Net FDI inflows touch record high of $34.9 bn in 2014-15Tue, May 26 2015Net FDI inflows have touched a record high in 2014-15 on growing investor confidence in India and as global growth remains anaemic

While foreign portfolio investments to India are slowing, net foreign direct investment (FDI) inflows, which are far more stable, have touched a record high of $34.9 billion in 2014-15, as made clear by the chart, compiled by Nomura Global Markets Research. In fact, net FDI inflows touched 1.7% of gross domestic product (GDP) in the just-ended fiscal year, up from 1.1% of GDP the previous year. The reason: more inbound FDI due to growing investor confidence in India and lower outbound FDI as global growth remains anaemic, said Nomura in a note on Tuesday. Foreign investment inflows to India are predominantly to infrastructure, mainly telecom, oil and gas, mining sectors, as well as the services sector. In fact, FDI in manufacturing has remained lacklustre, although there were some inflows into the auto sector. Higher FDI flows are good for Indias current account deficit and also help drive domestic investments. With the government opening up various sectors such as insurance and defence, these stable flows may continue this year as well.

Value of retail investor holdings in NSE firms hits record levelsReaches the highest level of 7.94 lakh crore, up 50% in a yearMumbai, May 26: Retail investor holding of NSE-listed companies has hit the highest levels in the last six years at 21.35 per cent as on March 31, 2015. According to Prime Database, which analysed shareholding patterns of 1,467 companies among the 1,471 companies listed on the NSE, the value of the stake held by retail investors was 7.94 lakh crore. FIIs holding in the NSE-listed companies was worth 19.32 lakh crore and the value of shares held by DIIs was 10.20 lakh crore.According to Pranav Haldea, Managing Director, Prime Database, The value of retail holdings recorded a handsome increase, reaching the highest level at 7.94 lakh crore, up 50 per cent from a year back, courtesy the buoyant markets. The continuing overwhelming presence of retail investors in smaller companies, from which institutional investors typically stay away, is very significant to note.Slow but steadyThe retail investor share of Nifty companies was 7.31 per cent, rising marginally to 8.19 per cent in case of top 100 NSE-listed companies.The top five companies with the highest retail holding in percentage terms as on March 31, 2015, were ATN International (85.54 per cent), Raj Oil Mills (77.76), Som Distilleries (76.51), Zenith Birla (76.10), and MIC Electronics (75.86).SQS India BFSI, Sita Shree Food Products, IVRCL, PSL and Arshiya were the top five losers of retail investor holdings as at March end.Overall, retail holdings went up in 712 NSE-listed companies with an average increase in stock price at 50 per cent, while holding went down in 718 companies with an average increase in stock price at a much higher 97 per cent. Proves dictum?According to Haldea, this validates the oft-used phrase that retail investors buy at the peak and sell at lows.Assets under management of retail investors have also gone up by 53 per cent from 1.17 lakh crore in April 2014 to 1.79 lakh crore in March.Recovery from near-zero NAVsIts agood time to look back at the 2008-12 volatile period and see which MFs came close to zero NAV Tue, May 26 2015.Its a queasy feeling to invest in a new fund at, say, Rs.10 (or at an even higher net asset value, or NAV) only to see the NAV drop to single digits or come closer to zero. In practice, a mutual fund (MF) schemes NAV can be near zero but doesnt go in the negative because of the way it is calculatedassets less current liabilities divided by the number of units. Assets are the market value of the investments, and liabilities include payments that the fund needs to make, say, towards redemptions. In practice, the value of the underlying investments is always more than the current liabilities. Hence, NAV stays in the positive zone.Its been more than a year since equity markets started to rise. Its a good time to look back at the 2008-12 volatile period and see which schemes came close to the danger mark of zero NAV. We analysed diversified fundslarge-cap and mid-cap-oriented MF schemeswith assets over Rs.100 crore to ensure that a sufficiently large number of investors are covered. We avoided thematic and sector funds as these are inherently riskier and are more prone to volatility. From the shortlist, we looked at five schemes whose NAVs hit