Mutual Fund Volume 11 # 2, News Letter From Ram s Desk Market Updates Fund Picks 1 Franklin India Bluechip Fund (G) 234 15/12/93 4929 17.62 12.58 03.57 06.19 18.75 08.08 / 3/- p.u 27/01/12 Give The Correct Answer Give The Correct Answer????????????????? And win the GIFT Fundatech Choose short-term debt funds instead of Fds The Reserve Bank of India (RBI) cut interest rates for the third time this calendar year when it cut the repo rate on Friday. Falling interest rates bode well for debt funds but should you still look at them despite three rate cuts already this year?... Funny Unit 1/3, 3rd Floor, Chandroday Society, C.S.T Road, Opp. Swastik Chambers, Chembur, Mumbai - 400 071. E-Mail: quadraticfin@vsnl.net Tel. (022) 4237 9900 Regd. Off : A-14, Rohit Apts., 4th Floor, 3rd Cross Lane, Lokhandwala Complex, Andheri (West), Mumbai 400 053
Volume 11 # 2 News Letter From Ram s Desk Ram Director Safety=Asset allocation Liquidity=Time horizon Your Asset Allocation Inside this Issue QFundamental Mutual Fund May has always been a hot month both in terms of climate and the stock markets. Bullishness is the general trend and this May will not be different. The macro trend suggests that the whole scenario is being outlined by FII and the money flows. This has resulted in asset valuations going up artificially. A very simple effect of that has been that asset values of even real estate and related assets have gone up inspite of various negative factors existing. There is a school of thought that suggests that assets like Gold, Real estate, Commercial estate will not fall. The first domino to fall has been gold as we have suggesting for the last one year. We believe the juggernaut will roll on over other assets which are overvalued and corrections will be the trend in those assets. We also have seen how commodities across the board correct and how it benefits India big time. The trend will continue for at least 2 years before we see a change in trend. Money Velocity and Money percolation has been happening quietly and the smart money (FII) has moved into equities from the above mentioned assets classes, but the retail is still stuck with the above mentioned asset classes and the modus operandi (MO) will again repeat in these asset classes. Our view is that this is probably the best time to invest in equities for the medium to long term. Our earlier 16 month view of Higher Top, Higher Bottom is still intact and if the current upmove goes upto 20300 or so we would have validated another leg of the trend. Mutual funds have done their bit and have managed risk better and outperformed the general market. That is a sign of the industry coming to terms with volatility both in markets and fund flows. This also means that the upmove is in the offing. Another classical event is the retail is completely absent from the equity markets and the markets are moving on institutional flows. That is a paradigm which can be best understood if we have cursory look at the last 16 months flows into the Indian markets between FII and the rest. FII have pumped in 1,80,000 cr net in the period and the rest have taken out over 70,000 cr. This has created a situation of a very shallow market and price swings have been exaggerated. This benefits the long term and patient investor as he gets opportunities to buy value stocks and value businesses. The event of HUL increasing its stake in its Indian arm by willing to invest 5Billion $ is a beginning of a global trend of chasing value. Our advice to our clients is to continue to buy thru. SIP and invest in Fixed income funds to take advantage of the interest rate decline and invest in lumpsums when the market corrects by 7-10%. One crucial aspect which will be seen is a correct asset allocation in your overall portfolio. OPPORTUNITIES ARE GOING TO KNOCK MANY TIMES, BUT WE NEED TO BE ALIVE TO IT. Fund Picks 2 Return=Profit booking 5 4 Choose short-term debt funds instead of Fds Unit 1/3, 3rd Floor, Chandroday Society, C.S.T Road, Opp. Swastik Chambers, Chembur, Mumbai - 400 071. E-Mail: quadraticfin@vsnl.net Tel. (022) 4237 9900 Regd. Off : A-14, Rohit Apts., 4th Floor, 3rd Cross Lane, Lokhandwala Complex, Andheri (West), Mumbai 400 053
