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Showing posts from May, 2010

Mutual Fund Review: UTI Opportunities

    The right sectoral calls have helped this fund's performance in recent years   As the name implies, the fund has accomplished what it stated it would do. And in the bargain, has made money for its investors.   Launched in July 2005, it got off to a weak start. It delivered a meagre 11 per cent in 2006, underperforming both, its category and benchmark by huge margins. One of the reasons being the high allocation to mid cap stocks when it was large caps that rallied that year. Coupled with sector picks that went wrong, such as being overweight on Auto (BSE Auto was among the worst performing indices that year).   Come 2007, the fund began to make up for lost ground. Upadhyaya took over in March 2007 and since then the fund's performance has been more than impressive. Over the 3- year period ended February 28, 2010, it was the best performing fund in its category with an annualised return of 20.01 per cent, double than that of its benchmark (10.30%) and category av

Fidelity MF to pay bonus to loyal investors

Eligible investors will receive two free units at present NAV for 500 units of fund   In an effort to keep investors locked in for a longer duration in its scheme, Fidelity Mutual Fund has announced a loyalty premium to those who have remained invested in Fidelity Equity Fund since its inception. The eligible investors will receive two free units at present net asset value (NAV) for every 500 units of Fidelity Equity Fund held since inception. The units will be added to investors' portfolio on May 18. Fidelity Equity Fund was the first fund of FIL Fund Management, which opened for subscription in May 2005. Since inception, the fund has given an annualised return of 25.23 per cent. The scheme had Rs 2,871 crore asset under management as on April 30. Ashu Suyash , MD and country head of Fidelity International, said: "We are delighted to offer this loyalty premium. We hope this will encourage more customers to stay invested in our equity funds in their own best interest

Understanding Power Of Attorney

  What does power of attorney mean? A power of attorney (PoA) is an instrument in writing empowering a specified person to act for and in the name of a person executing it. In other words, a power of attorney is an authorisation to act on someone else's behalf in a legal or business matter. The person authorising the other to act is the grantor/principal of the power and the one authorised to act is the attorney/agent. It is a unilateral document signed and executed only by the grantor or principal. A PoA may be revoked at the instance of the grantor or due to his death or incapacity. A PoA is usually construed very strictly. The PoA is frequently used in the event of a principal's illness or disability, or when the principal is out of the country and can't be present to sign necessary legal documents for financial transactions. Why should one make a PoA? Who should one choose? There are many reasons to make a PoA, as it ensures that someone will look after your finan

Mutual Fund Review: MAGNUM CONTRA

  The funds objective is to invest in undervalued scrips, which could be out of favour at the time of investing, but may show attractive growth over long-term. But, Magnum Contra has underperformed the category average in just 2 years out of the 10. Reason: It had transformed into a equity diversified fund sticking to consensus sectors. The funds higher allocation to auto in 2007 and lower to financials is a case in point. Currently, it is betting on oil & marketing companies (OMCs) and petrochemicals because there is a lot of pessimism and under-ownership built due to concerns on the near-term outlook. While underweight on information technology, this scheme is overweight on telecommunication and is more bullish on utilities, cement and hotels, as compared to it's peers. What you will find here is a diversified, multi-cap portfolio with a cautious view on contra bets. Its impressive returns of 2004 and 2005 may no longer be replicated, but it's long-term track rec

How to read stock price against company earnings?

    The PE and the PEG ratio, if used properly, are powerful tools for evaluating whether a stock deserves your investment Should I invest in this stock? The pursuit of an answer to this question is what keeps investors occupied round the year. One can use a host of quantitative and qualitative parameters to arrive at an answer. Two that most savvy investors employ are PE and PEG ratio. Here is a detailed look at both these ratios and how they can help you choose a stock.   PE Ratio The Price to Earnings ( PE ) ratio is among the most frequently used metrics. In essence, it is the company's current stock price divided by its earnings per share ( EPS ). In other words, the PE ratio tells you how much you are paying for every rupee of the company's earnings.   In the above equation, the numerator is the current price of a single share. But depending on what the annual earnings per share (denominator) is, you can have two types of PE ratios.   Historical PE. When in