the lowest levelswhat went wrong with them; what are they doing now; and whether you should hold on to them or exit. But first, a few caveats. The fund that hit the lowest NAV mark is not necessarily the one that underperformed the most. While a low NAV is an absolute number, a fall in NAV shows how the fund has actually performed in a given time period. Hence, this is not an exercise to shortlist the worst performing funds during 2008-12. Sure, the shortlisted funds underperformed, but there were others that have done worse. Most funds that show a low NAV are those that have been launched recently or in the time frame before the fall. Schemes with a long history would have already seen their NAVs rise over the years. A single market fall is not enough to bring their NAVs down to Rs.10 levels or even below that. Hence, all of the schemes that made it to this list were those that were launched between 2006 and 2008. For example, HDFC Equity Funds lowest NAV in this period was Rs.91.23, which it hit on 9 March 2009, the day when all our five shortlisted funds also hit their lowest NAVs. But the scheme was launched in 1994 and hence has seen its NAV rise over a much longer period of time; a single market crash is not enough to erode all of that. Third, absolute NAV levels dont matter much as they reflect the market value of current investments. They dont tell you anything about how the fund will perform in the future. That is why a fund with an NAV of Rs.10 isnt cheaper than one with Rs.50. The purpose behind our exercise is that near-zero NAVs spook investors, especially those who invest at around 10. Lets meet the shortlisted candidates. JP MORGAN INDIA MID AND SMALL CAP FUND This fund had the lowest NAV (Rs.2.69) in our set of 145 schemes, and that too barely a little over a year after its launch. JP Morgan India Mid and Small Cap Fund (JMSCF) invests in the bottom 25% of all the listed companies of the BSE Ltd and the National Stock Exchange. Launched in November 2007, the schemes corpus stands at Rs.355 crore. It invests at least 65% of its corpus in small- and mid- sized companies and the rest in larger companies.

Fund manager Harshad Patwardhan, who also heads equities at JP Morgan Asset Management (India) Pvt. Ltd, said that during the market crash of 2008 and the volatile period that followed, the scheme did not hold cash in excess of 10%. Our mandate is to invest in equities in the best possible way and not to second guess investors asset allocation. This is an open-ended fund, so theres no need for us to sit on cash, he said.Looking back at the day when the schemes NAV hit rock bottom, Patwardhan said 2008 was an exceptional year. The Sensex saw the worst-ever loss in a calendar year in 2008 when it fell by 52%. In 2011, when it posted its second biggest calendar year fall, it fell by 25%. Look at the difference, he said. The scheme likes to go for companies that dont need to raise capital often. As the underlying companies are small and relatively unknown, it invests in emerging businesses as well. Before the 2008 market crisis reached its peak, said Patwardhan, macro trends were largely ignored. That has changed now. This has been our biggest lesson. You cannot completely ignore external events, said Patwardhan. So, in 2013, when the earlier government was still in power, JMSCF increased its exposure to cyclical stocks on the back of expectations of a change in the central government. The scheme has recovered well. It has been in the top quintile consistently in the past few years, especially in the past two years. With a corpus of Rs.400 crore, its well placed for an encore. Existing investors should stay invested. BNP PARIBAS MIDCAP FUND Talk of a turnaround and BNP Paribas Asset Management (India) Pvt. Ltds performance comes to mind. In 2011, on the back of large-scale changes in its equity fund management, most of the fund houses equity schemes have turned around.BNP Paribas Midcap Fund (BMF) has been a part of the Mint50Mints curated list of 50 MF schemessince January 2014. Whats unknown to many readers though is that its NAV had touched a rock-bottom Rs.3.49 in March 2009. In 2008 and 2009, BMF was one of the worst performers in its category. The fund went through a rough patch before Anand Shah joined the fund house in January 2011 and turned things around. Its present fund manager, Shreyas Devalkar, joined around March the same year and later took over the reins of BMF. In 2011, 2012 and 2013, the scheme was in the top quintile. Clearly, something was working at the fund house.

