Prajna Capital - An Investment Guide

The fund's history may be relatively short, but it appears to be long on potential. In its six-year existence, the fund house has maintained a strong focus towards debt funds with some good liquid funds. It was only in 2008 that Deutsche Mutual Fund came out of obscurity on the equity front. Undoubtedly, its performances have impressed, but not at an opportune time. It did well in the bull run but did not dazzle. It actually made its mark in a sliding market and shot to prominence from January onwards. The most compelling aspect about this fund family has been its resolve to steer clear of the greed to launch funds just to bloat up the asset size, particularly in recent times when equity markets have been firing from all cylinders. The fund family has not shown any signs of impatience to script an overnight success story. Rather, its fund launches seem to be well thought out. Its four equity funds were launched in different years (2003, 2004, 2006, 2007). In 2005, it only launched ...

Investors are concerned about the change in ownership and whether it is linked to the current global crisis and Merrill Lynch's financial woes. It is not. This fund house remains as appealing as ever. DSP Merrill Lynch Asset Management (India) Limited was a joint venture between DSP Merrill Lynch Limited and Merrill Lynch Asset Management L.P. In 2006, the asset management business of Merrill Lynch (Merrill Lynch Investment Managers) was combined with BlackRock. The stake (40%) held by DSP Merrill Lynch Limited in DSP Merrill Lynch Fund Managers Limited, is to be transferred to BlackRock while the balance would continue to be held by the DSP Group (60%). Consequent to the transfer, DSP Merrill Lynch Mutual Fund will be renamed " DSP BlackRock Mutual Fund ". Despite the change in ownership, there is no indication of a shift in strategy - and that's good for investors. Neither is there any change in the fund management team. In fact, this fund house is known to retain i...

Private Insurers & Mutual FundsWith Experience Of Long-Term Funds May Take Lead BANKS, insurance companies and mutual funds will soon have the opportunity to manage pension funds. The Pension Fund Regulatory & Development Authority ( PFRDA ) sought applications from entities wishing to float pension funds to manage retirement assets of all Indian citizens, other than government employees already covered under the pension scheme. The criteria set out by PFRDA entitles government institutions, banks, insurance companies and mutual funds to sponsor a pension fund. One important condition is that the sponsor must have at least five years’ experience in running debt and equity funds and should have managed average monthly assets of Rs 8,000 crore for 12 months ending November 30, 2008. Insurance companies, being the only manager of long-term finance, are perhaps best suited to manage pension funds. We are very keen to participate in pension fund management. Among private li...

Credit cards offer both convenience and benefits. Careful use can enable you to manage your budget and save. That piece of plastic in your wallet can be a blessing, depending on how you use it. It can get you great deals. It can let you monitor your spending and thus help with budgeting. It can be a saviour in a cash emergency. A credit card not only lets you shop on- and offline, but also lets you earn rewards and discounts. That's the reason most middle-class people have credit cards. There are several other advantages. A credit card is easier to carry in your wallet than hard cash, you get interest-free credit for around 45 days - one of the biggest benefits your credit card offers you - and a family member can get a free add-on card. Cash when you need it Making big-ticket purchases is easy with a credit card. You don't even need to pay the entire amount at one go. You can convert it into equated monthly instalments. But there's a price to pay - an interest rat...

After a long period of relative inactivity, the buzz is that DBS Chola Mutual Fund has aggressive plans to rev up its offerings. Going by its two recent high-level recruitments, that may well be the case. Mohit Sachdev (ex-UTI) is now the Chief Marketing Officer while Sanjay Sinha (ex-SBI MF) is the Chief Executive Officer. But that's no cause for celebration. Though it has been around for over a decade, the AMC has failed to make a mark in this highly competitive industry, despite attempts by earlier CEOs Ved Prakash Chaturvedi (now with Tata MF) and Rajnish Narula (now with Canara Robeco). Neither have the funds' performances been outstanding, nor have its fund launches generated a significant response from investors.Since inception, the AMC established itself as a debt player. Its Monthly Income Plan (MIP). launched in July 2003, is a 5-star that began to impress from 2007 onwards. It had only three equity funds till 2004, seven were launched from 2005 onwards with none in 2...