Financial Services Pvt. Ltd Fund Picks Equity Fund Picks (Moderate Risk) 1 Franklin India Bluechip Fund (G) 234 15/12/93 4929 17.62 12.58 03.57 06.19 18.75 08.08 2 ICICI Pru Discovery(G) 55 23/07/04 2597 21.66 11.65 05.16 06.88 28.69 13.53 3 DSP BR Equity (G) 17 07/04/97 2247 08.98 04.41-0.54 02.86 18.21 06.33 4 Aggressive Conservative Moderately Aggressive Note: p.u = per unit Debt / Hybrid Fund Picks (Low Risk) ICICI Pru Focused Blue Chip Equity Fund(G) 18 07/05/08 4331 13.12 13.94 04.58 08.58 20.58 N.A 5 HDFC Growth (G) 91 11/09/00 1272 19.07 08.60 01.34 05.77 19.75 06.53 6 IDFC Sterling Equity (G) 20 15/02/08 1357 14.78 07.58 04.30 7 Templeton India Growth Fund (G) 122 05/09/03 615 20.20 12.54-0.49 01.86 18.20 05.70 8 Reliance Growth (G) 453 08/12/95 4849 23.97 04.18-1.46-0.36 16.82 04.12 9 DSP BR Small & Midcap (G) 18 29/07/06 1047 09.34 04.03-0.18 03.08 25.23 10 IDFC Premier Equity (G) 38 26/09/05 3240 19.13 12.93 07.65 08.91 26.26 11.81 05.96 24.65 14.85 08.79 / 3/- p.u 27/01/12 1/- p.u 16/03/12 0.50/- p.u 21/12/12 1/- p.u 25/01/13 3/- p.u 23/02/12 1.40/- p.u 2/- p.u 21/12/12 2/- p.u 23/03/12 1.5/- p.u 25/01/13 2.42/- p.u 23/03/12 S. r N o. CAGR 1Month 3 Months 6 Months 1 Year 2 Years 1 Templeton India ST Income(G) 2391 Jan 2002 5623 12.36 17.12 11.74 10.58 10.92 10.67 2 Templeton India IBA - B (G) 40 June 1997 769 16.92 27.94 12.63 12.11 12.56 12.52 3 Templeton India Income Opp.(G) 13 Dec 2010 2744 10.23 18.57 11.69 10.77 11.15 10.83 Thematic Funds (High Risk) 1 62 3 4 Reliance Banking (G) 113 21/05/03 1758 27.67 20.69 02.92 09.49 26.81 14.61 / IDFC Infrastructure (G) 08 28/02/11 57-09.35-6.18-11.02 N.A N.A N.A N.A Reliance Pharma (G) 69 26/05/04 626 24.28 18.33 11.13 11.72 36.26 23.19 Reliance Diversified Power Sector (G) 50 29/03/04 1700 19.69-8.15-16.47-14.96 01.79-05.62 3.5/- p.u 11/01/13 4/- p.u 18/01/13 1.5/- p.u 18/03/11 ELSS / Tax Saving Scheme (Moderate Risk) Deduction u/sec 80C 1 62 Franklin India Taxshield(G) 234 10/04/99 903 25.11 11.15 04.86 07.20 20.08 07.91 Reliance Tax Saver (ELSS) Fund(G) 23 26/05/04 1945 11.52 06.17 03.28 05.58 20.14 08.48 / 2/- p.u 18/01/13 N.A NSE Nifty F&O NSE (cr.) Average Small Cap Midcap CNX 100 Inflation (%) P/E (x) Crude Per bbl Gold / oz (US$) FII inflows (April 13) (.cr) 19,504 5930 1,50,508 6021 6344 5846 5.96 15.02 94.50 1468 5,145 /US$ 10 Year Gilt Forex Reserves US$ Mn Call Rate GDP (%) Crude Trend 53.80 7.79 296 07.82 5.20 Neutral Risk Factor: Trading and Investments decision taken on our consultation are solely at the discretion of the traders / investors. We are not liable for any loss, which occurs as a result of our recommendations. This document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. While we are not soliciting any action based upon this information, all care has been taken to ensure that the facts are accurate and opinions given fair and reasonable. Neither, Financials nor any of its employees shall be responsible for the contents. Our directors or employees or subscriber or our clients, may from time to time, have positions in, or options on, and buy and sell securities referred in our reports. We do not have any control over the action take by our subscribers and clients. Any one following and implementing as per the indication is responsible for their own actions and we are not liable for any loss that could occur of back of various reasons. 2 QFundamental
Financial Services Pvt. Ltd 18,000,000 16,000,000 14,000,000 12,000,000 10,000,000 SIP FIBCF & RGF v/s SIP Sensex & 100 as on 30 April, 2013 Product FIBCF RGF Sensex Nifty FIBCF = Franklin India Bluechip Fund & RGF = Reliance Growth Fund Total Invested SIP Period Current Value ( ) Appreciation ( ) 11,65,000/- Approx. 19 Yrs 1,56,48,527 1,44,83,527 10,45,000/- Approx. 17 Yrs 1,38,83,627 1,28,38,627 11,65,000/- Approx. 19 Yrs 42,23,190 30,58,190 11,65,000/- Approx. 