Shah changed the way the equities team at BNP Paribas Asset Management looked at investments. Instead of focusing too much on valuations, the fund house turned its attention towards analysing businesses. Just because one large-sized company is trading at 20 times price-to-earnings valuation and a mid-cap company is trading at 10 times, doesnt necessarily mean that this mid-cap company is a good buy. A mid-sized company has to become large or a market leader in the future, said Devalkar. He doesnt go for very cheap companies, nor does he shy away from paying a premium if he feels a company has the potential to grow further.Devalkar laid down a three-point criteria, and a potential investment had to meet at least one of thesebe a leader in a small market, be a challenger to the established companies, or be a consolidator or a company that either gets acquired or can acquire other companies. Typically, in case of consolidations, the companies that survive create wealth, said Devalkar. Its holdings in companies such as Just Dial Ltd, Info Edge (India) Ltd, and VA Tech Wabag Ltd, among others, helped. BMF continues to be a part of Mint50. Existing investors can stay invested and could invest more if they wish to allocate to mid-cap funds. DSP BLACKROCK MICRO CAP FUND After the scheme touched its lowest NAV of Rs.4.20 in March 2009, DSP BlackRock Micro Cap Fund (DBMCF) hasnt looked back. But 2008-09 was a dark period for all equity funds, and especially for those that focused on micro-cap companies or small-sized companies. In 2008, DBMCF was in the bottom quintile with a negative return of 63%.Its present fund manager, Vinit Sambre, started managing the fund since June 2010. Sambre started to look at companies business and also liquidity. Micro-cap companies are small-sized in nature and also illiquid. So, buying and selling in these companies is not very easy, he said. Apart from business prospects and the ability of companies to outperform their categories, Sambre also checks managements credentials before investing. Most of these companies dont have a long track record, but we try to look at their past cash flows, whether there have been deviations in them or any signs of misallocation of capital. How these companies have performed in falling markets and during adverse economic conditions is also something that Sambre looks at.

DBMCF is true to label and invests in only those companies that its mandate allows and name suggests. It avoids large-cap companies and invests about 75% in small-sized companies. The remaining corpus gets invested in mid-sized companies. Good and consistent performance resulted in a surge of inflows; from a size ofR363 crore in February 2014, its assets have jumped to Rs.1,931 crore as of April 2015. The fund does not accept inflows in excess of Rs.2 lakh per application. Its investments in companies such as Indoco Remedies Ltd, Solar Industries India Ltd and Symphony Ltd helped the funds performance. Existing investors should stay invested and may put in additional amounts if they wish to invest in small-sized companies. BIRLA SUN LIFE SMALL AND MIDCAP FUND Birla Sun Life Small and Midcap Fund (BSSMF) is a younger cousin of Birla Sun Life Mid Cap Fund that was launched in 2002. Its launch in April 2007 just months before markets collapsed in 2008 is the biggest reason why it fell much more than the mid-cap fund in 2008 (62% versus 58%). While the mid-cap fund invests significantly in stocks with a market capitalization of Rs.3,000 crore or more, BSSMF focuses on companies with market capitalization between Rs.500 crore and Rs.3,000 crore. Over the past one year, its exposure to large-sized companies has gone up from 0.58% in May 2014 to 16% in April, as per figures by Value Research. But it is our endeavour to bring this down. We also want to increase the exposure to small-sized companies. Its a matter of being comfortable with the underlying economic recovery, which is already underway, said Mahesh Patil, co-chief investment officer, Birla Sun Life Asset Management Co. Ltd.