AMCs are launching ELSS with the hope that people will invest in such funds at least for saving on tax In fact, despite volatile and uncertain equity markets, asset management companies have begun to launch equity linked saving schemes (ELSS) with the hope that investors would invest in such funds at least for saving tax. Recently, Bharti AXA, DBS Chola, JP Morgan and Tata AMC have launched their ELSS funds. ELSS funds are like other equity mutual funds with tax benefit. Investment in ELSS fund qualifies for deduction under 80C only if the money is invested for a minimum of three years. But in such fund investors need to stomach higher risk. Interestingly, some of these fund houses already have existing ELSS funds in their current portfolio but have come out with new fund offers (NFOs) in the same category. For instance, Tata Mutual Fund already has a tax gain fund called Tata Tax Advantage Fund but has come out with a new ELSS fund called Tata Infrastructure Tax Saving. Same is ...

Benchmark AMC might have dared to tread on the unbeaten path and establish itself as an ETF player, but is probably ahead of its time. Though Exchange Traded Funds (ETFs) are popular abroad, they still have to catch on in India. As a result, Benchmark Mutual Fund has remained a small entity. The fund house offers eight funds, its most popular being Banking BeES. Banking as a sector was coveted by Foreign Institutional Investors (FIIs) but due to the ceiling on FII ownership they had to resort to the BeES fund as the alternative to playing the banking story. As the price of gold surged in the past two years, Gold Benchmark ETF has also gained in popularity. As sector and thematic funds garner significant investor interest, the AMC is coming out with four global theme-based ETFs - Global Clean Fund, Global Private Equity Fund, Global Commodity Fund and Global Water Fund. All these funds (combined offer document with SEBI) would invest in ETFs linked to indices whose constituents are the ...

Birla Sun Life's standout performers tend to be its debt funds. The fund house is very strong on the debt side with the bulk of its debt assets in cash funds. Some of its gilt and short-term funds stand out. What's interesting about this fund house is that the fixed income team always takes a call and does not necessarily follow the consensus. That makes it understandable that the Birla Sun Life roster includes some of the best as well as some of the worst debt funds. Of its 14 funds which boast of a 5-star and 4-star rating, just one is an equity offering. Not surprising since equity assets stand at just around 17 per cent. None of the equity funds, barring Birla Sun Life Equity, are star performers. Birla Sun Life AMC is a joint venture between the Aditya Vikram Birla Group and Sun Life of Canada, with an equal stake. Besides the mutual fund business, Sun Life has equal partnership with the AVB group in financial distribution and stock-broking businesses and is also a partne...

Bharti-AXA is a newly-launched fund company that is a joint-venture between the Bharti Ventures (Airtel) group and AXA, a French insurance company . The two partners already have an insurance joint venture that has been operational for a couple of years. The company has just started operations and has launched one equity fund and two debt funds during this period. It has put together a small but experienced team. The only equity launch that it has made so far has some innovative features. It's possible to make an SIP investment in this fund with just Rs 300 a month. Also, the fund comes with an environment-friendly 'eco-plan', which has 0.25 lower expenses than the normal plan. The 'eco-plan' is a paperless plan under which investors receive all communications through email and the web. Given the poor state of the markets, it can be expected that the fund house will take some time to ramp up.

These days, the stock markets are quite volatile in nature with a bearish bias. Rallies do not last long in the markets and peaks of market rallies are reducing. The markets are hitting fresh lows in every fall. Many blue chip stocks are trading 50 percent lower than their high levels. Many stocks are currently trading at their year's low prices or all-time low prices. Many investors have lost their hard-earned money and many others are stuck with stocks that have corrected heavily in the last few weeks. Here are some tips for investors already invested in the stock markets: 1) Hold fundamentally strong options The domestic macroeconomic fundamentals are strong. The GDP growth rate is expected to slow down slightly from the nine percent last year to around 7 - 7.5 percent this year. This is still quite good and encouraging in comparison to other developed countries. The current market crash can be attributed largely to foreign institutional investors' ( FIIs ) outflows but...