19 Yrs 42,06,781 30,41,718 The most sensible decision is to invest in SIP / STP for a Safe and consistent Return but Time Horizon is over 3-5 years. Appreciation ( % ) 1243 1229 263 261 FIBCF, 30/04/2013 1,56,48,527 RGF, 30/04/2013 1,38,83,627 8,000,000 6,000,000 4,000,000 2,000,000-24/12/1993 1/8/1994 3/4/1995 1/12/1995 1/8/1996 1/4/1997 1/12/1997 3/8/1998 1/4/1999 1/12/1999 1/8/2000 2/4/2001 3/12/2001 1/8/2002 1/4/2003 1/12/2003 1/8/2004 1/4/2005 SIP Installment = 5000/- per month. Sensex, 30/04/2013 42,23,632 1/12/2005 31/8/2006 30/4/2007 31/12/2007 31/8/08 31/12/2009 31/8/2010 30/4/2011 This analysis has been done entirely with the purpose of only providing an analysis tool to team members and is not for public distribution. This material is solely the property of Financial Services Pvt. ltd and its employees, Directors or any person associated is not responsible for any errors, omissions. There is no assurance of any returns whatsoever and investors advised to refer to the Offer Document before investing. Nifty, 30/04/2013 42,06781 30/12/2011 8/31/2012 4/30/2013 All returns are CAGR Basis p.a 7 Year S.I.P - 11 Seven year Periods Q: What will be the Platinum Price in US$ on 31-05 - 2013? 1) 1450 2) 1500 3) 1550 Send Answer Before 21 Please mail us with the correct answer and get a surprise gift. mail at:- deq@quadraticfinancials.com Risk Factor: Trading and Investments decision taken on our consultation are solely at the discretion of the traders / investors. We are not liable for any loss, which occurs as a result of our recommendations. This document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. While we are not soliciting any action based upon this information, all care has been taken to ensure that the facts are accurate and opinions given fair and reasonable. Neither, Financials nor any of its employees shall be responsible for the contents. Our directors or employees or subscriber or our clients, may from time to time, have positions in, or options on, and buy and sell securities referred in our reports. We do not have any control over the action take by our subscribers and clients. Any one following and implementing as per the indication is responsible for their own actions and we are not liable for any loss that could occur of back of various reasons. 3 QFundamental
Fundatech QFundamental Choose short-term debt funds instead of Fds The Reserve Bank of India (RBI) cut interest rates for the third time this calendar year when it cut the repo rate on Friday. Falling interest rates bode well for debt funds but should you still look at them despite three rate cuts already this year? But that's just one reason to take a look at debt funds. In volatile equity markets, we may want to book profits and park our surplus cash somewhere. Some of us may keep this cash in our savings bank accounts but that earns just about 4% (though a handful of banks offer as high as 7%). Typically, if you are in the highest tax bracket (30%), we suggest you look at debt funds, especially if you have money to park for up to a year. And with interest rates expected to fall further this year, it's a good time to lock your money in short-term instruments if that is what your horizon is. Debt funds are complicated to make the most of them, we need to understand how they work. Here's what you should know about them. Should you time the market? Before we get to answer that question, keep in mind that interest rates and debt funds' net asset values () move in opposite directions. Take a simple illustration. Say, if a debt scrip today carries an interest rate of 10%. If interest rates rise, new debt scrips that hit the market will offer interest rates in line with the prevailing rates in the markets. Assume new scrips offers interest rates of about 11%. the interest rates of these new scrips are higher than that of the old scrip, the price of the old scrip (the one that offers 10% interest rate) typically falls. Debt funds, which are invested in that scrip, will see their s erode, as a result. But falling interest rates may not always offer a chance to make the most of debt funds. In September 2008, when equity and debt markets across the world fell on the back of credit crisis, the 10-year government security (G-sec) rate also started to fall. Between 1 October 2008 and 31 January 2009, the 10-year G-sec rate fell from 8.454% to 6.255%. Looking at this fall, even if investors would have invested in debt funds in November or December 2008 or even in January 2009 and stayed invested for a year, they would have made with returns as low as 4%.That is also because on 5 January, 