Volume 4, Issue 10

06Oct2012

The monthly newsletter from FundsIndia

An action-packed month
Srikanth Meenakshi

Inside this issue:

An action-packed
month - Srikanth
Meenakshi

The month ahead

- Equity recommendations B.Krishna Kumar

Empower yourself with fund

factsheets
Vidya Bala

Consistent Performers

Making the right

choice
Dhirendra Kumar

Greetings from FundsIndia!

This past month has been an action-packed one for the financial markets in general and mutual
fund investors in particular. The government unleashed a series of bold reforms that have
spurred gains for the equity market and, probably more importantly, the Indian Rupee. SEBI
provided more specifics in terms of the regulatory reforms for the MF industry and they went into
effect on October 1.
The combined effect has been mostly net positive for mutual fund investors. The portfolios have seen some welcome
upside as a result of the market movement. The regulatory actions have been mostly positive as well. Although there are
some small cost increases to the expenses in the form of service tax pass through and incentivizing small town investing,
there are tangible cost savings as well in the form of credit of exit load to schemes.
Another welcome consequence of regulatory action has been the consolidation of multiple plans in schemes (such as
retail, institutional etc) into a single plan. This will remove the clutter of schemes, and will likely lower costs for investors. However, the first few days of implementing this change will likely be chaotic with many AMCs dropping or
merging schemes to fit the mandate. We request your patience in this regard during this period of transition.
At FundsIndia, these are exciting times we are going into an overdrive in our effort to expand our customer base in the
coming months. You may have seen our iPad promotions over the past couple of months we have announced two
happy winners thus far one from Pune and another from Rourkela. This will continue, so please keep those application
forms coming!
Along with this promotion, we are also in the process of rebooting our referral system. It will be easier to refer and more
rewarding than before, so please keep your eyes open for an announcement from us in this regard.

And if you are reading this and you are one of our registered users who have not yet completed your account opening, now is a great time
to do so. Across 54 cities in the country, we have an arrangement with a service provider to pickup account opening documents from your
home. Please contact our customer support at welcome@fundsindia.com if you need more details.
Happy Investing!

Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing.

Volume 4, Issue 10

Page 2

The month ahead - Equity recommendations

B.Krishna Kumar
September turned out to be quite an eventful month as far as the stock markets were concerned. Nifty moved out of the trading range that
it was confined to, for months together. The governments sudden thrust towards reforms has had a positive impact on the stock market
sentiment.
The Rupee too has strengthened in relation to the US Dollar and this trend is likely to prevail in the near future as well. The cool-off in the
international price of crude oil is also a positive development from an economic fundamentals perspective.
While the 10-year bond yield has drifted in the past few weeks, it is still not factoring in the expectations of any meaningful interest rate
cut by the Reserve Bank of India. Any signs of easing off interest rates would aid stock market sentiment further.
From a technical perspective, the Nifty is in a strong uptrend and we maintain our target of 6,000 from a short-term perspective. A look at
the daily chart of the Nifty indicates that the index is now charting out a bullish sequence of higher highs and higher lows if viewed from
the Dec. 2011 low of 4,531.

A breakout past 6,000 would impart momentum to the uptrend and the index
could then rally to the next resistance at
6,300. A look at the index heavyweights
such as State Bank of India, Larsen & Toubro, Infosys and ICICI Bank lends credence to the bullish market outlook.

Last month, we had covered the outlook for a couple of stocks from the cement sector. Both ACC and Ambuja Cements have fared well in
September and have hit their targets mentioned last month.
This month, we cover the outlook for a couple of stocks from the banking sector. Given the strong case for the interest rate cycle having
peaked out, the banking sector would be in focus when the interest rate starts easing. Besides, any improvement in the economic fundamentals would have a positive rub-off on the banking sector.

A look at the weekly chart featured above indicates

that State Bank of India has a recovered off a crucial support recently. The short-term outlook is
positive and we expect a rally to the immediate
resistance at Rs.2,510.
Investors may use price weakness to buy State
Bank of India, with a stop loss at Rs.2,120, for an
initial target of Rs.2,510. Those willing to play the
waiting game may get opportunities to exit at
Rs.2,675.

Continued on page 3 . . .

Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing.

Volume 4, Issue 10

Page 3

Continued from page 2 . . .

Corporation Bank is another compelling portfolio candidate. A look at the weekly chart featured below indicates that the stock has recovered off crucial support levels.

The outlook is bullish and we expect a rally to

the short-term resistance at Rs.470. Investors
may buy the stock with a stop loss at Rs.378,
for a target of Rs.470. A move past Rs.470
could trigger a rally to the major resistance at
Rs.580.