Investing in small-cap companies comes with its own set of risks. The quality of management is a significant one. Patil said the fund house insists on doing a forensic analysis of the company. Sometimes, we find that the company makes profits but has a large number of debtors. We are not comfortable with such companies. Some companies books appear to be in order, but background research on promoters doesnt give us encouragement to invest in those companies. So, we avoid them, said Patil.BSSMF follows a bottom-up stock picking strategy. Its corpus size has moved up from Rs.83 crore at the end of January 2014 to Rs.182 crore as of end-April 2015. One of the reasons why the size hasnt moved much in the past one year, despite a surge in small- and mid-cap scrips and the subsequent investor interest, is that the fund house launched a number of closed-end funds in the same space. In 2014 itself, Birla Sun Life AMC launched five mid- and small-cap schemes that collected more than Rs.400 crore, according to Value Research. But our focus on this fund will remain, said Patil.BSSMFs track record and presence of better alternatives doesnt inspire confidence. We suggest that you either switch to Birla Sun Life Mid Cap Fund, or to better alternatives in the small-cap space. BIRLA SUN LIFE SPECIAL SITUATIONS FUND Birla Sun Life Special Situations Fund (BSSSF) is a diversified equity fund that focuses on large- and mid-sized companies. Launched in December 2007just two months before equity markets fell on the back of the global credit crisisit collected close to Rs.900 crore. As of April 2015, its size was Rs.138 crore.BSSSF invests in companies that are going through a special situationmerger or acquisition, buyback of shares, debt restructuring, among others. BSSSF also looks at companies that are contrarian investments, or are currently out of favour or neglected, but where it sees potential. The fund is managed actively because it is like a thematic fund, and opportunities are not that many. In falling markets, it becomes more diversified, but in rising markets, the portfolio tends to be concentrated.Between September 2011 and March 2013, its portfolio had as many as 55-60 stocks. In the past 10 months, it has held an average of 32 stocks. When equity markets go up, we get many opportunities. Our portfolios tend to become more concentrated then, said Mahesh Patil, co-chief investment officer, Birla Sun Life Asset Management Co. Ltd.Its cash allocation also goes up more than usual. A higher allocation to mid-cap stocks in the past one year contributed to its performance; with 62% returns, BSSSF was the top large- and mid-cap fund in 2014. Of late, it has done better than other special situation funds, but its long-term track record isnt impressive. A specialized and cyclical fund like this isnt for everyone. It may be better to stay with diversified schemes.

Nifty Companies Aggregate Profits Have Fallen 21% Even If You Ignore The Mammoth Loss By SterliteMay 26,2015Nifty results continue to be HORRIBLE. I cant even begin to tell you how bad the situation is, but see this today. Three Nifty companies announced results. And they were like this: BHEL saw consolidated profits fall 59% Tata Motors saw consolidated profits fall by 56% Tech Mahindra saw consolidated profits fall by 39%This is just serious suckage. At this point, this is simply the worst quarter Ive seen in recent times with respect to results and profit growth. 38 Nifty companies have announced results and this time, theyve dropped aggregate profits by as much as 55%. If you remove that big one timer by Sterlite (Vedanta), you still have a huge 21.1% drop in aggregate profits.

This is not a scorecard you want to see from an economy that has quoted at 20 P/E for the last year or so. Even RBI is starting to say the worst is yet to come. Whatever happens, dont ignore your stop losses. And remember that in such a market, investing in a consistently profitable company is probably even more important than ever before. Decoding Sensex - Do stock markets really help you make money?23 May,2015The main purpose of the stock market is to make fools of as many men as possible. - Bernard BaruchIndian stock markets have created a great interest among investors in India and world wide, yet again. While we aren't seeing the kind of euphoria that we saw in 2008, the interest is no less. Perhaps, the 2008 experience is still keeping a large number of retail investors at bay and thus, making it difficult for market makers to take the full advantage of the last 1 year's unprecedented bull rally. This rally definitely smells more sensible than the one we saw in 2005-2008but the picture will only get clearer as we scroll further.We all keep reading several articles and stories of how investing in stock markets has made people millionaires or billionaires. It appears such an easy thing to do. People keep saying how Rs 10000 invested in Infosys is worth some 2-3 crores