment and atmosphere from current levels in the coming six months.
3)The possibility of the global economic environment improving from current levels in the coming six months.
4)The likelihood of the BSE Sensex increasing in the next six months.
5)The prospect of your / your clients’ investment portfolio appreciating in the coming six months.
6)Expected increase or decrease in the amount of investment and/or increase in mutual fund inflows in the coming six months.
Responses to these 6 questions also form the basis for arriving at the Retail Investor Confidence Index, Corporate Confidence Index and the Advisor Confidence Index which are sub-indices of the Investment Confidence Index. At any given point, the indices can move from ‘0’ to ‘200’, with ‘0’ depicting the most negative outlook; ‘200’ depicting full and absolute confidence and ‘100’ showing a neutral position.
Krishnamurthy Vijayan, Executive Chairman of J.P. Morgan Asset Management said, “We are extremely proud to present the J.P. Morgan Asset Management – ValueNotes Investment Confidence Index to the Indian investment community. Investment sentiment has always been a key focus in our business strategy across the globe. We have been monitoring retail investor sentiment closely within the major markets of Europe and Asia for some time by conducting investor confidence surveys since the early 1990s. The inaugural investor confidence index was launched in the UK, followed by Germany, France and other European countries. In Asia, a similar Investor Confidence Index has been launched by the firm in markets like Hong Kong, Japan and Taiwan and has been well received.”
Arun Jethmalani, Managing Director, ValueNotes commented, “The Indian economic prospects drive confidence across the board. A Government with a strong majority was viewed as the most positive economic signal. The Investment Confidence Index at the end of July 2009 stands at 135.9, arrived by taking an average of the Investor Confidence Index (highest at 138.3), Corporate Confidence Index (136.0) and the Advisor Confidence Index (133.5). A deeper study of the indices throws up a recurring theme across all three categories – consistently high levels of optimism on an improvement in the Indian economic situation. This is contrasted by a marked pessimism or significantly lower confidence on a global economic recovery.”
Key findings:
The recent election results have influenced investment confidence favourably, as investors and advisors alike have voted for a government mandated with a strong majority as the single most positive signal for the Indian economy today.
•48% of retail investors expect their income will increase and they will make additional investments over the next six months.
•Retail investors are more confident about making additional investments (136.4) than their advisors (132.1) expect them to.
•Advisors are significantly more optimistic about portfolio appreciation (146.8) than their retail clients (138.2).
•Among cities – Retail and IFA confidence in Chennai is the highest at 160.2 and 147.3 respectively. In contrast, retail confidence in Hyderabad is lowest at 98.1 and IFA confidence is the lowest in Kolkata at 125.7.
•Retail investor confidence declines as age increases, with the age group 22 to 25 most confident (142.7) and investors aged 55 to 60 the least confident (131.3).
•By occupational status, the salaried employees from the private sector have the maximum confidence at 140.8.
•Retail investor responses indicate that investments in stocks and mutual funds increase with an increase in wallet size. While 37% of retail investors with wallet size between Rs 2 and 5 lakhs invested in stocks and mutual funds over the past 12 months, the figure increased to 79% for investors with wallet size Rs 50 lakhs and above.
•Both investors and advisors expect Sensex to be at 16,000 – 17,000 levels by December 2009. 76% of retail and 88% of advisors expect Sensex to rise from current (survey) levels.
•70% of corporates expect improvement in profits and employment opportunities.
•Half the corporates surveyed believe that the Indian rupee is likely to appreciate in the next six months while 76% of respondents expect interest rates to move upwards.
•36% of corporate respondents expect RBI to intervene in the medium term to reduce liquidity in 6-12 months while 44% believe that the NPAs can be expected to increase.
Bharti topples Reliance Ind as top fund bet
Leading mobile operator Bharti Airtel replaced Reliance Industries as the most preferred stock of domestic fund managers in July, becoming the only company to topple the dominance of the country's most valuable firm since at least December 2006.
"Bharti, as a consumption play, appears to be far more attractive to funds than a commodity play," said Sanjay Sinha, chief executive of DBS Cholamandalam Asset Management.
Bharti has a market value of about $33 billion, making it India's fourth-most valuable firm. Reliance is worth $66 billion, making it the country's largest firm by market cap.
As many as 273 funds collectively held 116 million shares of the cellular operator at July-end and 15 funds introduced the stock in their portfolios during the month, according to data from fund tracker ICRA Online.
By comparison, 270 funds held stakes in Reliance Industries, controlled by billionaire Mukesh Ambani, with at least seven dumping the firm -- which posted a larger-than-expected drop in June quarter net profit and is locked in a legal battle with Reliance Natural Resources, run by estranged younger brother Anil Ambani, over a gas-sales pact.
Bharti unseated Reliance Industries even though its shares have fallen 3.8 percent since it announced in May that it had renewed merger talks with South African peer MTN, nearly a year after the companies' prior talks fell through.
