Friday, August 23, 2013

Prajna Capital

Prajna Capital

HDFC Arbitrage Fund

Posted: 23 Aug 2013 05:11 AM PDT

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)
 

HDFC Arbitrage Fund With the volatility in the equity market, the focus will be back on arbitrage funds

HDFC Arbitrage Fund is a fund that uses the arbitrage difference between equity spot and equity derivative to achieve its investment objective. It's a lowrisk open-ended equity mutual fund, operational since October 2007. The fund invests in equity, equity derivatives and in debt instruments.


INVESTMENT OBJECTIVE: The fund aims to generate income through arbitrage opportunities between the spot and derivative market, arbitrage opportunities within the derivative segment, and by deployment of surplus cash in debt securities and money market instruments.


ASSET ALLOCATION & INVESTMENT STRATEGY: The fund has a mandate to invest 65 to 90 per cent of the assets in equity and equity related instruments and in derivative including index futures, stock futures, index options and stock options. The fund has a mandate to invest 10 to 35 per cent in debt securities and money mar ket instruments and fixed income derivative. The fund has a mandate to raise allocation in debt securities and money market instruments and fixed income derivative to 35 to 100 per cent when markets do not have arbitrage opportunity.


PLANS & CHARGES: The scheme offers retail and direct plan, each offering two options ­ growth and quarterly dividend option ­ with payout and reinvestment facility. There is no entry load. The exit load in respect of each purchase /switch-in of units is 0.50 per cent if units are redeemed / switched-out within six months from the date of allotment. No exit load is payable if units are redeemed / switched-out after six months from the date of allotment.


BENCHMARK: The scheme's performance will be benchmarked against Crisil Liquid Fund Index.


HDFC Arbitrage Fund has slipped from being a top performer to a poor performer over the past two years. But with the volatility in the equity market, the focus will be back on arbitrage funds, as the ability of these funds to generate higher returns depends on the volatility in equity markets ­ the higher the better. During the volatile 2006-2008 period, arbitrage funds gave healthy post-tax returns of 8-9 per cent.

The fund has underperformed with a one-year return of 7.66 per cent as compared to similar funds from other domestic fund houses, which have given return in the range of 8 per cent to 9.85 per cent. Still the fund's return are higher than the category average across one month, three month, six month, one year, two year, three year and five year. At present, fund's net asset value is at a 52-week high of 14.978 as on June 14.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund


Invest in Tax Saving Mutual Funds Download Any Application Forms
Buy Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now

Investing in commodities

Posted: 23 Aug 2013 01:59 AM PDT

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

 

In the last 10 years, commodities have been one of the best performing assets, giving high double- digit returns to investors. This is best exemplified by gold, that has nearly quadrupled in value (in dollar terms) since 2003 and was up five times in rupee terms in the last decade. In comparison, the benchmark S& P BSE Sensex is up around 4.7 times since the middle of 2003.

Gold's performance in the last five years has been even more spectacular. In the domestic bullion market, gold prices have appreciated at a compounded annual growth rate (CAGR) of 18.6 per cent since 2008, much higher than the 4.2 per cent CAGR return delivered by the National Stock Exchange's 50- stock Nifty index during the period. The yellow metal has delivered 18 per cent annualised return to investors who held on to their gold holdings in the last 10 years. In contrast, the Dow Jones appreciated at just 2.8 per cent per annum during the period. The picture has not been very different in the last five years either

This has led to huge investor interest in commodities. Most brokerages and fund managers now operate commodity desks that rival and even beat their traditional business in equity broking. For a typical retail investor in India, the case for commodities is strengthened by the stock markets' inability to scale up new highs in the last five years, negative interest rates (when adjusted to inflation) and ever rising commodity prices. This might suggest a new era of investment has emerged, where commodities compete with traditional assets such as equity, bonds and real estate for a share of your savings pool.

Dig deeper and the investment case for commodities is not as straightforward. Unlike equity or fixed income or even real estate, gold, metals or agricultural products don't carry any yields. This means the only way you can recover your investment in commodities is by selling it to others. In many instances, the dividend yield on equity could be significant to begin with or can become large over a period of time if the investor holds on to his or her investment. In the last 10 years, dividend income on a portfolio of stocks that mirrors the Nifty has grown at a compounded annual rate of 12.4 per cent, while initial yield has varied from a high of 3.2 per cent in May 2003 to low of 0.9 per cent in early 2008. At this rate, an initial investment of ₹ 1 lakh in 2003 in the portfolio would have yielded dividend income of ~ 7,660 in 2013

If the company whose shares you own doesn't declare dividends ( it is a matter of policy and not mandatory), you are still entitled to a share in the company's profit, proportionate to your ownership. In other words, equity is backed by corresponding cash, whether current (dividends) or deferred (retained profits not distributed as dividends).