today, how some x amount invested in mutual funds is 100x today and so on. All said, how certain can we be that the same will repeat over the next 10-15-20 years? To this, the market experts quote historical returns of stock markets and guide that this will be replicated in the future, although they add the disclaimer that past performance are not indicators of future returns. So, how do laymen decide whether or not to invest in equities or equity underlying instruments? A million dollar question.Following are some numbers that give you interesting insights on performance of the stock markets in India from January 1991. For the purpose of ease and convenience, I have used data for Sensex (monthly data). All percentages are in absolute terms (unless stated otherwise)

Monthly performance On a closing basis, in March 1992 saw a return of 42%, highest ever. In October 2008, the Sensex fell 24%, again the highest month over month decline. Would you believe that in October 2008 (intra month), the Sensex fell 42%? The month high was 13203 while the month low was 7697. The Sensex nearly doubled between Feb and Mar 1992. Lets say you are successful in buying at month's low and able to sell in the next month at the month's high, the highest gain you could make is 97% (March 1992 saw a high of 4318 and February 1992 saw a low of 2193). Can you believe that you would never lose money if you bought at any of the month's low as the Sensex has always gone higher in the next month. In other words, in all the months, at least on one occasion, the Sensex has always gone higher than the previous month's low in the subsequent month. On the other hand, lets say you bought at month's high and sold next month at themonth's low, the worst possible case is that you would lose 49% and the best possible case is that you could gain 2%. It is even more unbelievable that you would make a gain only in 4 out of 291 months. (2.1%, 1.1%, 0.3%, 0.2%). You'd end losing money in the remaining 287 months.3 month performance The sensex has posted a 124% in the 3 month period ending March 1992. It declined38% in 3 month period ending November 2008. Assuming you picked the index at the lows of December 1991, you could have made a gain of 139% by March 1992. On the other hand, if you had picked up at the highs of July 2008, you could have lost 49% by October 2008.6 months performance What's further interesting is that the best 6 month return the Sensex has posted is 127% for period ending March 1992 (just 3% more than 3 month best performance). It declined 45%, however, for the 6 months period ending Nov 2008. If you could pick the index at the lows of October 1991, you'd have made a 170% gain in 6 months (Apr 1992). However, if you had picked up at highs of Oct 2008, you'd have lost 56% by Apr 2009.Annual performance The best 12 month closing was posted in March 1992, a whopping 267%. It could have been 286% if the buying was done at the lows of Apr 1991. The worst 12 month closing was seen in Nov 2008, a loss of 53%. If the purchase was done at highs of Nov 2007, the loss could be up to 62% by Oct 2008.2 and 3 year performance Now, here comes the interesting part. On a 2 year closing, the Sensex gained the most by Jan 1993, gaining 173% compared to levels 2 years ago then. On a 3 year closing, however, it gained 307% by Apr 2006. What's even more interesting is that the Sensex lost 41% on a 2 year closing basis (Sep 2001) and lost 40% on a 3 year closing basis (Feb 2003), which are the worst performing 3 year periods. Note here that the worst 1 year period was much higher at 53% loss and the worst 6 month period was a 45% loss. Does this answer something about long term investing? Now, if you were able to pick at the lows of Feb 1991, you could make a 212% return by Jan 1993 (2 years), and 339% by Jan 1994 (3 years). Can you now see the kind of alpha? To further show what long term investing can do, the worst possible return you could have in a 2 year period would be by buying at the highs of Nov 1999, which could results in a loss of 47% by Oct 2001. In a 3 year period, if you'd have bought at highs of Apr 2000, you could have lost up to 48% by Mar 2003.5 year performance The best 5 year period on a monthly closing was posted by Oct 2007, an incredible 573%. If the buying was done at lows of Nov 2002, it could have been 616%. Funny enough, if you'd bought in Aug 1997, you'd still be in a loss of 31% for 5 year period ending Jul 2002. Unluckily, if you'd entered at the highs of Sep 1997, you'd be in a loss of 36% even at the end of a 5 years period ending Aug 2002. Now, slowly, are we asking a question on whether stock markets really help create wealth in the long run? Does timing the market play an important role?10 year performance Can you take a guess of what the best performance would be for 10 years? It'd be very difficult to believe that the best 10 year performance posted by the on a monthly basis is 559% by Apr 2013. Can