Bharti -- more than 30 percent owned by Southeast Asia's top phone firm Singapore Telecommunications -- has consistently added about 2.8 million subscribers a month, leading growth in an increasingly competitive space where rivals such as Vodafone have expanded networks rapidly.
Firms such as ICICI Prudential Asset Management, IDFC Mutual Fund, ING Investment Management and Principal Pnb Asset Management added Bharti stock to their portfolios, while Canara Robeco and DSP BlackRock dumped Reliance Industries from at least one of their fund's portfolios.
Bharti shares rose 2.4 percent in July, compared with an 8 percent rise in the broader market, while Reliance shares lost 3.3 percent.
"Bharti, as a consumption play, appears to be far more attractive to funds than a commodity play," said Sanjay Sinha, chief executive of DBS Cholamandalam Asset Management.
Bharti has a market value of about $33 billion, making it India's fourth-most valuable firm. Reliance is worth $66 billion, making it the country's largest firm by market cap.
As many as 273 funds collectively held 116 million shares of the cellular operator at July-end and 15 funds introduced the stock in their portfolios during the month, according to data from fund tracker ICRA Online.
By comparison, 270 funds held stakes in Reliance Industries, controlled by billionaire Mukesh Ambani, with at least seven dumping the firm -- which posted a larger-than-expected drop in June quarter net profit and is locked in a legal battle with Reliance Natural Resources, run by estranged younger brother Anil Ambani, over a gas-sales pact.
Bharti unseated Reliance Industries even though its shares have fallen 3.8 percent since it announced in May that it had renewed merger talks with South African peer MTN, nearly a year after the companies' prior talks fell through.
Bharti -- more than 30 percent owned by Southeast Asia's top phone firm Singapore Telecommunications -- has consistently added about 2.8 million subscribers a month, leading growth in an increasingly competitive space where rivals such as Vodafone have expanded networks rapidly.
Firms such as ICICI Prudential Asset Management, IDFC Mutual Fund, ING Investment Management and Principal Pnb Asset Management added Bharti stock to their portfolios, while Canara Robeco and DSP BlackRock dumped Reliance Industries from at least one of their fund's portfolios.
Bharti shares rose 2.4 percent in July, compared with an 8 percent rise in the broader market, while Reliance shares lost 3.3 percent.
Tough times ahead for mutual funds
India's mutual fund industry has been the cynosure of all eyes for the past several weeks. After capital market regulator Securities and Exchange Board of India (Sebi) announced a ban on entry load from August 1 and declared parity among all classes of unit-holders while charging exit load, experts believe mutual fund sales in the Indian market will not be the same as before. Several asset management companies, which run mutual funds, are slowing new fund offers (NFOs) following the ban on entry load.
Before the ban on entry load, investors paid an entry load of 2 to 2.25% at the time of investing which covered the asset management companies' selling and distribution expenses, commission to distributors. Now, an investor will receive units for the entire amount invested in schemes. They can now decide the commission payable to distributors in accordance with the level of service. Earlier, several fund houses paid an upfront commission to distributors to sell their products. Sebi's new proposals allow investors to directly make payments to distributors for their services, instead of mutual fund houses deducting them from the investment amount.
Post October crises many fund houses stayed away from launching the fund. However, Reliance Mutual Fund mobbed up around Rs 2,350 crore in their Reliance Infrastructure fund, which was launched in the month of May, 2009. While ICICI (ICICIBANK.NS : 748.25 -8.95) Prudential target fund collected Rs 800 crore, which was started on April, 2009.
Dhirendra Kumar, chief executive officer of Valueresearch Online, said, "Earlier, fund houses used to pass the entry load to the distributor, but now with ban we will see less number of NFOs. Not that there will be no NFOs, but the number will certainly come down in the next few months which will in turn hit the profitability of fund houses."
Sebi in its release also said, "The upfront commission to distributors shall be paid by the investor to the distributor directly. The distributors shall disclose the commission, trail or otherwise, received by them for different schemes which they are distributing or advising the investors."
Some market players feel that in the beginning the profitability of the fund houses is likely to take a hit, not only due to the ban on entry load, but also due to the increased spend on marketing, distribution and administrative expenses. Sundeep Sikka, CEO of Reliance Mutual Fund, says, "In the initial period, there are likely to be some problems (for the fund houses). But the regulator's move will certainly empower the investors and in the long run we can certainly make good amounts of profit."
Sebi earlier had mandated zero entry load in cases where investors apply directly for the schemes of mutual funds with effect from January 4, 2008, which received moderately good response with about 4%-5% mutual fund applications being made in this mode.
But with ban on entry load, distributions houses are likely to take a hit as some of the players believe that it will be very difficult to convince investor to pay a fee for the service given.
Sabapathy Iyer, CEO of JR Laddha Financial, a Mumbai-based distribution firm, says, "In a bull market there are chances that people will pay us but during a bear run, we fear the advisory fee will take a huge hit. It will take some more time for everything to settle down."