On the face of it such worries are understandable. Over the last few months, many big names have been revealed to be quite hollow. As I'm writing these words, news has come in that the AIG group, the world's largest insurer has, for all practical purposes, been nationalised by the US government, The company's top management is in the process of being sacked. Lehman Brothers has gone bankrupt and Merrill Lynch has been sold off in a distress sale to Bank of America. Who's next? Nobody knows. Here's what has been worrying investors: Tomorrow if Fidelity or Franklin or Prudential or Sun Life or BNP-Paribas or Morgan Stanley or any of the others go bankrupt or are nationalised or otherwise cease to exist, will there be any impact on the money that you've invested in their fund? The simple answer is that your money is safe. In Indian law and accounting, there's a sharp distinction between the fund company's own money and the investors' money that it is m...

Arbitrage Funds aim to capitalize on the opportunities arising from a pricing mismatch between the spot and the future markets . They constitute an asset class whose returns are not linked to the stock market. Their strategy to profit from the difference between the prices of a stock in different markets makes them immune to upswings and downswings of the stock market. They are undoubtedly less risky as compared to equity funds. These funds are suitable for risk-averse investors as they are the least volatile in comparison to all other types of funds. Moreover, these funds are more tax efficient than debt funds as they are treated in line with equity funds. The performance of arbitrage funds depends on the availability of arbitrage opportunities and volatile markets carry a higher potential of mis-pricing between the spot and derivatives markets. Hence, during such volatile times they form a good option to invest in.

IN a move that could revolutionise sale and purchase of mutual fund units by investors across the country, the Association of Mutual Funds in India (AMFI) is working towards setting up an electronic platform. This would not only benefit unit holders, but also distributors and fund houses. The electronic platform will bring paperwork to a bare minimum, improve operational efficiency, provide transaction convenience and reduce cost. The proposed electronic platform will help investors trade even in open ended-mutual fund scheme units, like in the case of shares, switch between schemes of different fund houses, and also enable mutual fund investors to view their entire portfolio on a single portal. The modalities of the platform are being worked upon by an Amfi-appointed committee. At present, if an investor wants to buy units of a scheme, online, he has to go to the web site of that fund house. He can switch between the schemes of that particular fund house, but not among schemes of d...

Asset management companies ( AMCs ), which invest the pooled funds of retail investors in securities, are said to provide more diversification, liquidity, and professional management than individual investors can themselves manage. But a look at the stocks held by 28 asset management companies show that one-third of their assets is invested in only 10 stocks. Their favourite 10 being: RIL, SBI, Bharti, ONGC, ICICI Bank, Infosys, Bhel, L&T, HDFC Bank and HDFC. AMCs of fund-houses such as Morgan Stanley Investment Management, Benchmark Asset Management, Deutsche Asset Management and LIC Mutual Fund Asset Management have invested funds to the tune of Rs 200 crore to Rs 1,100 crore in these 10 stocks. This means that this type of top-heavy form of AMCs' equity portfolio could be affected by a swing in just a few stocks. As per latest data, AMCs held maximum assets in form of shares in RIL (Rs 4,592 crore), followed by SBI (Rs 3,855 crore), Bharti (Rs 3,508 crore), ONGC (Rs 2,995...

The constraints of managing funds that invest in a select few sectors can often prove to be demanding for fund houses. As a result, it isn't entirely uncommon to find a sector/thematic fund changing/expanding its investment objective/style in due course. This bears testimony to the intrinsic inadequacy of a sector/thematic fund in terms of sustainability over the long-term. Nonetheless sector/thematic funds continue to be launched at regular intervals. Now isn't this dichotomy interesting. Why sector/thematic funds are launched in that sector/theme, there is often more to it than meets the eye. Experience suggests that fund houses find it rather easy to garner monies in new fund offers ( NFOs ) as opposed to existing funds. Maybe, it's something to do with the Rs 10 net asset value ( NAV ) that attracts investors; then again, it could be the result of the higher commission payouts on NFOs vis-a-vis existing funds. In most cases, with the exception of the investor, the NFO w...

AIG is a young fund house that has had a reasonable run since its launch in mid-2007. However, its parent, the American Insurance Group, has been in the thick of the global crisis. On September 16, it was the impeding collapse and the subsequent bailout of this insurance giant that triggered the most severe phase of the global crisis. At this point of time, AIG's future in India is completely uncertain. According to the parent company's CEO Edward M. Liddy, AIG is likely to pull out of all non-insurance businesses across the world.As a result, it looks likely that AIG's fund business in India will be sold off to someone else. The speculation is that AIG will look for a single buyer for its asset management business worldwide. However, it could take some time before AIG's future becomes clear.

Like your colleagues who throw a warm farewell for you when you leave after putting in substantial years, your employer too has a small, but significant, way of singing 'he's a jolly good fellow' to reward you for your service to the organisation. He does so by giving you a free lump sum of cash - called gratuity in financial parlance - on your exit. The amount that he gives is based on the number of years of service you have put into the organisation. Read on to know more about this little-known windfall and some ideas about what you can do with the free money that comes your way. When are you entitled? Gratuity in earlier days was rather arbitrary and completely hostage to the whims of the employer. A wealthy, well-established employer would reward his dedicated employees and the not so rich would refuse such generosities. This led to a lot of discord and finally the government stepped in, passing the Payment of Gratuity Act, 1972, making it mandatory for all employers wi...

You may have taken extra care with your insurance policy. But chances are that it may not meet the expenses resulting from an accident. So get wiser. WHAT are the must-haves in your insurance kitty? A quick response probably could be a term cover and mediclaim. But have you thought about paying premium for a personal accident cover separately? What is a personal accident cover? As the name suggests, it is a cover for an individual and his dependants from risks of accident. This includes the income loss resulting out of the treatment that follows. Take the example of Navin Sheth, a software professional, who drives to office everyday. Recently, he fractured his hand in an accident, which kept him out of action for a couple of months. The medical treatment cost him almost Rs 1 lakh. Thankfully, the personal accident policy came to his rescue, which compensated for the treatment as well as the loss of income. Any accident drains out your finances as you have to meet your healthca...

Mr & Mrs Achar, both in their early thirties, have a long list of want to-do things post-retirement. While Achar, a private banker, wants to travel a lot and write a book, Mrs Achar wants to look after their children and do some social work. The interesting part, however, is that they want to do this after 10 years, when they plan to retire! Yes, you are right, they do want to retire in their early forties and wish to pursue their passions. Wait a minute... did we hear similar voices from you too. Alright, so let's see how this can be achieved with systematic planning that includes having reasonably aggressive investment plan, regular savings and may be a slight change in lifestyle to ensure a better and safe tomorrow. Early retirement is essentially a lifestyle issue and is proportionate to one's income and consumption pattern. To retire early one needs have to do careful planning and calibrated thinking. Before making any retire plan, one should first prepare a balance sh...

Lists the 10 biggest financial mistakes investors make in their over-enthusiasm to make quick bucks HAVE you lately started falling short of your investment target or having difficulty in meeting your monthly expenses? Or have you been forced to take one credit card to clear the dues of another? If yes, you’ve got some serious financial trouble ahead, which may be because of some simple financial mistakes you must have made in the past. Surprisingly, not only common but even seasoned investors make financial mistakes, which they sometimes find difficult to rectify. For many aspects of financial planning, there is no going back, at least without some sort of penalty. The good news, however, is that it’s never too late to learn from your own mistakes or those of others. Here are the top 10 financial mistakes people generally make: 1) PUTTING OFF FINANCIAL PLANNING Undeniably, the biggest mistake that people make is to ignore the value of financial planning. Financial planning, in f...