you now see that this is lower than the 5 year best of 573%. It could have been up to 597% if buying happened at lows of May 2003. Now, if we take a look at the worst possible returns in a 10 years period, you'd still be in a loss of 19% by March 2002, if you'd bought at the closing of Apr 1992. If bad luck had its way, buying at highs of May 1992 would still keep you in a loss of 28% by Apr 2002.One should take these numbers with a pinch of salt as these numbers speak only of the extremes on a monthly closing basis assuming that all the investment was done in a single go at a single point of time. However, one should also note that the periods are long enough to show some kind of inference too. A negative return in a 10 year period is simply unacceptable for any investor for any reason. After all, when the adviser pushes an investment, he always says, even in worst cases, you will be positive in the long run, which he generally means 3-5 years. So, 10 years is really long enough. At any point of time, there are proponents of both buying and selling, and investors often get confused due to multiple opinions. Often, investments by common people are in the times of boom and even higher in euphoria (when the bull market is exactly ending), as the sentiments are very positive. So, does timing the market play a significant role? The data at least clearly shows that it does. How important is the time in the market? Now, the data says that it is important but there are several instanceswhere you'd make far money in shorter periods than longer ones.So, what do we conclude from all this? May be nothing. One may feel that we must follow an SIP route to beat this volatility and take advantage of rupee cost averaging. However, there could also be periods where even SIP would givea negative return (probably, I'll do an analysis on that next). Investment managers always advise investors to look for the long run (10-15 years), perhaps because they too are aware of the kind of returns volatilemarkets could post, and you never know when they turn volatile. The markets always take a long time to move up but they are very sharp when they are moving down. The truth is that nobody knows. Simply nobody. Perhaps, that is the reason why we do not have stock market experts debating on news channels, rather they patiently wait and speak as less as possible, unlike political or social experts who are on the top of their voice always.So, again, what do we conclude? Perhaps, I'd just close it in the words of NSE. Soch kar, Samajh kar, Invest kar...Mutual funds invest in equities for 13 months in a rowTue, May 26 2015Money managers are betting that the streak will continue, as gold and real estate deliver lower returns.Mumbai: Indian mutual funds have invested in equities for the 13th month in a row in Maythe longest spell of net mutual fund inflows into the stock market in at least 15 yearsand money managers are betting that the streak will continue, as gold and real estate deliver lower returns.Mutual funds have invested a net of Rs.53,831.1 crore in Indian shares since last Maywhen the National Democratic Alliance (NDA) won the 16th general electionuntil 21 May this year, according to data from the Securities and Exchange Board of India (Sebi).It is the longest period of net investments by mutual funds since January 2000, when records began to be maintained. Since the election results, the BSEs benchmark Sensex has risen 15.64%, and for the year to date it is up 0.5%, at 27,643.88 points.To be sure, the Sensex has dipped 6.87% from its record closing high of 29,681.77 points on 29 January on a combination of factors, including concerns about the slow pace of corporate earnings growth and worries about tax claims made against foreign portfolio investors on past capital gains.On Thursday, Citigroup cut its December 2015 target for the Sensex to 32,200 points from 33,000 earlier, saying investors faith in India is a little fickle. HSBC Holdings Plc. cut Indias ratings to underweight from overweight on 13 May.Even so, retail investors are expected to stay invested in stocks as they seek to reap potentially higher gains from the stock markets.In India, around $10 trillion is invested in real estate, $1-2 trillion in gold, and fixed income exposure through debt and fixed deposits is $2.5 trillion, according to Nilesh Shah, managing director of Kotak Mahindra Asset Management Co. Ltd. Equity holdings of retail investors, directly and through mutual funds, roughly stands at a far lower $300 billion, he estimates.Retail investors have limited exposure to equities. Now, they are realizing that equity is delivering better returns, and by not investing much in equity they have made a mistake, said Shah.They (retail investors) are in a slow train of debt and gold and the world is now in the fast train of equities, Shah said, adding that around 7.8 million systematic investment plans were continuing irrespective of market conditions.