After the ban on entry load, several strategies were taken by different fund houses such as giving upfront commission to the distributors from their own pocket and increasing the exit load from one-three years from the earlier six months to one year. An exit load is a fee collected at the time an investor withdraws money from a fund.
According to one of the senior official from the leading fund house, "The main aim to increase the exit load was only to make up for losses from the ban on entry load. But now with Sebi bring the parity among all the classes of unit holders, we can't do much at that end." Until now, these firms typically charged up to 1% exit load for retail investors for premature redemption and big ticket investors who invested above Rs 5 crore did not have to pay any exit load.
Sebi in its circular dated August 7 said, "It is observed that mutual funds are making distinctions between the unit holders by charging differentials exit load based on amount of subscription. In order to have parity among all the classes of unit holder, it has now been decided that no distinction among unit holders should be made based on amount of subscription while charging the exit loads."
Market participants believe that this move will have more impact on the big ticket investors rather than retail investors. In fact now we might witness a separate new scheme floated for the institutional investors by the fund house.
"If a fund house come out with a scheme stating that, no entry load or exit load will be charged for the investors investing minimum Rs 2 crore or above that, then Sebi will not have any problem with that and fund houses can also save their clients," added Kumar.
He further states that, apart from that, some fund houses will reduce the existing load structure. While some might roll back the current lock-in period of three years. With the steps taken by the market regulator, the fund industry is likely to grow in the long term believes some of the players. Currently asset under management of fund houses stand at Rs 689,946 crore for the month of July, according to the association of mutual funds in India.
Before the ban on entry load, investors paid an entry load of 2 to 2.25% at the time of investing which covered the asset management companies' selling and distribution expenses, commission to distributors. Now, an investor will receive units for the entire amount invested in schemes. They can now decide the commission payable to distributors in accordance with the level of service. Earlier, several fund houses paid an upfront commission to distributors to sell their products. Sebi's new proposals allow investors to directly make payments to distributors for their services, instead of mutual fund houses deducting them from the investment amount.
Post October crises many fund houses stayed away from launching the fund. However, Reliance Mutual Fund mobbed up around Rs 2,350 crore in their Reliance Infrastructure fund, which was launched in the month of May, 2009. While ICICI (ICICIBANK.NS : 748.25 -8.95) Prudential target fund collected Rs 800 crore, which was started on April, 2009.
Dhirendra Kumar, chief executive officer of Valueresearch Online, said, "Earlier, fund houses used to pass the entry load to the distributor, but now with ban we will see less number of NFOs. Not that there will be no NFOs, but the number will certainly come down in the next few months which will in turn hit the profitability of fund houses."
Sebi in its release also said, "The upfront commission to distributors shall be paid by the investor to the distributor directly. The distributors shall disclose the commission, trail or otherwise, received by them for different schemes which they are distributing or advising the investors."
Some market players feel that in the beginning the profitability of the fund houses is likely to take a hit, not only due to the ban on entry load, but also due to the increased spend on marketing, distribution and administrative expenses. Sundeep Sikka, CEO of Reliance Mutual Fund, says, "In the initial period, there are likely to be some problems (for the fund houses). But the regulator's move will certainly empower the investors and in the long run we can certainly make good amounts of profit."
Sebi earlier had mandated zero entry load in cases where investors apply directly for the schemes of mutual funds with effect from January 4, 2008, which received moderately good response with about 4%-5% mutual fund applications being made in this mode.
But with ban on entry load, distributions houses are likely to take a hit as some of the players believe that it will be very difficult to convince investor to pay a fee for the service given.
Sabapathy Iyer, CEO of JR Laddha Financial, a Mumbai-based distribution firm, says, "In a bull market there are chances that people will pay us but during a bear run, we fear the advisory fee will take a huge hit. It will take some more time for everything to settle down."
After the ban on entry load, several strategies were taken by different fund houses such as giving upfront commission to the distributors from their own pocket and increasing the exit load from one-three years from the earlier six months to one year. An exit load is a fee collected at the time an investor withdraws money from a fund.
According to one of the senior official from the leading fund house, "The main aim to increase the exit load was only to make up for losses from the ban on entry load. But now with Sebi bring the parity among all the classes of unit holders, we can't do much at that end." Until now, these firms typically charged up to 1% exit load for retail investors for premature redemption and big ticket investors who invested above Rs 5 crore did not have to pay any exit load.
Sebi in its circular dated August 7 said, "It is observed that mutual funds are making distinctions between the unit holders by charging differentials exit load based on amount of subscription. In order to have parity among all the classes of unit holder, it has now been decided that no distinction among unit holders should be made based on amount of subscription while charging the exit loads."
Market participants believe that this move will have more impact on the big ticket investors rather than retail investors. In fact now we might witness a separate new scheme floated for the institutional investors by the fund house.