In the stock market, the bulls are constrained by concerns over the macro-economic scenario domestically, the grim global scenario, persistent Foreign Institutional Investor (FII) outflows and the possibility of another round of monetary tightening. That does not mean the bears have a free hand. The correction in commodities, especially crude, provides ample ammunition for the bulls to conduct a short-term rally. Investors who flocked to gold as the 'safe asset' were disappointed at the way the price dropped in August. Real estate rates too have dropped and by all indications will continue to fall. No asset seems to be a safe haven anymore. The only asset that beckons is debt with interest rates rising. But would it make sense for an investor to move into debt? While this is a good time to reassess one's portfolio, it would not be wise to simply rush to income funds, Fixed Maturity Plans ( FMPs ) or fixed deposits. Read on to figure out how to make the best in such a bleak ...

The Sensex is an "index". What is an index? An index is basically an indicator. It gives you a general idea about whether most of the stocks have gone up or most of the stocks have gone down. The Sensex is an indicator of all the major companies of the BSE. The Nifty is an indicator of all the major companies of the NSE. If the Sensex goes up, it means that the prices of the stocks of most of the major companies on the BSE have gone up. If the Sensex goes down, this tells you that the stock price of most of the major stocks on the BSE have gone down. Just like the Sensex represents the top stocks of the BSE, the Nifty represents the top stocks of the NSE. Just in case you are confused, the BSE , is the Bombay Stock Exchange and the NSE is the National Stock Exchange. The BSE is situated at Bombay and the NSE is situated at Delhi. These are the major stock exchanges in the country. There are other stock exchanges like the Calcutta Stock Exchange etc. but they are not as pop...

A RIGHTS issue is a way by which a listed company can raise additional capital. However, instead of going to the public, the company gives its existing shareholders the right to subscribe to newly issued shares in proportion to their existing holdings. For example, 1:4 rights issue means an existing investor can buy one extra share for every four shares already held by him/her. Usually the price at which the new shares are issued by way of rights issue is less than the prevailing market price of the stock, i.e. the shares are offered at a discount. Why does a company go for it? The basic idea is to raise fresh capital. A rights issue is not a common practise that a corporate organisation resorts to. Ideally, such an issue occurs when a company needs funds for corporate expansion or a large takeover. At the same time, however, companies also use rights issue to prevent themselves from being conked out. Since a rights issue results in higher equity base for the organisation, it also prov...

Companies are rushing to buy back Foreign Currency Convertible Bonds (FCCBs) as the RBI’s deadline of March 31 draws closer. Firms such as Mahindra & Mahindra ($11 million), Uflex ($45 mn), Moser Baer ($4 mn) have announced FCCB buybacks in the past few days while others such as GV Films, Nahar Industrial, Everest Kanto have said they are considering bond repurchases. An FCCB is a convertible bond that is a mix between a debt and equity instrument. It acts like a bond by making regular coupon and principal payments, but these bonds also give the bondholder the option to convert the bond into stock. Around 156 companies have issued FCCBs between 2006 and 2008 raising close to $15 billion, according to Reliance Money. According to an investment banker, "now many of these bonds are trading at steep 50% discounts. So, if a seller is available then you can buy FCCB bonds worth $10 million for only $5 million”. After buying back FCCBs worth $4 million in late January, auto ...

I remember several years ago when I asked one of my brokers to explain what 'Options' was, he told me so many things which made no sense at all to me at that time. Talks about option premiums, calls and puts can be extremely confusing for somebody who has no idea at all about all these things. I will now try explaining it to you using the simple principles of learning things the Happionaire way. In the past as soon as I learnt about options, I got tempted and traded in them. Since the returns possible are quite high, a lot of us get tempted very easily. Sometimes we made huge profits trading in options and sometimes we made losses. In the end I don’t think I made any substantial amount of money trading in options. Luckily I didn’t risk too large an amount and learnt a lot from the mistakes I made. 'Options' explained in a very simple way by sharing a small story below. Let us say you want to buy an apartment. After searching a lot you find a nice apartment that costs Rs...