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

Mr.B.Krishna Kumar also hosts a weekly webinar that discusses the market outlook
for the following week. You can register for the webinar by clicking here:
https://www4.gotomeeting.com/register/927617871

Empower yourself with fund factsheets

Vidya BalaHead - Mutual Fund Research

Even a quarterly review of the factsheets disclosed by your funds will equip you with information that can enhance the quality of your
investment decisions.
Have you been reading your fund factsheets? If not, you may be losing out on vital disclosure that will help you make an informed decision in investing, holding or redeeming mutual funds. Information such as fund returns,
portfolio and risk measures help you compare performance and investment style of the
funds you hold. Heres a list you can keep watch for. Gather the monthly factsheets for a
quarter/half year and compare them to get a better idea of how your fund performs over
time.

Facts to note
Compare returns with benchmark
and peers

Compare returns

Check portfolio changes over qtr.

Whether you hold an equity or debt fund, the performance of the fund against its own

Know how volatile your fund is

benchmark is the first step to know whether your fund is an outperformer. Underperfor-

Is the risk you take justified?

Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing.

Volume 4, Issue 10

Page 4

mance of benchmark over 1-2 year time frame is something that should worry you.
Since the returns (other than returns since inception) will be the same across funds, you also can compare them, provided they are of the
same category. For instance you can compare two mid-cap funds you hold. Fund houses also provide you with SIP returns. This will help
you assess whether investing across market cycles has helped you outperform the market.
Portfolio
The stocks and sector holding of your funds help you know their investment strategy and style. For instance, if your mid-cap fund begins
to add more blue chip stocks to its top holdings, you need to review if this fund can deliver a higher return which a midcap fund ought to.
Sometimes, a fund may also take a bet on a single sector and hold high exposure of say over 8 per cent in it. This should be reviewed as
you need to check if the higher risk taken delivers well.
If you hold a debt-oriented fund then the characteristics of the fund portfolio is reflected through few other disclosures. The portfolio allocation will tell you whether your fund prefers to invest more in corporate bonds or government instruments. This together with the credit
rating of these instruments will determine how risky your portfolio is.
Also, the funds portfolio maturity will tell you whether your fund is holding a long-term or short-term portfolio (in line with its mandate). In other words, it highlights the maturity period of the underlying securities.
Typically a maturity of less than a year would be short-term and over four years long
term. Funds with a flexible mandate try to maintain a short maturity cycle when interest rates are rising and vice-versa. A wrong call here would tell on your returns.
Volatility
The standard deviation, beta, portfolio turnover and sharpe ratio mentioned by most
fund houses in their factsheets are by far the best measures for you to know how risky
your equity fund is vis--vis the others. Standard deviation tells how far a funds return
can swing from its own mean returns. The higher it is the more volatile a funds performance can be.
For instance, HDFC Top 200 had a standard deviation of 5.3 per cent, as against Franklin India Bluechips 4.6 per cent, suggesting the
latter is less volatile.
Beta is yet another number you will see in most factsheets. This will depict the tendency of the fund to move with its benchmark. A higher
beta means the fund can fall or rise more than the index.
You may be willing to take all that risk but does your fund compensate you for that? The risk-adjusted returns or sharpe ratio will help
you figure how much returns your fund delivers, over and above a risk-free instrument like government bond, for a given level of risk.
The higher it is the better your fund compensates you for risks you assume. A negative sharpe ratio means that the fund has not even
beaten the returns of a risk-free instrument. But a word of caution here: while comparing this across funds, ensure they are disclosed for
the same time period. This is typically done based on three-year returns.

Vidya Bala is the Head of Mutual Fund Research at FundsIndia. A chartered Accountant by training, she was earlier with the Hindu Business Lines
research bureau, tracking mutual funds, stock markets and sectors for eight years. She will write for our monthly newsletter on topics including mutual
fund, personal finance and equity markets. Vidya Bala can be reached at vidyabala@fundsindia.com

Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing.

Volume 4, Issue 10

Page 5

Consistent Performers
FundsIndia Research
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.

Large Cap Funds

Fund Name
Franklin India Bluechip
SBI Magnum Equity
HDFC Index Sensex Plus
ICICI Prudential Top 100

3-Y Return (%)

8.76
7.64
6.5
7.66

3-Y Rank
4/65
7/65
16/65
6/65

5-Y Return (%)