Ditto for fixed income products such as bank deposits and bonds. All these pay a predetermined interest to the investor. A house and commercial property provide rental income if you let it out and the owner can choose to live off the income, rather than encash the property.

Commodity investors, however, can't live off their investment and must encash it sooner or later by finding a buyer. This won't be an issue in the normal course but would prove crucial in a sudden and sharp fall in prices as in the late 2008 post- Lehman crisis. This leads many experts to label commodities as dead money. It doesn't pay any interest or dividends and is not expected to shield you from inflation. Besides, commodities cost money in storage, insurance and a management fee if you invest through exchangetraded funds such as gold ETFs. The storage and handling fee in equity and fixed income is minimal.

Commodity traders agree and caution investors about the risk involved in commodity trading. A commodity is not an investment product that you buy and hold for the long term. It is closer to equity derivatives where you take short- term trading calls. However, he says, commodities are less volatile than stocks and, thus, safer. "As it takes time and a lot of resources to produce commodities, prices move in a narrow band," he adds.

The lack of yield also makes it tough for investors to arrive at a fair value. A stock or share can be valued on the underlying ( actual or estimated) data on earning per share, dividend yield or book value per share or other such valuation ratios. In a given period, the market value of the share can fluctuate over a wide range on the various valuation parameters, but at every point, investors have visibility about the stock price relative to underlying parameters. This visibility is not there in commodities.

Experts say that just as you do the fundamental analysis in equities, this can be done for commodities. Commodity prices are purely a function of demand and supply and it's not very difficult to map this equation for an informed investor. Besides, commodity prices cannot move too far from their cost of production.

Critics, however, say the demand- supply equation and cost of production is relevant for actual manufacturers and users of the commodity. But more than half of the investors in commodities are now pure- play ones, there just to make a quick gain. For buyers of commodity futures, the purchase price doesn't matter as long as they hope to find buyers willing to pay a higher price for the contract. More so as commodity trade is typically more leveraged than equity trades.

In the equity market, a typical investor can leverage his funds by five times. In commodities, the ratio can be as high as 20. This has the potential to exacerbate the boom- bust cycle in commodities.

Commodities have a lower portfolio risk because the return isn't correlated with stocks. According to empirical study by the Wharton School, based on data from 1959 to 2004, commodity futures returns are negatively correlated with stocks; that is, they rise when stocks languish and vice versa. This link, however, seems to have broken due to the large presence of financial investors common across all asset classes. It results in a sell- off in, say, equity or real estate market spreading to all other markets.

For instance, the 2008 Lehman crisis was triggered by a fall in house prices which resulted in a global sell- off in equities, bonds and commodities. Crude oil prices, for instance, crashed by two- thirds, while gold prices halved in months. Then, all assets classes, including equities, recovered in 2009, almost in tandem.

Since then, while the US equity market made anew high, most commodities with the exception of gold failed to scale up their 2008 highs.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund


Invest in Tax Saving Mutual Funds Download Any Application Forms
Buy Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now

What to do in a volatile Stock Market?

Posted: 23 Aug 2013 12:23 AM PDT

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 


Volatile and uncertain markets have put investors in a dilemma whether to invest in equities or not. Staying away from equities is not a good idea because as and when the economy improves, you will not be able to ride on the wealth generated through the stock market. However, during volatile times, it is advisable to invest with caution and not aggression.

Currently, there is high amount of uncertainty in the stock market. Many stocks and sectors are seeing three or five year lows. Stocks in sectors such as banking, infrastructure, real estate, etc are seeing a phenomenal decline in prices. Are these low prices reason enough to buy stocks? Or should you avoid stocks as their prices could fall further? When the economy is booming, most of the stocks perform better irrespective of their business model or sector in which they operate. However, in times of slowdown, some stocks or sectors are affected much more than stocks in other sectors. This is due to the impact of factors such as interest rates, crude prices, fiscal measures, inflation, etc. However, certain sectors are less affected by the downturn. In capital market terminology these stocks are known as defensive stocks. Companies in the defensive sectors are those whose businesses are not dependent on general economic prosperity. Also, they have a competitive advantage in terms of brand, pricing power and low borrowings.