That seems to be the popular view, with real estate and gold offering diminished returns in recent times.For real estate, taking the example of Mumbai property prices, realty services firm Jones Lang LaSalles India unit expects the citys real estate to see a mere 6% price appreciation in 2015.Dont expect a major appreciation on your property in the next two years; returns on property are likely only from the third year, Ramesh Nair, chief operating officer, business, and international director, JLL India, said in a 20 May note.Given that average property prices across Mumbai have plateaued and sales remain sluggish, many home buyers are speculating if a correction will take place in 2015, added Nair.From its peak on 29 August 2013, when MCX gold was at a record high of Rs.32,943 per 10g, it has declined 17.71%. On Monday, it was trading 0.08% higher at Rs.27,105 per 10g.Indian household savings have been very poorly invested in financial assets like equities and debt instruments, while they are heavily over-invested in physical assets such as gold and real estate. A mere 2.3% of Indian household savings are allocated to equity, said S. Naren, chief investment officer at ICICI Prudential Asset Management Co. Ltd.Due to underperformance of physical assets, we are seeing signs of domestic investors returning to financial assets. Over the longer term, financial assets have the potential to outperform all asset classes and therefore, we are likely to see more and more domestic investors allocating to long-term debt and equity, added NarenThe Indian mutual fund industrys assets under management (AUMs) swelled around 10% in April from the previous month, riding on inflows into liquid, equity and balanced funds, the latest numbers from the Association of Mutual Funds in India show.The tally at the close of the month was Rs.11.86 trillion, up Rs.1.04 trillion over the previous month, Crisil Research said in a report on 7 May.Going forward, more investment will come into mutual funds, as provident fund money will also come in, Shah of Kotak added.On 31 March, the labour ministry decided to invest a portion of the Employees Provident Fund corpus in the equity market, ending years of doubt and scepticism.The Employees Provident Fund Organisation will invest 5% of its incremental corpus, or a little over Rs.8,000 crore, in exchange-traded funds (ETFs). An ETF comprises a clutch of stocks that reflect the composition of an index, like the S&P CNX Nifty, or BSE Sensex, and are traded on stock exchanges like company stocks.A closer look at the investing pattern of mutual funds in equities shows that their preference has shifted away from oil and gas companies, which were once among their favourite bets.Data for sectoral deployments by mutual funds show that since October 2009, when the break-up of such investments was made available, there has been a shift away from oil and gas stocks towards banks, auto, pharmaceuticals and software stocksThis shift captures both mutual funds change of preference and stock price changes.In October 2009, mutual funds held 13.18% of their total equity AUMs in oil and gas stocks, while as of April 2015, this stands at 7.65%.Mutual funds held 26.89% and 10.24% of their total equity AUMs in banking and financial services and auto and auto ancillaries, respectively, in April 2015, compared with 17.55% and 4.59% in October 2009.Since the start of October 2009, the Sensex has risen 63.24%.In the same period, the BSE Oil and Gas Index shed 9.34%, while the BSE Bankex and BSE Auto Index logged gains of 115.03% and 187.79%, respectively.We believe that a cyclical revival will eventually happen. Consequently, cyclical sectors like infrastructure and financials could do well in the long term, said Naren.Also, given the fact that the rupee has appreciated substantially, the technology sector, which has been hurt by this rupee movement, is likely to benefit, since we believe that the rupee is not likely to continuously appreciate against the euro, added Naren.Mutual funds exposure to software services companies has risen to 9.43% of equity AUMs in April from 6.71% in October 2009, and it currently ranks third in asset managers exposure, in terms of percentage of AUMs.