6.26
4.75
5.39
4.58

5-Y Rank
2/46
8/46
4/46
10/46

7-Y Return
(%)
15.24
15.17
14.49
13.77

7-Y Rank
2/37
3/37
4/37
6/37

Average
Ranking(%)
5.30
12.09
14.71
15.73

Rating
5 Star
4 Star
4 Star
4 Star

7-Y Rank
9/32
3/32
7/32
4/32
5/32

Average
Ranking(%)
12.14
12.39
12.50
14.65
20.27

Rating
5 Star
4 Star
5 Star
4 Star
4 Star

Large & Mid Cap Funds

3-Y ReFund Name
turn (%)
UTI Opportunities
10.49
ICICI Prudential Dynamic 9.96
UTI Dividend Yield
9.99
HDFC Growth
9.85
Franklin India Prima Plus 9.34

5-Y Re3-Y Rank turn (%)

4/65
10.34
7/65
7.54
6/65
10.1
8/65
7.28
10/65
5.81

7-Y Return
5-Y Rank (%)
1/47
14.88
8/47
16.43
3/47
15.92
9/47
16.38
14/47
16.09

Mid & Small Cap Funds

3-Y ReFund Name
turn (%) 3-Y Rank
Reliance Equity Opportunities
16.89
5/52
Tata Dividend Yield
13.06
13/52

5-Y Re7-Y Return

turn (%) 5-Y Rank (%)
7-Y Rank

Average
Ranking(%) Rating

10.44
9.08

9.30
21.35

6/42
8/42

18.0400
14.2900

1/25
5/25

4 Star
4 Star

Multi Cap Funds

Fund Name
HDFC Equity

3-Y Re5-Y Re7-Y Return

turn (%) 3-Y Rank turn (%) 5-Y Rank (%)
7-Y Rank
9.31
6/34
8.62
3/31
16.84
2/21

Average
Ranking(%) Rating
12.28
4 Star
Continued on page 5...

Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing.

Volume 4, Issue 10

Page 6

Continued from page 4. . .

Hybrid: Equity-oriented Funds

3-Y Return (%)
14.44
12.37
10.93

3-Y
Rank
2/26
3/26
6/26

5-Y Return 5-Y

(%)
Rank
12.13
1/25
10.9
4/25
8.54
5/25

7-Y Return (%)

14.41
16.6
15.4

3-Y ReFund Name

turn (%)
Canara Robeco Equity Tax Saver 10.61
Franklin India Taxshield
11.37

3-Y
Rank
5/35
3/35

5-Y Return 5-Y

(%)
Rank
10.35
1/28
7.14
6/28

7-Y Return (%) 7-Y Rank

16.24
1/20
14.22
2/20

Fund Name
HDFC Balanced
HDFC Prudence
Tata Balanced

7-Y Rank
4/24
1/24
2/24

Average
Ranking(%)
9.45
10.57
17.14

Rating
5 Star
5 Star
4 Star

Tax Planning Funds

Average
Ranking(%) Rating
7.62
5 Star
13.33
4 Star

MIP Funds

Fund Name
SBI Magnum Children's Benefit
Plan
ICICI Prudential ChildCare-Study
Tata MIP Plus
Reliance MIP

6-M Re- 6-M

turn (%) Rank
8.11
6.29
6.1
5.97

1/59
4/59
6/59
10/59

Average
1-Y Re3-Y ReRanking
turn (%) 1-Y Rank turn (%) 3-Y Rank (%)
Rating
14.4
12.77
12.29
12.04

1/57
4/57
6/57
7/57

9.55
10.45
7.82
8.77

5/47
2/47
10/47
6/47

4.70
6.02
13.99
14.00

3 Star
4 Star
3 Star
5 Star

Debt Ultra Short Term Funds

Fund Name
Peerless Short Term
Taurus Short Term Income
Templeton India Low Duration
Tata Fixed Income Portfolio
Scheme B2 Reg

Average
3-M Re- 3-M
6-M Re- 6-M
1-Y ReRanking
turn (%) Rank
turn (%) Rank
turn (%) 1-Y Rank (%)
Rating
2.55 19/182
5.29 18/179
10.61
8/177
8.34
5 Star
2.49 24/182
5.22 29/179
10.36 19/177
13.37
5 Star
2.46 28/182
5.18 34/179
10.31 26/177
16.36
5 Star
2.43

38/182

5.13

41/179

10.09

39/177

21.94

3 Star

Debt Income Funds

Fund Name
SBI Magnum Income
Templeton India Income Builder
IDFC SSI Inv Plan F
UTI Dynamic Bond
IDFC SSI Inv Plan B

Average
3-M Re- 3-M
6-M Re- 6-M
1-Y ReRanking
turn (%) Rank
turn (%) Rank
turn (%) 1-Y Rank (%)
Rating
3.58
6/97
6.79
3/95
12.59
4/89
4.61
3 Star
3.63
4/97
6.52
6/95
12.29
6/89
5.73
4 Star
3.11
17/97
6.14
9/95
11.55
12/89
13.49
3 Star
3.72
3/97
5.95
22/95
11.45
13/89
13.62
3 Star
3.08
18/97
6.09
16/95
11.44
14/89
17.04
3 Star

Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing.