2009, then finance minister Pranab Mukherjee announced an additional borrowing programme that spooked the debt markets. This begs the question: should you then time the market? One of the cues that investors should try and look at is the average yield of the 10-year benchmark scrip over the past five to seven years. If the prevailing yield at the time of investment is higher than this average yield, investors can still invest. The chances of the prevailing yield moving towards the average yield are more than moving away. But if the prevailing yield is lower than average yield, then there are more chances of the yield moving up (towards the average yield); in the case of the latter, when yields go up, prices of debt securities and therefore the s of debt funds go down. By that logic, while the prevailing 10-year yield is about 7.75%, the five-year average is 7.87%. Source : Economic Times Continue on next page... Risk Factors: Trading and Investments decision taken on our consultation are solely at the discretion of the traders / investors. We are not liable for any loss, which occurs as a result of our recommendations. This document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. While we are not soliciting any action based upon this information, all care has been taken to ensure that the facts are accurate and opinions given fair and reasonable. Neither, Financials nor any of its employees shall be responsible for the contents. Our directors or employees or subscriber or our clients, may from time to time, have positions in, or options on, and buy and sell securities referred in our reports. We do not have any control over the action take by our subscribers and clients. Any one following and implementing as per the indication is responsible for their own actions and we are not liable for any loss that could occur of back of various reasons. 4 QFundamental
Financial Services Pvt. Ltd QFundatech Match your needs with duration To get the most out of your debt funds, match your investment horizon with that of the debt fund. If you invest in a liquid fund, for instance, and then stay invested in it for long term like one or two or more years, your returns will be disappointing. Similarly, if you invest in a long-term bond fund, but withdraw within few months, you may end up losing money as they can be volatile. Interest rates and bond prices move in opposite directions. A good measure to look at your fund's sensitivity to interest rates is its modified duration. Most fund houses disclose this in their monthly factsheets. Expressed in years, this number will tell you how much your debt fund would get affected if interest rates (your bond fund's yield) were to move up or down by 1%. Assume your bond fund has invested in a 10-year bond with a face value of.100 and a coupon (interest rate) of 8%. Back of the envelope calculations show that the yield to maturity of this bond comes up to 8.16% and the fund's modified duration comes to 6.77 years. In simple words, it means that if your fund's yield rises by 1%, the bond price will fall by.6.77. Or if the fund's yield falls by 1%, the bond price will rise by.6.77. The higher your fund's modified duration, the riskier is your fund because its impact on change of interest rates will be high. Typically, long-term bond funds have a higher modified duration and vice-versa. FDs or debt funds? For those who wish to invest for more than a year, debt funds are more tax-efficient than bank fixed deposits (FDs). While interest income from FDs are charged as per the income-tax rates (10.30%, 20.60%, 30.90% including surcharge and cess), debt funds are charged at 10.30%. In the short-term, debt funds are also charged at income-tax rates. Investors in the 30% tax bracket should opt for the dividend reinvestment plan. Although Budget 2013 increased the dividend distribution tax from 27.038%, up from 13.519% a year back, it is still lower than the marginal tax rate of highest tax bracket of 30.90%. In fact investors who earn more than.1 crore, the tax rate has now gone up to(additional 10% surcharge on the base rate). Keep an eye on FD rates though. These days, interest rates on bank FDs for a 60-90 day tenor yields 4-8.65%. Deposits with