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CAPITAL
LETTER
Volume 5
Issue 04
http://www.meracover.com
Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing.
The S&P CNX Nifty has cracked significant support levels on Friday and this might open up more room to the downside. As we have emphasized earlier, until the index moves past 5,400 there is no point in thinking about increasing allocation to equities.
The index now appears headed to the next support at 4,850-4,900 range. Lets take a look at the two wheeler sector this month. Frontline
stocks from the sector such as Bajaj Auto and Hero MotoCorp have been significant out-performers, in relation to the Nifty, in the past few
years.
The recent chart patterns however suggest that both Bajaj and Hero have run into significant resistance and could get into a significant downward correction. Direct your attention to the daily chart of Bajaj Auto featured below.
Unless there is a quick reversal and breakout past the recent swing high of Rs.1,765, there would be a strong case for a slide to the short-term
support at Rs.1,250. Existing holders of the stock may use any recovery to reduce exposures in Bajaj Auto.
The technical picture of Hero MotoCorp is similar to Bajaj. The stock has been pounded after the company announced its quarterly results a
couple of days ago. From the daily chart displayed below, it is evident that the stock has faltered at the crucial resistance of Rs.2,210-2,250.
Mr. B.Krishnakumar is the Head of Equity Research at FundsIndia. With extensive experience in tracking the stock market (over 15 years) he has worked with
companies such as The Hindu , Business Line and Dow Jones Newswires. He will be contributing to our monthly newsletter with his stock market outlook
which shall hold good for a month. Mr.B.Krishnakumar can be reached at b.krishnakumar@fundsindia.com
Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing.
Consistent Performers
BY SRIKANTH MEENAKSHI
In this page, we feature mutual fund schemes in popular categories that have stood the test of time and delivered performance consistently. These
schemes have consistently featured in the top quartile of their category in terms of performance over multiple time periods in the past. For equity
funds and income funds, we have chosen three, five and seven year time periods for such ranking. For short term and ultra-short term funds, we
have chosen shorter time frames. Please note that in some cases, we have pruned the list for length - we have removed institutional schemes and
those that have very high initial investment amounts (in the debt side) from this list.
This list will be updated every month, although we do not anticipate significant changes on a month-on-month basis. Rankings data for this report
has been sourced from Value Research Online.
Fund Name
3-Y Return
(%)
3-Y
5-Y Return
Rank (%)
5-Y
7-Y Return
Rank (%)
7-Y
Rank Average
VRO Rating
20.88
6/62
9.59
2/43
19.51
3/38
7.4%
YYYYY
19.52 11/62
10.73
1/43
21.58
1/38
7.5%
YYYYY
21.01
5/62
8.42
4/43
20.15
2/38
7.5%
YYYYY
18.87 12/62
7.88
7/43
18.1
5/38
16.2%
YYYY
18.12 15/62
7.35
9/43
18.48
4/38
18.5%
YYYY
Fund Name
3-Y Return
(%)
3-Y
5-Y Return
Rank (%)
5-Y
7-Y Return
Rank (%)
7-Y
Rank Average
Rating
22.75
9/57
12.23
3/44
21.83
2/27
10.0%
YYYYY
HDFC Growth
23.72
5/57
11.47
6/44
19.61
5/27
13.6%
YYYYY
22.33 13/57
9.15 11/44
21.91
1/27
17.1%
YYYY
Fund Name
3-Y Return
(%)
3-Y
5-Y Return
Rank (%)
5-Y
7-Y Return
Rank (%)
7-Y
Rank Average
Rating
34.78
7/51
11.53
6/37
21.18
1/21
11.5%
YYYYY
34.92
6/51
13.16
5/37
20.32
3/21
13.1%
YYYYY
Fund Name
3-Y Return
(%)
3-Y
5-Y Return
Rank (%)
5-Y
7-Y Return
Rank (%)
7-Y
Rank Average
Rating
Multi Cap
HDFC Equity
Fund Name
26.81
3-Y Return
(%)
2/35
11.4
3-Y
5-Y Return
Rank (%)
4/29
21.75
5-Y
7-Y Return
Rank (%)
2/18
10.2%
7-Y
Rank Average
YYYYY
Rating
Hybrid: Equity-oriented
HDFC Prudence
27.24
2/25
13.35
3/25
19.85
1/22
8.1%
YYYYY
HDFC Balanced
25.87
3/25
13.82
1/25
17
4/22
11.3%
YYYYY
Fund Name
3-Y Return
(%)
3-Y
5-Y Return
Rank (%)
5-Y
7-Y Return
Rank (%)
7-Y
Rank Average
Rating
Tax Planning
Canara Robeco Equity Tax Saver
26.42
2/35
13.81
1/28
21.82
1/19
4.8%
YYYYY
(Continued on page 4)
Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing.