"If a fund house come out with a scheme stating that, no entry load or exit load will be charged for the investors investing minimum Rs 2 crore or above that, then Sebi will not have any problem with that and fund houses can also save their clients," added Kumar.
He further states that, apart from that, some fund houses will reduce the existing load structure. While some might roll back the current lock-in period of three years. With the steps taken by the market regulator, the fund industry is likely to grow in the long term believes some of the players. Currently asset under management of fund houses stand at Rs 689,946 crore for the month of July, according to the association of mutual funds in India.
Thursday, August 13, 2009
Online mutual funds to gain from no-entry load norm
The no-entry load regime of Securities and Exchange Board of India (SEBI) has left mutual fund distributors with little choice but to increase their online presence. The immediate gainers from such a move would be the online platforms that provide mutual fund (MF) distribution services.
As Kanwar Vivek, CEO of Birla Sun Life Distribution Company put it, "Online platforms are likely to find favour with people looking at mutual fund route for investment." Such platforms have existed for some time, though their reach has been limited.
"At present, 90 per cent investors use distributor services to invest in mutual funds. Only 10 per cent use online services to invest directly," said Rajesh Krishnamoorthy, MD of iFAST Financial India.
"Servicing clients offline is an expensive proposition. Fund houses and distributors are showing interest in online platforms," said Bikramjit Sen, CEO of TechProcess Solutions, which makes online solutions for MFs.
The Association of Mutual Funds in India (AMFI) is planning a common industry platform, said Jaideep Bhattacharya, Chief Marketing Officer of UTI Mutual Fund and chairman of the AMFI panel on the Common Industry Platform
As Kanwar Vivek, CEO of Birla Sun Life Distribution Company put it, "Online platforms are likely to find favour with people looking at mutual fund route for investment." Such platforms have existed for some time, though their reach has been limited.
"At present, 90 per cent investors use distributor services to invest in mutual funds. Only 10 per cent use online services to invest directly," said Rajesh Krishnamoorthy, MD of iFAST Financial India.
"Servicing clients offline is an expensive proposition. Fund houses and distributors are showing interest in online platforms," said Bikramjit Sen, CEO of TechProcess Solutions, which makes online solutions for MFs.
The Association of Mutual Funds in India (AMFI) is planning a common industry platform, said Jaideep Bhattacharya, Chief Marketing Officer of UTI Mutual Fund and chairman of the AMFI panel on the Common Industry Platform
Wednesday, August 12, 2009
Protect your investment and enter the market on Dip
GAUTAM PRASAD
During the month of March when I recommended my readers to enter the share market and buy large cap Mutual funds under SIP a few old friend of mine called me up and told me that they did not want to invest in such a dull and depressed market. I told advised them that the basic principal of investment is that when market was depressed get in so that you would be the first person to reap the benefit when market turns around. My friends were not convinced. They laughed at me and hung up.
However a few young readers thought what I did say was sensible and they mustered enough courage to enter the market when the Sensex was around 10,500 only. Today with in 120 days market has turn around and those who laughed at me called me up and again asked whether they can enter the market now. The sensex at present is flat at 15,500 . My old friends lost the opportunity but young readers gain handsomely.This has happened always. I replied to them to hold on to their money. There would be correction after some time It would be prudent to enter the market then. They asked me when the correction would start? I replied that it is impossible to pin point a date but it would be soon.
The most important trait is that investor must have patience accompanied by his risk taking capacity. Those investors who entered the market in the Month of March made 30% profit already. My advice to them was if you are chicken hearted then book the profit. If you are bold and brave then hold on. There would be correction soon but that would be followed by a gradual upturn and Sensex may go up to 17000 points by April 2010. At this point of time I would like to remind my readers that by 2010 June the Sensex would see a new high. So on every dip in the share market try to buy some share or the units of large cap mutual funds. Younger persons can buy 60% equity whereas Mid aged person should by 40% if they have risk taking capcity for longer years (atleast for five years)
One thing must be kept in mind that these are only calculated guess work. Nobody in the world , not even Warren Buffet , can predict exactly the behavior of Share market and consequently of the Mutual funds. The advisors and experts can hopefully wish but cannot predict. No science have been perfectly developed so far which can forecast the behavior of the share market. If such predications could have been possible there would not have been great depression in the world. During 2008 world was engulfed with recession despite the fact that this world have got highest number noble laureates in Economics and very large numbers of financial honchos who are rich and proud..
The Reserve Bank Governor conceded recently that Indian economy will revive faster than other countries of the world but it was not possible to predict a date. It is a fact that India would be the growth engine of the world economy sooner or later. So we need to keep patience and move ahead and invest in a determined manner. We need to ensure safety but agree to take a little calculated risk should money be made for future .However safety and prudence should be the watchword for economy would take time to revive.