Stock views on Patel Engineering, L&T

Angel Sec on L&T - Target Rs 1809   Angel Securities has recommended accumulate rating on Larsen & Toubro, L&T with a target of Rs 1809, in its research report. "L&T has always traded at a premium to Sensex valuations, and has outperformed the Sensex on a consistent basis, given its  strong operating cash flows , superior return ratios (in excess of 20%) and  excellent capital efficiency. In recent times (over the last 6 months), the stock's  performance has been subdued, given poor quarterly performances and rich  valuations that provided limited scope for disappointment. However, going ahead, we believe that L&T would outperform on the back of: 1) Strong  quarterly numbers, resulting in the fading away of market concerns over  execution, 2) Robust order book, 3) Recent underperformance giving an entry  opportunity for long-term investors , and 4) 18% Earnings CAGR expected over  FY2010-12E. Hence, we maintain an Accumulate on the stock, with a revis

The Canara Robeco InDiGo

    A very innovative debt scheme. The Canara Robeco InDiGo Fund will invest in debt and money market instruments (65-90%) and gold (10-35%). InDiGo is a sort of abbreviation for Income from Debt Instruments and Gold.   The debt portfolio will comprise high quality paper (to minimise credit risk), short-term (to avoid duration risk) paper with the focus on generating a steady stream of interest income with a low level of risk. The gold portion will find its way into a gold exchange traded fund (Gold ETF).   The portfolio will be rebalanced every 10 days and the final call on the actual allocation between the two asset classes will be made by the fund manager. The latter will take his cue from seasonal patterns of gold, global and domestic macro economic events, and government policy and Reserve Bank of India (RBI) actions to decide on the actual allocation.   The fund management team has looked at data since 2000 and has narrowed down on periods during the year when India wi

Investing in foreign stocks will become easier through Indian depository receipts (IDRs)

  Indian investors have had the option to buy shares listed on foreign stock exchanges for a few years. The process is set to get much easier, with the introduction of Indian Depository Receipts ( IDRs ). Just as investors abroad can participate in Indian companies' issues through the American Depository Receipt ( ADR ) and Global Depository Receipt (GDR) route, Indian investors can now invest in foreign companies through the IDR. Standard Chartered Bank will be the first IDR issue, opening May 25. IDRs are depository receipts that represent ownership interest in shares of an overseas company. The subscribers will receive depository receipts in dematerialised form. A particular receipt would represent a number of shares; for example, one receipt could represent four shares of the company. These receipts act as shares and convey the same rights as a normal shareholder, such as access to dividends and voting. The underlying shares would be held by another depository in the cou

SBI Mutual Fund has announced the launch of its SBI PSU Fund

    It is an open-ended equity fund.   The fund will mainly invest in a basket of stocks of Public Sector Undertakings ( PSUs ) and a small portion in debt instruments issued by PSUs. While it will invest up to 100 per cent in equities of PSU, it may also allocate up to 35 per cent in debt.   Through this fund, the fund house aims at capitalising on stored value through disinvestment. Disinvestment tends to improve price discovery, valuation and liquidity of such stocks.   The fund will cherry pick PSUs that are likely to emerge as more robust and vibrant players in different industries of the economy as the disinvestment process takes place.   The industries where PSUs have a strong presence are infrastructure, exploration and exploitation of oil and natural resources, technology development and capital goods.   Currently there are two other funds falling under the equity category which follow a similar investment strategy - Sundaram BNP Paribas PSU Opportunities Fund

Sebi panel may bar MFs from selling equity options

  A COMMITTEE of market regulator Sebi will consider the issue of restricting mutual funds from selling an equity product that involves betting on future prices.    The Sebi Mutual Fund Advisory Committee is concerned that this is not mutual funds' core activity and may take a decision on May 31. Equity options is a derivative product where investors bet on future value of stocks or their indices and Sebi is against mutual funds getting into the hedging business, as it could suffer losses.    In a letter sent to all fund houses recently, Sebi had sought proposals from asset management companies ( AMCs ), regarding selling of equity options and an increased disclosure of their investment in this segment, sources in fund houses said. Mutual funds have already submitted their view to Sebi and they may be reviewed at the Sebi's Mutual Fund Advisory Committee meeting scheduled on May 31. "MF industry body Association of Mutual Funds of India ( Amfi ) has already submitte

