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Volume 6, Issue 11


'Tis the Season of Change

Srikanth Meenakshi

Inside this issue:

Tis the Season of

Tax-saving funds
that made an impression - Vidya

Equity Recommendations
- B. Krishna Kumar

Financial Planning
Education Series

The Un-Diwali Investment Strategy

Dhirendra Kumar

Greetings from FundsIndia!

Hope you had a happy Diwali. Our equity markets certainly did and we are off
to a rocking start to the new (traditional) Indian financial year with new index
highs. It is a little too early to say if this rally is real and if it will find sustenance from earnings reports. Our view on the market, however, has been to
not get too low with the downs nor get too high with the ups. Our goal is to roll
with the curves and trust that the long investment term will take care of the returns.
So, we turn our attention to what's happening in your favourite investment platform Some of you may have already seen it - we have made a couple of enhancements to how SIPs are managed (now you can change the scheme and amount of
your SIP directly online) and added an ability to create notes for your portfolio. We've also
tweaked the annualized returns calculation to show IRR data for investments that are less
than a year old.
You can find details about these changes in the blog postThree Changes, or by simply
logging into your account.
We are working on more changes that you will see as this month progresses. We are continuing to enhance the way we show mutual fund data for your investments, and I'm confident that you will find these useful.
All these changes are results of suggestions from our investors, so big props to folks who

have been sending in valuable feedback about improving our services and platform.
It is also the season for tax savings. Before your HR department (or your tax attorney) reminds you to do so, please go
ahead and make your 80-c tax saving mutual fund investment as soon as possible.
Choosing a good tax fund has never been easier our research has produced a small list of the best tax funds that you
can choose from.
Please read Vidya Balas article in this newsletter (or in our blog) to see what these funds are. Remember, we can send
you the mutual fund account statement for your tax saving investment as soon as the investment has been completed.
Happy (tax-saving) Investing!

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

Volume 6, Issue 11

Page 2

Tax-saving funds that made an impression

Vidya Bala
With the tax season on, it may be time for you to scout for tax-saving funds to benefit from tax deductions under Section 80C of the Income Tax Act up to Rs 1 lakh.
Franklin India Taxshield, Religare Invesco Tax Plan, Canara Robeco Equity Tax Saver and ICICI Pru Tax Plan have been
our select list of funds in the tax-saving category. These are well-established funds and have developed a consistent track record of performance although they may not always turn out to be chart busters.
But there have been other funds in this category that have been conspicuous in the performance chart in recent times, although they do
not have a very long track record. We take a look at 3 of these funds that have hogged the limelight.
Axis Long Term Equity Fund
Having been launched in the beginning of 2010, this fund has been in the limelight since its first year. Its three-year return is superior to
even established peers. But 2 factors have worked in the funds favour since its launch.
One, for the first 3 years (almost until early 2013), the fund would not have seen any redemptions as it has a 3-year lock-in as an ELSS
fund. That could well have helped contain declines, especially in a turbulent market such as the one in 2011. The fund fell just 14.8% that
year even as its benchmark, BSE 200 fell 27%.
Two, the fund does not hesitate to get into cash to protect downside. In 2011, its equity holdings went lower than 90%. In 2013 too, it reduced equity exposure in March but quickly ramped it up. That the fund also has higher exposure to large-cap stocks also means that it
does not bear the mid-cap brunt as much as a few other funds. Its average market cap for instance, is much higher than ICICI Pru Tax
The funds performance provides comfort for a buy but given that it is only one year since the fund has corpus that are open for redemption, you will do well to keep exposure to the fund limited. Completion of a 5-year record, with similar colours would make this fund a core
part of a tax-saving portfolio.
BNP Paribas Tax Advantage
BNP Paribas Tax Advantage has changed hands since its launch under the ABN Amro AMC stable in early 2006 (which limits us from
granting it the benefit of a long track record).
Its performance during its life time is therefore a bit chequered, with the fund beating its benchmark less than 50% of the times on a rolling one-year return basis since launch. But this has significantly improved in the last 2 years since takeover by fund manager Shreyash
The fund appears to position itself as a scheme with large-cap bias in recent times, given that its large-cap holding (above Rs 10,000 crore
market cap) is higher than many peers. That means, in a mid-cap driven rally, its participation may be a bit capped, if it continues its current strategy.
That it seeks to contain downside is also evident by the way it holds underweight position (in relation to its benchmark BSE 200) in sectors such as finance, which took a knock in the last few quarters.
This fund managed to cross the Rs 100-crore AUM about a year ago but is still much smaller than Axis Long Term Equity.
IDFC Tax Advantage (ELSS)
Launched a year before Axis Long Term Equity, this fund can claim to have gone through slightly longer market cycles than the former.
The fund is what one would call a typical ELSS fund, with higher exposure to mid-cap stocks than the other two mentioned above.
But that also means that this fund can take a sharp knock in market falls. In 2011, for instance, the fund fell a good 7 percentage points
more than larger peers such as Franklin India Taxshield. But it adequately made up for this in 2012 with higher returns that year.
Although laden with slightly more midcaps than the other two, the fund has played its sectors cautiously; with higher exposure to IT and
Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing.