It is absolutely necessary to switch investment in order to earn better returns. Some Mutual funds provides better return for a year or so and later fails to earn better returns. Once Magnum Global Fund and Prima Fund were darling of investors’ .Today, these are tired funds. Switching of fund provided better earning scope always. The investor must try to protect his investment all the time. Investor must reshuffle his investment from time to time periodically, in case he wants to maximize his return. Investing money is only first step in financial planning. The second step is the most important step and that is protection of invested money.
Investor must redeem his units in mutual fund as soon as he makes 30% return. The Golden rule of investment is that do not invest all your money in Share market or in Mutual fund. Any person desirous of investing money (other than in saving bank account) should invest adhering to the formula of “100 minus his age = % in equity.” So what should be done by small investors? The small investor must buy mutual fund only through Systematic investment plan for long term.. No investment should be done in lump sum. Another important thing before investment is done investors should consult a qualified investment advisor. Thirdly, investor should set an investment goal for himself and put in place an asset allocation strategy depending on the risk bearing capacity. You must invest in equity or equity link instrument if you are young. The older persons should be more cautious while investing in equity. No investment needs to be done in equity after seventy five.
Is this the time for investment? This is a million dollar question. I feel that there could be correction soon and our investors should not miss the opportunity to enter the market then. If some of the investors are seating now they can enter the market but through systematic investment plan in diversified mutual fund in the opportunity and infrastructure sectors. Do consult your advisor but decision needs to be taken by individually always.
During the month of March when I recommended my readers to enter the share market and buy large cap Mutual funds under SIP a few old friend of mine called me up and told me that they did not want to invest in such a dull and depressed market. I told advised them that the basic principal of investment is that when market was depressed get in so that you would be the first person to reap the benefit when market turns around. My friends were not convinced. They laughed at me and hung up.
However a few young readers thought what I did say was sensible and they mustered enough courage to enter the market when the Sensex was around 10,500 only. Today with in 120 days market has turn around and those who laughed at me called me up and again asked whether they can enter the market now. The sensex at present is flat at 15,500 . My old friends lost the opportunity but young readers gain handsomely.This has happened always. I replied to them to hold on to their money. There would be correction after some time It would be prudent to enter the market then. They asked me when the correction would start? I replied that it is impossible to pin point a date but it would be soon.
The most important trait is that investor must have patience accompanied by his risk taking capacity. Those investors who entered the market in the Month of March made 30% profit already. My advice to them was if you are chicken hearted then book the profit. If you are bold and brave then hold on. There would be correction soon but that would be followed by a gradual upturn and Sensex may go up to 17000 points by April 2010. At this point of time I would like to remind my readers that by 2010 June the Sensex would see a new high. So on every dip in the share market try to buy some share or the units of large cap mutual funds. Younger persons can buy 60% equity whereas Mid aged person should by 40% if they have risk taking capcity for longer years (atleast for five years)
One thing must be kept in mind that these are only calculated guess work. Nobody in the world , not even Warren Buffet , can predict exactly the behavior of Share market and consequently of the Mutual funds. The advisors and experts can hopefully wish but cannot predict. No science have been perfectly developed so far which can forecast the behavior of the share market. If such predications could have been possible there would not have been great depression in the world. During 2008 world was engulfed with recession despite the fact that this world have got highest number noble laureates in Economics and very large numbers of financial honchos who are rich and proud..
The Reserve Bank Governor conceded recently that Indian economy will revive faster than other countries of the world but it was not possible to predict a date. It is a fact that India would be the growth engine of the world economy sooner or later. So we need to keep patience and move ahead and invest in a determined manner. We need to ensure safety but agree to take a little calculated risk should money be made for future .However safety and prudence should be the watchword for economy would take time to revive.
It is absolutely necessary to switch investment in order to earn better returns. Some Mutual funds provides better return for a year or so and later fails to earn better returns. Once Magnum Global Fund and Prima Fund were darling of investors’ .Today, these are tired funds. Switching of fund provided better earning scope always. The investor must try to protect his investment all the time. Investor must reshuffle his investment from time to time periodically, in case he wants to maximize his return. Investing money is only first step in financial planning. The second step is the most important step and that is protection of invested money.
Investor must redeem his units in mutual fund as soon as he makes 30% return. The Golden rule of investment is that do not invest all your money in Share market or in Mutual fund. Any person desirous of investing money (other than in saving bank account) should invest adhering to the formula of “100 minus his age = % in equity.” So what should be done by small investors? The small investor must buy mutual fund only through Systematic investment plan for long term.. No investment should be done in lump sum. Another important thing before investment is done investors should consult a qualified investment advisor. Thirdly, investor should set an investment goal for himself and put in place an asset allocation strategy depending on the risk bearing capacity. You must invest in equity or equity link instrument if you are young. The older persons should be more cautious while investing in equity. No investment needs to be done in equity after seventy five.
Is this the time for investment? This is a million dollar question. I feel that there could be correction soon and our investors should not miss the opportunity to enter the market then. If some of the investors are seating now they can enter the market but through systematic investment plan in diversified mutual fund in the opportunity and infrastructure sectors. Do consult your advisor but decision needs to be taken by individually always.