Financial planners and bankers point out that poor credit management is becoming a common occurrence. Currently, gross domestic savings is at 30 percent of the gross domestic product. But an increasing number of families are going in for easy credit without looking at the repercussions. Why debt counselling? Sloppy credit assessment, the availability of easy credit, and a low level of public awareness about the financial implications of credit options are making indebtedness a serious concern. Throw in the increasing preoccupation with an affluent lifestyle, and the scenario gets bleaker. Many also borrow to speculate in stocks, realty and even to outright gamble. People are used to a 20-25 percent increase in annual income. But what happens if there's a slowdown? Over commitments can get you in trouble. The entire family might pay the price, through domestic disharmony. This is why debt counselling - a common service in the developed world - has become an urgent requirement ...

A reverse mortgage is a product that’s structured around the needs of senior citizens for regular income. What’s more, the legal heirs can repay the loan and retain the property. You may want to know what a reverse mortgage is and how it can help you remain independent. Here’re the major points. WHAT ARE THEY? Reverse mortgages are products that have been structured around the need of senior citizens for a regular income. Instead of approaching a bank for a loan, which you have to pay it back as installments, a reverse mortgage allows you to mortgage your house to a bank or a housing finance company, which pays you a regular amount at regular intervals. This amount can be used for fulfilling your needs excluding any speculative or trading activity. Some of the banks/housing finance companies which provide reverse mortgage services include LIC Housing Finance, Dewan Housing Finance, Punjab National Bank, State Bank of India and Axis Bank. ELIGIBILITY CRITERIA To avail of a reverse mo...

A RECESSION can be loosely defined as a slowing down of the activity in an economy or when the economy enters a phase of negative growth . Since the GDP is a measure of the economic growth of the economy, a technical definition of recession would be a decline in the GDP growth of a country over two or more consecutive quarters of a year. This is very often accompanied by a fall in the stock markets. Many experts feel that a recession is a part of a normal business cycle after a period of growth and feel that it could last anywhere between 6-18 months. During a recession, there is generally a lowering of interest rates in order to pump liquidity back into the economy. The line between where recession ends and depression begins is often debated. However, most experts feel that when the GDP has fallen by over 10%, then it can be defined as an economic depression. There are, however, many who feel that GDP is not the only indicator and hence they look upon employment, industrial prod...

US GOVERNMENT debt, long considered the safest investment in the world, looks like it too has been hit by “bubble” fever. Prices of US Treasury bonds appear dangerously overstretched after a soaring rally, another sign of how financial markets have been turned on their head. Treasuries are the riskiest securities on the planet. While few fear that the US government will fail to honor its debts, many see a risk that bond prices may plunge just as spectacularly as house, commodity and stock prices have in recent months. It looks like the Treasury market is in bubble territory. The rally in the nearly $5 trillion US government bond market picked up speed this week when the Federal Reserve hinted it may buy longer maturity government bonds. Fears of a bubble in Treasuries underscore how far investors have fled from risk since ballooning house price valuations popped in 2007, causing huge losses in markets across the board and sparking a global economic crisis. Yields on long...

The domestic investors are increasingly realising that it takes a combination of timing, patience and probably little bit of luck to make money from the stock markets. Those who missed the opportunity of booking profits during the earlier boom run are regretting, and even those who made an entry less than a year ago are not a happy lot. That is sure to make many wonder what it takes to be an investor in the stock markets. Check out if you have these traits. Risk appetite Equity sure lets you earn more money but not all your investments can turn into a goldmine. This is particularly true when you bet on stocks. As a result, an equity investor needs to have the ability to take risks which could be in the form of negative returns. While the prospects of loss of capital are much lower when the investment horizon is long, there are chances that some stocks may not recover even in the long term due to a change in their business prospects. In such cases, 'stop loss' becomes a st...