Volume 6, Issue 11

Page 3

pharma and lower weight to finance.

This fund too has a small asset size of close to Rs 150 crore.
Which should you choose?
If you are investing in equity funds for the first time and have taxsaving in mind, the established funds (mentioned in the beginning)
should be your first choice.
If you already own some of the established ELSS funds then you may
consider limited exposure to one of the 3 funds mentioned above. Of
them, IDFC Tax Advantage is suitable for a slightly aggressive investor;
the fund could capitalise on a mid-cap rally. Axis Long Term Equity for
a moderate-risk investor and BNP Paribas Tax Advantage for a valuefocused investor.
Vidya Bala is the Head of Mutual Fund Research at FundsIndia. She
writes for our monthly newsletter on topics including mutual fund,
personal finance and equity markets. Vidya Bala can be reached at

The Month Ahead - Equity Recommendations

B. Krishna Kumar
The stock market sentiment was distinctly positive in October. Both the Sensex and the Nifty inched closer towards their life-time high last
month. While the Sensex has moved past its all-time high recently, the Nifty is still within the striking distance of the high at 6,358.
The Rupee has appreciated from its record low of close to the 70-mark to the US Dollar ,while consumer inflation still remains at lofty
levels. The Reserve Bank of India has hiked interest rates, which has resulted in an upward revision in base lending rates by the banking
The high interest rate regime is a dampener for corporate sector growth as well as retail investor participation in the stock market. Investors still seem comfortable parking their surplus either in risk-free term deposits or FMPs. The overwhelming response to the recent taxfree deposits from public sector entities is a testimony to this observation.
From a positive perspective, the earnings scorecard from the companies thus far has not been disappointing. Companies across a diverse
set of industries have reported their earnings and most of them have been either in-line or marginally better than expectations.
Buying interest is visible in beaten down sectors such as public sector banks, realty and infrastructure. Technically, we remain cautiously
optimistic on the near term outlook for the stock market. There are still quite a few key events that could influence market sentiment.
The major factor could be the US Federal Reserves decision on tapering their quantitative easing program. Any decision on this front
would have a big influence on almost all asset classes. The next major event would be the outcome of the elections in key states in India,
including Delhi.
Investors may adopt a SIP kind of approach to investment. Buying index ETFs on weakness would not be such a bad idea. We maintain the
positive view on the Nifty as long as the index trades above the key support at 5,700.

(Continued on page 4 . . . )

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

Volume 6, Issue 11

Page 4

As long as the support at 5,700 holds, we would

expect the Nifty to touch 6,650-6,700 soon. We
expect the interest rate sensitive sectors such as
banking, realty and automobile to drive the index
to higher levels. We are also positive on the metals space, with Tata Steel being the preferred
This month, we cover the outlook for Dabur India and Chambal Fertiliser. We are positive on
both these stocks and expect 8-10% appreciation
from a short-term perspective. Investors may
accumulate these stocks at the current levels as
well as on declines.
Dabur India is one of the popular
companies in the FMCG sector. The
company has delivered impressive
performance for the quarter ended
September 2013. A look at the daily
chart of Dabur India indicates that
the stock is in a major uptrend and
the recent downward correction
offers an opportunity to buy the

The preferred or the ideal buying zone for Dabur is at Rs.167-170 range. The stop loss for long positions may be placed at Rs.163. As long
as the support at Rs.163 is not breached, expect a rally in Dabur to Rs.189.
Chambal Fertiliser is a relatively more risky call compared to Dabur. The stock has been in a major downtrend that has been arrested at
key support levels. From the weekly chart of Chambal featured below, it is evident that the stock has been consolidating for a while and
appears poised for the next leg of the uptrend.