Celent sees mutual fund assets at $500 bln by 2014
MUMBAI (Reuters) - Assets of mutual fund industry could surge to more than $500 billion by 2014 from about $150 billion now, helped by faster growth in profitable retail segment, consultant Celent said in a report on Wednesday.
Retail investors account for about 37 percent of the industry assets, while institutional investors contribute 56 percent. By comparison, retail contribution to fund assets in markets such as China is 70 percent and US is 86 percent.
Focus on institutional investors has led to poor distribution in smaller cities and rural India, but Celent forecasts retail segment to grow 35 percent annually for the next five years, driven by rising income and awareness of mutual fund products.
The institutional segment will grow by a quarter annually, driven mainly by the lack of alternative liquidity management instruments for corporates.
"The institutional segment will be the volume driver for the industry, while the retail segment drives profitability," Sreekrishna Sankar and Arin Ray said in the report.
They said profits as a percentage of assets under management for the industry dropped to 16.5 basis points in 2008 from 23 basis points in 2006 as the growth during the period was mainly led by relatively less profitable fixed income funds.
Even as assets surge, profits will remain at its present level mainly due to increasing cost on development of distribution channels and falling margins due to greater competition among the money managers, Celent said.
India's 36-member mutual funds industry has attracted the likes of Shinsei's, Italian bank UniCredit's Pioneer Global arm, France's Axa and South Korea's Mirae Asset in the last two years.
Allianz, UBS, Sanlam and Credit Agricole are among global firms looking to set up shop.
Retail investors account for about 37 percent of the industry assets, while institutional investors contribute 56 percent. By comparison, retail contribution to fund assets in markets such as China is 70 percent and US is 86 percent.
Focus on institutional investors has led to poor distribution in smaller cities and rural India, but Celent forecasts retail segment to grow 35 percent annually for the next five years, driven by rising income and awareness of mutual fund products.
The institutional segment will grow by a quarter annually, driven mainly by the lack of alternative liquidity management instruments for corporates.
"The institutional segment will be the volume driver for the industry, while the retail segment drives profitability," Sreekrishna Sankar and Arin Ray said in the report.
They said profits as a percentage of assets under management for the industry dropped to 16.5 basis points in 2008 from 23 basis points in 2006 as the growth during the period was mainly led by relatively less profitable fixed income funds.
Even as assets surge, profits will remain at its present level mainly due to increasing cost on development of distribution channels and falling margins due to greater competition among the money managers, Celent said.
India's 36-member mutual funds industry has attracted the likes of Shinsei's, Italian bank UniCredit's Pioneer Global arm, France's Axa and South Korea's Mirae Asset in the last two years.
Allianz, UBS, Sanlam and Credit Agricole are among global firms looking to set up shop.
Tuesday, August 11, 2009
Drought Risk Looms But GDP To Grow At 6% : FM
Mukherjee said the government was ready to manage a drought and a contingency plan was also in place.
More than a quarter of India's districts are facing the threat of drought and the sowing of crops nationally is 20 percent lower than in the previous year, Finance Minister Pranab Mukherjee said on Tuesday.
While many of these districts are not major crop producers, the minister's statement underscored growing government concern that a weak monsoon could reduce output of crops like rice and dampen economic growth already hit by a global recession.
After the driest June in 83 years, the annual rains have been more than a quarter below below normal this season.
The minister said he expected the economy to expand more than 6 percent in 2009/10, in line with the central bank's outlook, although some private economists have warned that the risk is to the downside given the poor monsoon performance.
"Monsoon situation is still erratic," Mukherjee told reporters. "One hundred and sixty one districts have been declared drought prone. So far as sowing is concerned, 20 percent would be down," he said. India has 604 districts. He did not specify the drought-prone districts.
The rain deficit since June 1 worsened to 28 percent at the weekend, raising fears that the season may turn out to be as bad as 2004 when summer crop output fell 12 percent after a drought. GDP fell to 7.5 percent that fiscal year from 8.5 percent in the previous year.
The rains are vital for sugarcane, oilseeds and other crops, although the impact has been more severe for certain crops -- particularly rice -- than for many others. A feared shortfall in the sugar harvest has lifted global prices to near record highs.
Mukherjee said the government was ready to manage a drought and a contingency plan was also in place.
"Of course, always there is a contingency plan," the minister said. "There is no point of pressing the panic button because you will go and start chanting drought, drought, drought and it will have an adverse impact," he said.
Among measures the government could take to mitigate the situation are to raise imports and curtail exports. It has already stepped up efforts to buy more sugar and has banned wheat exports and restricted rice shipments.
"Fortunately, Punjab and Haryana have extensively used the ground water. Bihar and certain other states, there are shortfalls," Mukherjee said.
Mukherjee was also confident that targets for direct tax receipts for the 2009/10 fiscal year would be surpassed.
GROWTH THREATENED
Asia's third largest economy expanded 6.7 percent in the last fiscal year, sharply lower than the 9 percent or more it grew in the previous three years, as the global economic crisis took a toll.
"It's still a budding recovery so the deficient monsoon has overshadowed the recovery process," said Rupa Rege Nitsure, chief economist at Bank of Baroda in Mumbai.
"Growth of around 6 percent is feasible despite the fact that monsoon has so far been deficient, but it being above 6.5 percent or in the range of 6.5 to 7 percent looks impossible," she said.
Last month, farm minister Sharad Pawar told the parliament that four states -- Manipur, Jharkahand, Assam and Uttar Pradesh -- declared drought in certain pockets. On Monday, the eastern state of Bihar also declared drought in 26 of 38 districts.
Other than Uttar Pradesh, which accounts of almost half of the country's sugarcane production, other drought-hit states do not make a significant contribution
www.reuters.in
More than a quarter of India's districts are facing the threat of drought and the sowing of crops nationally is 20 percent lower than in the previous year, Finance Minister Pranab Mukherjee said on Tuesday.
While many of these districts are not major crop producers, the minister's statement underscored growing government concern that a weak monsoon could reduce output of crops like rice and dampen economic growth already hit by a global recession.
After the driest June in 83 years, the annual rains have been more than a quarter below below normal this season.
The minister said he expected the economy to expand more than 6 percent in 2009/10, in line with the central bank's outlook, although some private economists have warned that the risk is to the downside given the poor monsoon performance.
"Monsoon situation is still erratic," Mukherjee told reporters. "One hundred and sixty one districts have been declared drought prone. So far as sowing is concerned, 20 percent would be down," he said. India has 604 districts. He did not specify the drought-prone districts.
The rain deficit since June 1 worsened to 28 percent at the weekend, raising fears that the season may turn out to be as bad as 2004 when summer crop output fell 12 percent after a drought. GDP fell to 7.5 percent that fiscal year from 8.5 percent in the previous year.
The rains are vital for sugarcane, oilseeds and other crops, although the impact has been more severe for certain crops -- particularly rice -- than for many others. A feared shortfall in the sugar harvest has lifted global prices to near record highs.
Mukherjee said the government was ready to manage a drought and a contingency plan was also in place.
"Of course, always there is a contingency plan," the minister said. "There is no point of pressing the panic button because you will go and start chanting drought, drought, drought and it will have an adverse impact," he said.
Among measures the government could take to mitigate the situation are to raise imports and curtail exports. It has already stepped up efforts to buy more sugar and has banned wheat exports and restricted rice shipments.
"Fortunately, Punjab and Haryana have extensively used the ground water. Bihar and certain other states, there are shortfalls," Mukherjee said.
Mukherjee was also confident that targets for direct tax receipts for the 2009/10 fiscal year would be surpassed.
GROWTH THREATENED
Asia's third largest economy expanded 6.7 percent in the last fiscal year, sharply lower than the 9 percent or more it grew in the previous three years, as the global economic crisis took a toll.
"It's still a budding recovery so the deficient monsoon has overshadowed the recovery process," said Rupa Rege Nitsure, chief economist at Bank of Baroda in Mumbai.
"Growth of around 6 percent is feasible despite the fact that monsoon has so far been deficient, but it being above 6.5 percent or in the range of 6.5 to 7 percent looks impossible," she said.
Last month, farm minister Sharad Pawar told the parliament that four states -- Manipur, Jharkahand, Assam and Uttar Pradesh -- declared drought in certain pockets. On Monday, the eastern state of Bihar also declared drought in 26 of 38 districts.
Other than Uttar Pradesh, which accounts of almost half of the country's sugarcane production, other drought-hit states do not make a significant contribution
www.reuters.in
M&M Enters Private Equity ; Forms Mahindra Partners
Anand Mahindra said that Mahindra Partners will look after new business opportunities for the group.
Diversified business group Mahindra & Mahindra (M&M) is the latest business house to form an in-house private equity fund. The company will make proprietary investments from Mahindra Partners.
Anand Mahindra, Vice-Chairman and Managing Director of M&M told ET Now, a domestic business news channel that the new division will be the group’s growth driver in the future. The PE vertical is a ‘fairly significant change’ in the architecture of the group, Mahindra added.
He further stated that unlike conventional private equity, Mahindra Partners will be allowed more elbow room to scale up its start-ups and not pressured to get in and out of a business within a certain period of time.
From now on, Mahindra Partners will look after new business opportunities for the group and will determine whether there is enough potential to enter in or not.
R-ADAG, Aditya Birla group, Nicholas Piramal and Tatas have already tested the private equity waters.
M&M is part of a $ 6.7 billion conglomerate Mahindra Group. It has presence in sectors including automobiles, trade, automotive components, information technology, holidays, financial services, retail and logistics, engineering, steel and infrastructure development.