tenors of 91-179 days pay an interest rate of 5.25% to 8.7%. Alternatively, ultra short-term bond funds have returned between 8% & 10% annualized on average, for a period of six months ending between November 2012 &date. Liquidity: While debt funds are liquid, bank FDs aren't as liquid. For instance, if you invest in a two-year bank FD that yields an interest rate of 10% and you decide to withdraw after, say, six months, your bank will pay you an interest rate that was valid for a six-month FD, which could be, say, 6% at the time you invested. Many banks also add a 1% penalty charge for premature withdrawal. Conservative vs moderate short-tenor funds In times when interest rates are on a decline, typically short-term bond funds tend to invest in slightly longer-tenor securities and, therefore, their own average maturity or duration goes up. The average maturity of short-term funds was 1.86 years, up from 1.77 years in September 2013. Check the fund's allocation to corporate bonds, especially the longer-tenor bonds. While some funds invest about 20-30% in corporate bonds, few others invest as high as 70% in corporate bonds. Many ultra short-term funds, too, invest in longer tenor scrips.schemes such as Axis Short Term Fund, Kotak Bond Short Term and SBI Short Horizon Debt Short Term have invested close to or more than 70% in long-term debt instruments such as corporate bonds and nonconvertible debentures. Others such as Canara Robeco Short Term Fund and DSP BlackRock Income Opportunities have invested about 35% in such securities. What should you do? Opt for ultra short-term bond funds, if you wish to invest for a time period of a month to six months. Conservative investors can stay invested in them for even up to a year. For six months to a period of two years, go for short-term bond funds. Risk Factor: Trading and Investments decision taken on our consultation are solely at the discretion of the traders / investors. We are not liable for any loss, which occurs as a result of our recommendations. This document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. While we are not soliciting any action based upon this information, all care has been taken to ensure that the facts are accurate and opinions given fair and reasonable. Neither, Financials nor any of its employees shall be responsible for the contents. Our directors or employees or subscriber or our clients, may from time to time, have positions in, or options on, and buy and sell securities referred in our reports. We do not have any control over the action take by our subscribers and clients. Any one following and implementing as per the indication is responsible for their own actions and we are not liable for any loss that could occur of back of various reasons. 5 QFundamental
Financial Services Pvt. Ltd FUNNY Source: Real Life Adventures by Gary Wise and Lance Aldrich Unit 1/3, 3rd Floor, Chandroday Society, C.S.T Road, Opp. Swastik Chambers, Chembur, Mumbai - 400 071. E-Mail: quadraticfin@vsnl.net Tel. (022) 4237 9900 website: www.quadraticfinancials.com Edited / Compiled by: Ram / Choksi / Piyush Printed / Published for private circulation by: Financial Services Pvt Ltd. Risk Factor: Trading and Investments decision taken on our consultation are solely at the discretion of the traders / investors. We are not liable for any loss, which occurs as a result of our recommendations. This document has been preparedon the basis of publicly available information, internally developed data and other sources believed to be reliable. While we are not soliciting any action based upon this information, all care has been taken to ensure that the facts are accurate and opinions given fair and reasonable. Neither, Financials nor any of its employees shall be responsible for the contents. Our directors or employees or subscriber or our clients, may from time to time, have positions in, or options on, and buy and sell securities referred in our reports. We do not have any control over the action take by our subscribers and clients. Any one following and implementing as per the indication is responsible for their own actions and we are not liable for any loss that could occur of back of various reasons. 6 QFundamental