We expect Chambal Fertiliser to rally to Rs.45

-46 from a short-term perspective. Investors
may buy this stock in a staggered fashion,
with a stop loss at Rs.34. Any weakness may
be used to enhance exposure in Chambal. The
idea is to buy as close as possible to the stop
loss price in order to reduce the overall risk in
the trade.

Mr. B. Krishna Kumar also hosts a weekly webinar that discusses the market outlook for the following week. You can follow him on Livestream to receive reminders for his webinars: http://
Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing.

Volume 6, Issue 11

Page 5

The Advantages of Financial Planning

S. Sridharan Head - Financial Planning

Financial planning is a systematic approach to create a roadmap in order to reach your goals. It helps you
identify and quantify your current financial needs in order to judge how much money you will need for the
With financial planning, you can set important milestones such as your childs education, your childs marriage, your retirement, or the purchase of a new asset, and start saving for them.

Here is how a financial planner can help you:

It is simple. A financial planner will help you determine and quantify your goals, and then evaluate your
income and expenses to see how to allocate funds towards your goals in a way that your financial objectives are accomplished.

Once a plan is created by taking all your personal financial goals into account, you can start investing towards reaching your goals.

Financial planning is not only for the wealthy. It is essential that individuals who are just starting out on
their career path also receive good financial advice in order to ensure that they are not reckless with their

As each individuals needs are unique, you will need a tailor made financial plan that fits your requirements. Of course, the financial planner would charge a nominal fee for developing an independent comprehensive financial plan that suits you.

Investment products are varied and complex in nature. Every product has its own advantages; but it may
also be unsuitable for a few. A financial planner would help identify a product that could be suitable to
your objectives rather than just picking a product.

A financial planner has a vital role to play in aiding you to achieve your desired financial goals. And rest
assured, the presence of a competent, experienced and honest financial planner can ensure that your financial process becomes an easy task.

Mr. S. Sridharan is the Head of Financial Planning at FundsIndia. You can reach Mr. Sridharan at

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

Volume 6, Issue 11

Page 6

The Un-Diwali Investment Strategy

By Dhirendra Kumar | Nov 4th, 2013

The best way to invest this Diwali (or indeed, any Diwali) is to pretend that it's not Diwali. In other words, to
have an un-Diwali investment strategy. I realise that this may sound sort of sacrilegious--perhaps it is--but
investments are serious business and it's never a good idea to make investing decisions based on custom or
habit or ceremony.
Diwali, like all other festivals, is a great time to celebrate, to be with friends and family and to conduct whatever rituals and traditions that are customary for your community. However, unlike many other festivals, Diwali
is intertwined with wealth and investments and prosperity which gives it an additional aspect of being an auspicious time to invest.
However, any rational analysis as an investor would perforce lead one to the conclusion that there is no reason to treat a date--any date--as special. Whether the date is a calendar new year like January 1, or a traditional new year like Diwali, or the start of a new decade, it has no more significance to how you invest than your
own birthday.
Therefore, just like one does for these other 'round number dates', I'd say that the investment strategy to be
followed should depend entirely on what your needs are, and not on what the calendar shows. However, that
immediately brings up the question of dealing with what your needs are and how to map them on to the investments you make.
The trick here is to divide your investments into specific financial goals, a goal being defined as the combination of a target amount and a target date. For example, you'll need money for your daughter's higher education after three years. You'd like to buy a house at least ten years before retirement. You'd like to go on a vacation to Europe after two years. You'd like Rs 2 lakh to always be available for emergencies.
Each of these goals is very precise. The risk you can take with it, as well as the amount of money needed can
be quantified quite precisely. Therefore, it is relatively easy to decide what kind investments should be made
for each of them. Instead each individual must have many portfolios, one for each financial goal. And then can
you tune each portfolio's level of conservativeness or aggressiveness to the right level by choosing the right
kind of assets.

Syndicated from Value Research Online. Read the article online here:


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