In the first quarter ended on June 30, 2009, Mahindra & Mahindra Ltd saw a growth of 26.3% in its gross revenue from its corresponding figure in the previous year. The revenue of the company stood at Rs4751.3 crore as against Rs3760.7 crore during the corresponding period last year.
The net profit before tax for the quarter was Rs 538.1 crore as against Rs213.4 crore in Q1 last year – a growth of 152.1%.
Source:-www.vccircle.com
Diversified business group Mahindra & Mahindra (M&M) is the latest business house to form an in-house private equity fund. The company will make proprietary investments from Mahindra Partners.
Anand Mahindra, Vice-Chairman and Managing Director of M&M told ET Now, a domestic business news channel that the new division will be the group’s growth driver in the future. The PE vertical is a ‘fairly significant change’ in the architecture of the group, Mahindra added.
He further stated that unlike conventional private equity, Mahindra Partners will be allowed more elbow room to scale up its start-ups and not pressured to get in and out of a business within a certain period of time.
From now on, Mahindra Partners will look after new business opportunities for the group and will determine whether there is enough potential to enter in or not.
R-ADAG, Aditya Birla group, Nicholas Piramal and Tatas have already tested the private equity waters.
M&M is part of a $ 6.7 billion conglomerate Mahindra Group. It has presence in sectors including automobiles, trade, automotive components, information technology, holidays, financial services, retail and logistics, engineering, steel and infrastructure development.
In the first quarter ended on June 30, 2009, Mahindra & Mahindra Ltd saw a growth of 26.3% in its gross revenue from its corresponding figure in the previous year. The revenue of the company stood at Rs4751.3 crore as against Rs3760.7 crore during the corresponding period last year.
The net profit before tax for the quarter was Rs 538.1 crore as against Rs213.4 crore in Q1 last year – a growth of 152.1%.
Source:-www.vccircle.com
Saturday, August 8, 2009
Market Sentiments Should Not Affect Investor Strategy
2009 has already been a year of two halves - the first quarter marked by pessimism and the subsequent by optimism.
From an investor perspective, neither of these are desirable states to base an investment decision.
It is important to have your long-term goals, ability to take risk and requirements of liquidity at the top of the pecking order at all times. This should lead to a serious thought on the appropriate asset allocation.
If this is the framework guiding your investment and is coupled with profit booking when valuation levels get outlandish, the odds are to move in your favour to meet long-term and short-term financial goals.
We have looked at the patterns of monthly inflows and outflows from different categories of mutual fund products across the industry over a ten-year period. There is high degree of correlation between the inflows and the market trend as well as outflows and the market trend.
The magnitude of the former is significantly higher than the latter in a bullish phase while that is not the case in bearish phases.
This indicates two aspects:
• A sizeable cross-section of investors appear to get interested in equity only in the later stages of a bull market.
• A section of investors appear to take profits as equities move towards peak levels, probably to avoid negative effects of deep declines.
Outflows assume a larger dimension only when a downturn gets more protracted. We hope to publish a detailed analysis in the next month or two as information is now available from the Association of Mutual Funds of India for a ten-year period.
What has been indicated is only from a first-cut analysis of the numbers.
Even this points to optimism and pessimism playing a major role in the manner most investors execute plans to deploy their savings. This is not, in our view, appropriate for investors from a long-term perspective.
(T P Raman is Managing Director, Sundaram BNP Paribas Asset Management. The opinions expressed are his own)
Sources:-Ww.REuters.in
From an investor perspective, neither of these are desirable states to base an investment decision.
It is important to have your long-term goals, ability to take risk and requirements of liquidity at the top of the pecking order at all times. This should lead to a serious thought on the appropriate asset allocation.
If this is the framework guiding your investment and is coupled with profit booking when valuation levels get outlandish, the odds are to move in your favour to meet long-term and short-term financial goals.
We have looked at the patterns of monthly inflows and outflows from different categories of mutual fund products across the industry over a ten-year period. There is high degree of correlation between the inflows and the market trend as well as outflows and the market trend.
The magnitude of the former is significantly higher than the latter in a bullish phase while that is not the case in bearish phases.
This indicates two aspects:
• A sizeable cross-section of investors appear to get interested in equity only in the later stages of a bull market.
• A section of investors appear to take profits as equities move towards peak levels, probably to avoid negative effects of deep declines.
Outflows assume a larger dimension only when a downturn gets more protracted. We hope to publish a detailed analysis in the next month or two as information is now available from the Association of Mutual Funds of India for a ten-year period.
What has been indicated is only from a first-cut analysis of the numbers.
Even this points to optimism and pessimism playing a major role in the manner most investors execute plans to deploy their savings. This is not, in our view, appropriate for investors from a long-term perspective.
(T P Raman is Managing Director, Sundaram BNP Paribas Asset Management. The opinions expressed are his own)
Sources:-Ww.REuters.in
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