A stock like Marico or Colgate, for instance, which caters to personal care segment, will not see its business affected during a downturn considering the demand for such products will continue irrespective of the market or economic conditions.

The Information Technology sector, to some extent, is also a preferred sector. The sectors earnings are more insulated to the domestic economy and the companies benefit on account of depreciating rupee. This may be more so during a slowdown due to lower forex inflow, as foreign investments slowdown. The defensive sectors are FMCG, Pharma, Information Technology etc. (e. g. GlaxoPharma, Marico, TCS, Colgate, Bata etc.) Stocks in sectors such banking, infra, real estate, commodities, etc are best avoided now. These are interest rate sensitive, demand sensitive and the industries are cyclical in nature, which is why they are expected to see a decline. It is better to avoid them as they may cause further depreciation in your portfolio value.

Auto companies also would be impacted in a rising interest rate scenario, like we are seeing currently, or in an economic downturn as people will postpone their car purchases. Interest rate sensitive sectors like auto, banking and real estate and infrastructure would be the absolute opposite of defensive sectors.

Sectors such as realty, capital goods, metal have been worst performers if we track the three or five year returns. Stocks of Public Sector Undertakings have also been poor performers. One reason for this could be the government milking them to meet their fiscal deficit.

However sectors such as FMCG, Healthcare, IT have provided considerable returns even during a sluggish economy.

Identify defensive stocks:

Stocks can be identified as defensives based on parameters like the beta ( i. e. stock price change compared to the overall stock market change) of a stock and its dividend yield. Defensive stocks typically have a beta of less than 1. A beta of 1 means the stock price moves at the same rate as the overall market, whereas a beta of less than 1 would mean that the stock would move less than the market on the upside as well as the downside.

Further, the stock should have an attractive dividend yield (dividend yield is the current annual dividend divided by the stock price). It should also have a history of steady dividend payments. A dividend yield of greater than 3- 4 per cent on a consistent basis is highly appreciable.

Although these stocks create long term wealth at a lower risk, in a sustained bull run these stocks will underperform the market. When the market recovers it is the cyclical and high beta stocks that tend to outperform.

Also, many stocks within the defensive space are already trading at their fair valuations, given the steady increase in their price ( e. g. FMCG stocks). The best time to buy defensives is when there is a gloomy picture on earnings for manufacturing sectors, higher crude prices and higher interest rates. As the defensive sectors are less prone to the risks mentioned above they offer value in times of uncertainty.

So, if one is convinced that the market is going to remain bearish for along period of time, one can go ahead and buy good quality defensive stocks with low beta, low debt- equity ratios and high dividend yields.

Strategies your equity investment:

Equity investment always needs certain strategic planning. Unlike bank FD or fixed income instruments, in case of equities you need to have a proper plan and need to stick to the plan unless there is valid reason to deviate from the plan adopted. Most investors exit during downturn and enter when the market has peaked. Due to this they are not able to maximise their gain from the equity market.

Look at large cap companies: It is now clear that the economy will take some time to regain momentum. Slower growth rates, high inflation, high interest rates and rupee weakness may stay on for some more time.

Large companies will be in a much better situation to tide over the slower growth than the small or mid cap companies. It is best to stick to largecap stocks in the coming months.

Even within the large- cap space, you must be careful while picking stocks and sectors. Metal stocks for instance may be in for an extended downturn because of falling commodity prices. Diversify: The infrastructure sector has been badly beaten, but analysts expect it to do well when the economy revives. It is a good time to start looking at infrastructure stocks at these beaten down levels. But spread your bets across a basket of stocks and sectors.

Have a Systematic Investment Plan( SIP):

In case you have a SIP plan, do not think about terminating it at this point. If you stop now you will effectively turn down the chance to buy more at lower prices. The markets are down, but there is no knowing where the bottom is. Those who do not have an SIP, should go for the same. To avoid buying high, invest in monthly installments. In this manner, you will be able to gain the advantage of the rupee- cost averaging that the SIPs offer.

Defensive approach and adopting the right strategy can help cushion the impact of volatile market. Do invest in equities even during uncertain times, but with caution.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund


Invest in Tax Saving Mutual Funds Download Any Application Forms
Buy Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now

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