Now breath easy with New Saral form to file tax returns

       The Central Board of Direct Taxes (CBDT) has come out with a new income tax Form - Saral-II. The new form aims at making the process of filing tax returns easier for individual taxpayers. The form is to be used to file the income tax returns for the financial year 2009-10 (assessment year 2010-11).    The Saral-II is a two-page form. It was mentioned by the Finance Minister in his budget speech for 2010-11. This form will enable indi viduals to enter relevant details in a simple format in only two pages. The form can be downloaded from the Income Tax Department's website ( www.incometaxindia.gov.in ). It has to be noted that: • ITR-1 has been renamed Saral - II • E-filing will be also available along the lines of last year ITR-1 • New addition to the format of ITR-1 is that an assessee can show 'Income from House Property'. The house property income can be from one property only. If more, use ITR-2. An assessee can show loss from house property (interest paid)

BIRLA SUNLIFE INDIA REFORMS FUND - NFO

  Birla Sunlife's New Fund To Focus On Policy Change, Divestment And Government's Increased Spending On Core Sectors    THE communication revolution has not just made telephone services cheaper, it has also created enormous wealth for shareholders in telecom companies over the decade. This win-win situation will not have happened without sweeping reforms.    There has been better utilisation of available resources and increased participation by the private sector in all sectors that have seen reforms. Reforms, be it the green revolution or the white revolution, have changed lives and opened up vast opportunities. As the government continues its journey on the reforms path in many sectors, investors are being offered an opportunity to participate in the process. A dedicated approach to this opportunity can be found in the new fund on offer from Birla Sunlife Mutual Fund – Birla Sunlife India Reforms Fund. THE FUND The investment objective of the fund is to generate growt

Mutual Fund Review: Magnum IT

    Magnum IT has left its peers way behind in the returns game but is still is a risky bet for any investor   If you look at the 1-year return of Magnum IT , it is nothing short of impressive. At around 147.74 per cent (March 31, 2010), it ranks amongst the top 10 in the entire category of equity funds. That was the good news.   The bad news is that its track record, as far as performance goes, is pretty spotty. Moreover, it has witnessed a fair amount of turnover where fund managers are concerned. Launched mid-1999, the fund got off to a really pathetic start. From 2000 to 2002, it managed to be consistent by maintaining its second worst performer spot all through those three years. Not that it was particularly impressive in 2003 and 2004 either. However, Magnum IT enjoyed a banner year in 2005. The reason? Sandip Sabharwal took over the fund that year and the result was that it catapulted to the No. 1 slot and changed its fortunes for the better. But that victory was sho

Nominee Versus Legal Heir

A nominee is simply a custodian for most assets, except in case of equities Last week, when the Supreme Court ruled that a nominee may not necessarily be the beneficiary of a deceased person's proceeds, it opened a debate regarding the status of a nominee vis-à-vis a legal heir. The well known theory is that a nominee is merely a trustee, not the owner. He/she may temporarily possess the money, but will have to hand it over to the heir when the situation arises. For most investments, the legal heir is entitled to the deceased's assets. For instance, Section 39 of the Insurance Act says the appointed nominee will be paid, though he/she may not be the legal heir. The nominee, in turn, is supposed to hold the proceeds in trust and the legal heir can claim the money. Similarly, Reserve Bank of India ( RBI ) guidelines specifies that the deceased's nominee would receive the money in the capacity of a trustee of legal heirs. The same applies for all other financial transacti

Mutual Fund review: HDFC EQUITY

  After putting an impressive show in 2005, it delivered a pretty muted performance in 2006 and 2007. Even if the fund suffered temporarily, it stuck to good quality businesses, diversification and is wary of richly valued investments. In 2007, low exposure metals or construction and energy helped the fund. This fund fell 50 per cent in 2008, marginally lower than the category average (54 per cent)without plunging into large caps or aggressive cash calls. It was fully invested when the market picked up in March 2009 returning 106 per cent. The large corpus has resulted the fund get more diversified. With less than 20 stocks in the portfolio till 2003, it now holds 60. The top 10 holdings have averaged at around 40 per cent in past one year. All in all, despite hitting the occasional road block, its still one of the sturdiest shops around.