The difference between the ROE of BSE 500 companies & 10 year G-Sec Yield is at its lowest in a Decade.May 20,2015

The Gold Monetization Scheme: The What, The How and The Capital Mind ViewMAY 20,2015 The government has released Draft Guidelines for the new Gold Monetization Scheme. In Budget2015, Jaitley had mentioned this. Essentially you can deposit gold with banks and theyll give you interest (in Gold!) of something like 1% a year, and you are expected to rush to the nearest bank and dump all that yellow metal you have, and save India tons of money in valuable foreign exchange because we import gold like crazy. The contours of the scheme are in. Theyre yet to be finalized, but at least we have something.Heres the Process.You dont go to a bank. This might sound a little stupid, but bear with us please. You go to a Purity Testing Center, called a Hallmarking Center. These guys tell you the genuine nature of your gold. You give them the gold, they do a prelim test on an XRF machine, and tell you approximate values of pure gold that youve given. You dont like it? You walk away. Time spent: 45 minutes. Cost: we dont know yet. Then you fill up a KYC form, and give your consent to melt your gold. Which means they melt it and remove any other stuff like studs or stones (typically added to jewellery). Then then do a fire assay test and tell you how much gold you really have. Time: 3 to 4 hours.Cost: Rs. 500+ for melting, Rs. 300 for the fire test, and melting losses at actuals. Rs. 100 or so for removing stones. At least Rs. 1000.My Golds Melted, Now What?The fire test tells you how much gold you really have. You can say no, I dont like it. Then you walk away with your gold in the form of a gold bar, for which there is another charge. We dont know how much.But lets say you agree with their estimate.You then say gimme a deposit certificate, which just says the center has X amount of gold of Y purity. The gold is then deposited at the center and sent to a refiner or to a bank for holding.Note: Minimum 30 grams, which is about Rs. 85,000 worth of gold.Now You Go To The BankAnd you give them the deposit certificate. The bank opens a gold savings account for the customer; and has an interest rate. The interest is paid either: as gold, so if you put 100 grams at 1% a year, you get 101 grams after a year as cash, so if you put 100 grams at 1% a year, you get cash worth 1 gram of gold after one year (valued at the time the interest is paid, which might even be monthly) You gotta choose one of the above when you create the account. Loans are for 1 year or multiples of 1 year, but you can break the deposit and redeem earlier (the interest rate will be lower).Wait, How Do Banks Earn This Extra Gold?Well, they can lend it to jewellers. Jewellers might be happy to pay back 1.5% a year, or even more, to compensate the banks risk.Banks can sell the gold abroad, and earn forex. They can even sell it in domestic exchnages. they will however have to buy back the gold if it is redeemed by investors, and the price risk has to be hedged appropriately. Banks may be able to use the gold as CRR, the Cash Reserve Ratio. Because gold is like cash. TaxesThey want to make the returns exempt on both capital gains and income tax. It is however fairly clear that if you deposit large quantities of gold and havent really paid income taxes, someone from the tax department will ask questions. This is fair. You dont want to encourage black money through this scheme.What We ThinkThe scheme applies only to large cities, we think. There are currently ZERO testing centers in the north east. Zero in Goa. Just 14 in all of UP, 5 in MP, 3 in Bihar, 1 in Chhatisgarh, 1 each in Jharkhand, Himachal and Jammu/Kashmir. Oh, there are 39 in Kerala and 57 in Tamil Nadu, so those are interesting.Its going to take too much time. A full day at the purity center for one. Another day at the bank. Its also too much money as fees. Theres a melting fee, a stone removal fee, a test fee, a refining fee, a holding fee and who knows what other charges. All of these are going to be passed on to the customer. Unless you have gold of more than 5 lakh rupees, youre probably not even going to recover the fees in a year. So this, and the fact that there are too few centers, means the poor and the small wont make it.Theres no mention of how temples can do this. Temples should be encouraged to give their gold over. They dont need it, and its safe with a bank. But this has simply not been addressed. Without temple participation, this scheme has very little real application.The process of redemption isnt clear. What if you dont get the right quality of gold? What if, when you take the redeemed gold to a different jeweller, tells you theres a purity issue? Who do you complain to? There has to be a better answer than the banking ombudsman, or a consumer forum. No one has that kind of time they should create a framework for redressal.Overall, we would view this sceptically until we actually see gold move in. We think the draft can be improved upon, in terms of addressing time/cost and redressal concerns, and bring temples a better way to do things.