3-M Return
(%)
3-M
Rank
2.92 2/179
5.32 8/178
10.39 9/174
3.5%
2.78 5/179
5.31 9/178
10.27 15/174
5.4%
YYY
2.64 14/179
5.43 5/178
10.34 12/174
5.8%
YYYYY
2.64 13/179
5.18 11/178
10.35 10/174
6.4%
YYYYY
2.64 15/179
5.15 14/178
10.49 7/174
6.7%
YYYYY
3.07 1/179
5.38 6/178
9.89 40/174
8.9%
Unrated
2.66 11/179
5.09 19/178
9.98 28/174
10.9%
YYYYY
2.63 20/179
5.05 23/178
10.21 17/174
11.2%
Unrated
2.57 34/179
5.1 16/178
10.16 20/174
13.1%
YYYYY
2.56 37/179
5.08 20/178
10.16 19/174
14.2%
YYYYY
2.74 6/179
4.97 34/178
9.93 36/174
14.3%
2.59 26/179
5.07 21/178
9.96 34/174
15.2%
YYYY
2.65 12/179
4.94 42/178
9.88 41/174
17.9%
YYYY
2.55 42/179
4.95 41/178
9.86 42/174
23.5%
YYYY
Fund Name
VRO Rating
Fund Name
3-M Return
(%)
3-M
Rank
Rating
Debt Income
Templeton India Income Builder
2.64
2/91
6.37
9/89
11.15
6/87
6.4%
YYYY
2.33
16/91
6.46
6/89
10.33
12/87
12.7%
YYYY
I want to know the benefit of an NPS contribution to the extent of 10 per cent of my salary deductable from taxable income. Is
this applicable only to government employees? Can you elaborate under which sections of the Income Tax Act are such benefits available to non-government employees?
-Keshav Kumar
This is a new section 80CCD(2) effective 1st April 2012, which gives a benefit to the National Pension System (NPS). This is quite a huge advantage, under which the employers contribution of up to 10 per cent of the employees basic salary to the NPS is exempt from tax. There is no
ceiling to this benefit, and it is available over and above the 80C benefit that you already get. This benefit is available to government as well as
non-government employees. Hence, if you are at the liberty of structuring your salary, this could be a huge concession for you.
http://www.valueresearchonline.com/story/h2_storyview.asp?str=19838
Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing.
Back in August 2009, markets regulator SEBI made a wrenching regulatory change to the mutual fund business in
India by banning entry load on fund investments. Now, two years later, the mutual fund industry has started speaking out clearly about the business impact of the change. A few days ago, in an interview in this newspaper, the head
of AMFI (the fund industrys association) said that the negative impact of the decision should be debated.
AMFI CEO HN Sinor says that without the extra revenue from entry loads, distributors as well as many funds companies are finding business difficult. He points to the exit of Fidelity from India as well as the lack of growth of
other stakeholders in the industry. Since Mr. Sinors interview is in his capacity as AMFIs Chief Executive, one can
assume that what he has given voice to is the collective view of Indias mutual fund industry.
This view is not wrong and theres no doubt that the end of entry load has played a role in the business distress that the fund industry faces today.
However, that does not mean that theres a case for simply restoring entry load in the same shape as it existed till July 2009. It must be remembered that at that time there was a valid context for SEBIs action. Churning of investors fund holdings in order to earn commissions out of the
entry load was a widespread abusive practice among some distributors, as was the NFO-and-dump cycle of investments. The heady days of 20042007 were basically one long party of endless NFOs and repeated churning of investments.
Now that the dust has truly settled on those days, I would say that the entry load ban is not the only reason for the current listless state of the industry. SEBIs crackdown on frivolous NFOs and the long stagnation in the equity markets have also played strong supporting roles. But of course,
none of this points to a solution.
The epicentre of any business is not the providers financial well-being but what is delivered to the customer. Its logical that the solution must
come from the creation of a business model that explicitly links the economic interests of the distributor with the interest of the investors. Think of
it in a simple manner. For example, the interest of the investor lies in being recommended a good fund, starting an SIP in it and then sticking to it.
How we can align the distributors interest with this? Perhaps by giving him a more substantial (and possibly escalating) trail commission if this
outcome is achieved.
Im not saying that this is the exact solution. Instead this is just an example of how distributor business model and remuneration should be directly linked to the actual desired outcome. In this regard, SEBIs abolition of entry load missed a trick. The goal should have been the abolition of
upfront commissions because of the churning-type abuses. What it did instead was to ban entry loads since commissions were paid out of the entry loads. However, the commissions are still paid but out of the AMCs pocket. Basically, the pie has gotten smaller but its structure remains the
same.
From here on, the way forward would probably have to start with making the pie bigger. This could well be necessary for growth and expansion
into new markets. Whether this is paid for by higher expenses or by higher exit loads is the question. However, it would make sense for all changes
to be directly linked to the desired outcomes instead of hoping for the outcomes to be a side-effect. For example, if expansion to smaller cities and
first-time investors is a goal, then the AMC and the distributors must be able to derive a meaningful economic payback for delivering these outcomes.
The fund industrys starting viewpointthat the entry load ban may have been counter-productiveis correct. But the solution doesnt lie in turning the clock back.
Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing.