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- ICICI Prudential Mutual Fund dividend
- Why have FIIs started to buy INR Bonds in India?
- Long Term Income Funds
| ICICI Prudential Mutual Fund dividend Posted: 07 Feb 2014 04:23 AM PST Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Leave a missed Call on 94 8300 8300
ICICI Prudential Mutual Fund has announced dividend under the following schemes:
The record date has been fixed as January 24, 2014.
The record date has been fixed as January 23, 2014.
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| Why have FIIs started to buy INR Bonds in India? Posted: 07 Feb 2014 02:50 AM PST Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Leave a missed Call on 94 8300 8300
On the arbitrage front, despite healthy differentials between yields on US treasuries and INR Bonds, the forward rates are too high for any spread plays. One and ten year US treasury yields at levels of 0.1% and 2.85% are way below INR bond yields at 8.7% and 8.65% levels respectively. The yield differentials work out to 8.6% and 5.80% respectively.
The borrowing cost for an FII would be around Libor plus 100bps to 150bps. Six months Libor is at levels of 0.33% while one year Libor is at levels of 0.57%. Assuming that an FII borrows six month Libor at 0.33%, the total borrowing cost at the lower end of spread of 100bps is 1.33%.
Six month forward rates for the USD/INR is 8.3%. The total cost for an FII on a fully hedged basis is 8.3% + 1.33% = 9.63%. Hence the FII is actually earning a negative spread by investing in one or even ten year INR bonds. Corporate bonds too do not offer spreads for the FII as one, three, five and ten year AAA corporate bonds are all trading at levels of 9.35% to 9.6%.
FIIs are not buying INR Bonds for interest rate arbitrage, as there are not any available. So why are they buying INR Bonds?
FIIs are tending to believe that the INR is fairly valued at current levels of Rs 62 to the USD and has scope for appreciation going forward. The reason for this is that many macro factors that took down the value of the INR by 12% in calendar year 2013 is turning around. Current Account Deficit is down 40%, fiscal deficit at 4.65% of GDP (expected) for fiscal 2013-14 is down from last fiscal levels of 4.8% of GDP. Inflation at the consumer and wholesale levels are seen to have peaked at levels of 11.2% and 7.5% as vegetable prices that drove inflation to higher levels are falling sharply. Economic growth forecast is positive with IMF revising upwards the growth forecast for the country.
Political risk in the form of a hung parliament is ever present given elections in May 2014 but that is not deterring better macro conditions. The Fed tapering is not seen as too negative this time around given that markets have adjusted positions accordingly. Markets had sold off emerging market currencies and bonds in the June 2013- September 2013 period on tapering fears.
FIIs are buying INR Bonds largely on an unhedged basis though they will periodically play the INR movements in the NDF (Non Deliverable Forwards) market.
FIIs are also turning positive on INR Bond yields that have come off by almost 30bps in the month of January 2014. Ten year benchmark government bond yields are down from levels of 8.90% to 8.60% on the back of the markets taking out bets of rate hikes by the RBI and on the back of the government lowering its borrowing by Rs 150 billion for fiscal 2013-14. RBI is likely to keep liquidity comfortable in the system as economic growth at below 5% levels is well below trend growth levels of over 7%.
FIIs are likely to continue buying INR Bonds given better domestic and global macro prospects but bouts of selling are not ruled out if either domestic politics or prospects of rate hikes in global economies gain ground.
For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call
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--------------------------------------------- Invest Mutual Funds Online
Download Mutual Fund Application Forms from all AMCs Download Mutual Any Fund Application Forms ---------------------------------------------
Best Performing Mutual Funds
B. Large and Midcap Funds Invest Online
C. Mid and SmallCap Funds Invest Online
D. Small and MicroCap Funds Invest Online
2. Franklin India Smaller Companies E. Sector Funds Invest Online
F. Tax Saver Mutual Funds Invest Online 1. ICICI Prudential Tax Plan 2. HDFC Taxsaver
G. Gold Mutual Funds Invest Online
H. International funds Invest Online 1. Birla Sun Life International Equity Plan A 2. DSP BlackRock US Flexible Equity 3. FT India Feeder Franklin US Opportunities 4. ICICI Prudential US Bluechip Equity 5. Motilal Oswal MOSt Shares NASDAQ-100 ETF
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| Posted: 07 Feb 2014 12:34 AM PST Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Leave a missed Call on 94 8300 8300
As interest rates pause, duration funds look attractive again
Income- focused investors looking for some capital appreciation could revisit gilt and long- term bond funds. These funds took a big knock last year, when interest rates shot up suddenly, but are now poised to make big net price gains if the rate cycle starts to reverse.
One prime reason for the shift is the fact that the interest rate increase seems to have peaked. Last month, Reserve Bank of India ( RBI) Governor, Raghuram Rajan, surprised the market by holding rates steady in the wake of high inflation. Now, with the key inflation rate, the wholesale price index ( WPI), surprising on the downside, RBI is more likely to continue to hold rates steady for now.
The WPI declined to a five- month low of 6.16 per cent in December, compared to 7.52 per cent the previous month. This should provide some comfort to RBI, which may consider holding the repo rate in its coming monetary policy review on January 28. The possibility of a rate increase is low in the next policy, and the RBI is more likely to hold rates for now. It will come as welcome relief for long- term bond funds. These funds lost as much as three per cent in the second half of last year on the rate increases. Currently, long- term gilt and bond funds have posted returns of only 3.1 and 5.4 per cent in the past year, according to data from Value Research, largely due to the distortion in the bond markets in July 2013. If you look at bond returns pre- and post the July event, when all bond portfolios went for a toss, the returns are around the normal ranges. As normalcy slowly returns to the bond market, and long- term interest rates show signs of peaking, investor could consider switching some of their investments into long- term bond funds.
However, those who parked money into less volatile short- term bond funds should incrementally begin to make that switch, rather than at one go. When the interest rates go down, long- term bond funds make higher returns. But you have to be very cognisant of the fact that there’s incrementally higher risk and investors should stay with a longer horizon. Also, experts say it be some time before we could see areversal in the rate cycle. Since the elections are a major event, liquidity in the system still needs to be watched. Till there is some clarity on the fiscal side and since there’s a major event happening, investors can wait for some more time and assess the situation. So, even if starting now, experts say that begin with about 5 or 10 per cent in long- term bond funds. However, investors should be ready to play the duration, i. e. hold on for some time, and wait for interest rates to reverse, more likely to happen in the latter half of this year. That’s when investors should bag huge returns from long income funds.
For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call
Leave a missed Call on 94 8300 8300
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 Mutual Funds Online
Download Mutual Fund Application Forms from all AMCs Download Mutual Any Fund Application Forms ---------------------------------------------
Best Performing Mutual Funds
B. Large and Midcap Funds Invest Online
C. Mid and SmallCap Funds Invest Online
D. Small and MicroCap Funds Invest Online
2. Franklin India Smaller Companies E. Sector Funds Invest Online
F. Tax Saver Mutual Funds Invest Online 1. ICICI Prudential Tax Plan 2. HDFC Taxsaver
G. Gold Mutual Funds Invest Online
H. International funds Invest Online 1. Birla Sun Life International Equity Plan A 2. DSP BlackRock US Flexible Equity 3. FT India Feeder Franklin US Opportunities 4. ICICI Prudential US Bluechip Equity 5. Motilal Oswal MOSt Shares NASDAQ-100 ETF |
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