Retirement planning - Better late than never

While it is best to begin early, there are options for those starting on their retirement plans later in life too      It is very important to think about and plan for life after retirement. Individuals should start planning for their retirement fund as early as possible. Investing early gives time to your investments to grow by way of compounding. Also, one can invest in instruments with a higher risk-return ratio.    Considering factors such as increase in average lifespan, financial commitments, higher cost of living, higher cost of medication, competition, nuclear families etc, it becomes even more important to start early so that you become totally independent in your golden years.    Although it is important that one should start retirement planning as early as possible, there is no hard and fast rule on when one should start. The point is that you should not delay it unnecessarily. Those who have not yet thought about retirement planning can start from today.    Some fe

Home-loan swaps - Prepayment Rules May Be Changed To Help Borrowers Escape Rate Hike By Banks

  THE government may seek changes in the pre-payment rules to enable a home loan borrower to shift to cheaper lenders if his bank raises interest rates soon after disbursing the loan. The government wants banks to provide a two-month window to their new borrowers to shift to some other bank without prepayment penalty if they have raised interest rates too quickly after disbursement. The finance ministry is likely to take up the matter with the central bank to seek these changes.    "If a bank hike interest rates within a month of the loan taken by a customer, the borrower should also be allowed to look for cheaper options without paying any charges," said a senior finance ministry official adding that levying a pre-payment charge in such cases was like a double penalty.    The government is not convinced with banks' argument that allowing easy foreclosure without any penal charges may lead to asset-liability mismatch. "The aver age maturity of deposits a bank ho

Opting for Co-payment may suit both insurer and you

  If you are a healthy person, it makes sense to opt for a co-payment policy as your premium outgo would be much less    Faced with the challenge of trimming losses in their health portfolio, particularly in the group mediclaim segment, many non-life companies are exploring ways of keeping their costs in check. In line with the objective, several health insurers have introduced the co-payment clause, mainly in the group mediclaim policies offered by them, with a few companies having extended the same to individual policyholders as well. Going forward, the number of companies looking to bring individual health policies into this fold is likely to go up. How Does It Work? Co-payment refers to the portion of claim that a policyholder agrees to bear, while the insurance company undertakes to chip in with the rest. The co-payment ratio, though a function of pricing, is arrived based on market acceptance. Not many people would be interested in purchasing a health policy with a co-payment

Mutual Fund review: ICICI PRUDENTIAL DYNAMIC

  It reduces exposure to equities when the market is high and gets fully invested when valuations are low, as the risk-return trade-off is better and opportunity is greater. The fund can fully get into equity or liquidate the holdings to zero. Over the past few years, its equity holdings dropped to 76 per cent. The fund has a defensive nature underweight on domestic consumption, interest rate cyclicals. But, it bets on energy for being more conservative than commodities. The fund has tremendous flexibility, to shift between asset classes and market caps. It started as a large-cap fund, moved to mid-caps in 2003 and was back to large-caps in 2006. Its performance has not always been impressive. But, over a 5-year period, this fund has a better potential to outperform than other funds.

Fund review: Tata Balanced

  THE fund is not for the faint-hearted investors but for those who can stay put for the long run. What is impressive about the fund is its ability to compensate well in a rising market. And this has helped the fund build a competitive record over the long run. Over the five-year period ending April 30, 2010, the fund has delivered an annualised return of 22 per cent against its category's 18 per cent. In the 2008 bear phase though, it shed 44.78 per cent, slightly higher than its category's fall of 42.70 per cent. But in the subsequent bull run (09/03/ 2009 to 30/04/2010) it delivered 83 per cent against category's 70 per cent. From 2003 till 2007, it has outperformed its category in every year except for 2005 when it delivered average performance. In 2007, it beat its category by an impressive margin of around 12 per cent. The fund's equity allocation can move between 65 and 75 per cent. Although historically, its equity allocation has gone below 65 per cent

Tata Mutual Fund's PSU Equity Fund

    Tata Mutual Fund has filed an offer document with the market regulator the Securities and Exchange Board of India (SEBI) seeking its approval for the launch of the Tata PSU Equity Fund, an open ended equity fund. The scheme is looking to invest predominantly (at least 65% of the corpus) in equity/equity-related instruments of public sector undertakings (PSUs). This may even go up to 100 per cent.   The scheme has left it open to invest up to 35 per cent each in other equity/equity-related instruments, foreign securities and debt and money market instruments. Except for debt and money market instruments, the risk profile is high.   The Tata PSU Equity Fund will be a sector-specific fund and the fund house is at pains to explain to the market regulator that none of its   other funds matches this mandate.   The fund has been benchmarked against BSE PSU Index. The fund would be managed by Venugopal M. He holds a MBA (Finance) degree and a BSC (Mathematics) degree. He has
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