Volume 4, Issue 10

Page 7

Making the Right Choice

By Dhirendra Kumar | Sep 28, 2012

The most important point is not which fund but who you are.
Last month, India investments regulator, the Securities and Exchange Board of India (SEBI), announced a range of new
rules and regulations that will apply to mutual funds. The headlines next day (and analysts commentary thereafter) were
mostly preoccupied with the incentive system that SEBI has put into place to encourage mutual funds to expand to smaller
towns and villages. However, there was another item in SEBIs announcement that may eventually end up being of greater
import to how we invest in mutual funds and how we invest and how we choose the funds that we invest in. SEBIs announcement said that it had decided to ...evolve a system of product labeling.
To understand why this is important to you, think of the way the choice of a mutual fund is typically made. When an investor wants to decide which
fund to invest in, he tends to ask exactly that, Which fund should I invest in? And as an answer, he expects exactly that toothe name of the one fund
that he should invest in, the the best one, according to some vague definition of best that he has in his mind. However, this is not the right question, or
at least its not the right first question to ask.
The correct place to start this quest for the most suitable fund to investment is to ask what type of fund to invest in. Choosing a good fund to invest in is
a top down activityfirst you need to know what is the right kind of fund and then you come to which specific fund to invest in. Think of the original
question that you asked, Which fund should I invest in? The most important bit of this question is not which fund but I. The question is not which
fund but who you are. There are scores of mutual funds that are worth investing in. The point is, who is investing? Are you retired salary earner who is
dependent on the fund for a monthly income? Are you a young person on a first job whos saving up for a marriage or a house? Are you a middle-aged
businessman who wants the highest returns possible but doesnt mind a bit of risk? Or are you the CFO of a company looking to park some cash for a
few weeks? Depending on your circumstances, your financial goals, the time-horizon of your investments, different types of funds will be suitable. Only
after the type of fund is defined does the question of which specific fund come up. Theres an old joke that if the race is between five horses and five
humans, then theres very little point in trying to figure out which human is the fastest. Its important to get the category right. If the category is wrong,
then choosing the best within that is pointless.
Heres an illustration of what Im talking about. Suppose you have just sold some real estate and have a large sum of money that you dont need for
about a year. Having decided to park the money in a mutual fund for the period you ask someone which is the best fund around without defining your
actual need. You are suggested a good mid-cap equity fund which has a five star rating from Value Research, into which you promptly invest the entire
sum. A year down the line, the stock markets have remained shaky and your treasure has shrunk by perhaps 10 or 20 per cent. Did you choose a bad
fund? No, the fund you chose was fine. Its just that the type of fund was unsuitable for the purpose. For a predictable time horizon of one year, a Fixed
Maturity Plan (FMP) would have provided a reasonable return with negligible risk.
Conversely, suppose you are putting aside a certain sum of money from your monthly income for long-term savings, which you may not need at least
for a decade or more. In such a case, choosing anything but an equity fund is pointless. The period is long enough for the volatility of the equity markets
to be damped out. Since you will be investing gradually in a monthly SIP, you will be able to make earn returns that are actually better than the overall
gains of the equity markets. However, for such a purpose, a fixed income fund would be most unsuitable. In a high inflation environment like India,
fixed income rarely beats inflation and your money effectively becomes less over the years.
But how do you figure out which fund is of what type and what are the various types suitable for? Thats the problem that SEBI is trying to solve with
the effort to evolve a new system of fund labelling. You see, fund companies rarely state in unambiguous terms what type a fund fits in. Theyll do so in
broad terms that are statutorily required like whether a fund is an equity fund or a balanced or debt fund. However, and specially in equity funds, basic
marketing wisdom dictates that the sellers try and differentiate their products as much as possible. Therefore, fund companies typically describe the
investment approach of their funds as being unique. This is an attempt to de-commoditise the fundthe fund company is now able to claim that the
fund should be evaluated only by its own claimed characteristics and not by comparing it to any other fund.
However, theres very rarely anything genuinely new under the sun. What is needed is an unambiguous labelling system that can tell you which fund is
of which kind and therefore suitable for what type of investment goal. Of course, what SEBI will now evolve is a statutory labelling system. Fund analysts like Value Research analyse the entire universe of mutual funds and fit them into logical categories that help investors make apples-to-apples comparisons. Hopefully, SEBIs official labelling system will control the excessive differentiation and confusion that it has caused among investors trying to
choose funds.
Syndicated from Value Research OnlineArticle can be viewed online herehttp://www.valueresearchonline.com/story/h2_storyview.asp?
str=21054

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Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing.