Prajna Capital - An Investment Guide

    A LARGE-CAP bias, consistency of returns and good downside protection makes the fund a good pick for a core holding of any portfolio. With a strategy to invest in the top 100 companies by market capitalisation, the fund has outperformed its peers in a consistent fashion and is the best performing fund over the longrun among its peers set. Launched in February 2003, it has turned in returns ahead of its peers every year and in the market downturn in 2008, it shed just 45.54 per cent against category's 52.32 per cent. The fund manager is not hesitant of taking aggressive sectoral bets and at the same time making quick in and out of sectors in case of opportunities or lack of it. The fund looks fairly diversified with around 38 stocks in the portfolio over the past one year and the top five holdings accounting for close to 25 per cent of the portfolio. Although, the allocation to a particular stock has exceeded eight per cent on quite a few occasions, investors don...

  This tiny fund packs quite a punch. After an absolutely dismal 2006, it shot to prominence in the bull run of 2007 and 2009. Its fall in 2008 was in-line with the category average. Fund's philosophy is to buy stocks with asecular growth story. It focuses on longterm growth opportunities in India and not market direction. In December 2008, when the fund's exposure to cash and debt was high amongst equity funds, it was exposed 83 per cent to equity, which rose to 88 per cent over the next two months. By March 2009, it was at 90 per cent and by May, it was fully invested (96 per cent). This put the fund in an enviable position. Despite the agility a small fund offers, this fund opts for a large-cap bent, refrains from frequent churning and tilts towards a buy-and-hold approach. There has been a tilt in the fund's portfolio from asset creators to asset owners. The fund manager is cautious on infrastructure as it is a very long-term growth story and the sector is rich...

    Recently, Franklin Templeton Mutual Fund came out with the proposal to shut down one of its funds - Franklin India International Fund ( FIIF ) - a fund that invested in foreign debt.   Launched at the start of 2003, FIIF was essentially a feeder fund, the parent fund being Franklin US Government Fund. The mandate of Franklin US Government Fund is to invest solely in government-backed Government National Mortgage Association (GNMA) pass-through securities popularly known as Ginnie Mae with provisions for also going into cash.   Unlike the mortgage backed securities of Fannie Mae and Freddie Mac, the security issued by Ginnie Mae was not severely hit by the downturn in the U.S. housing crisis of 2008. So the question that begs to be answered is: Why is the fund house shutting down the fund?   The reason cited is "the strengthening rupee against US dollar which has resulted in a sharp reduction for demand of the fund."Fair enough. But after the rupee appreciated ...

    When a mutual fund advertises high returns on a particular equity scheme, investors get lured. If the actual returns disappoint, they stay on, hoping for luck to turn, or move to another top-ranked (as they believe) scheme. The fundamental question is whether returns should be the sole or crucial differentiator to pick an MF scheme. Returns are one of the most important aspects, but you shouldn't ignore other factors. Returns Demystified : First, let us understand the concept of "returns". Take the case of an equity growth scheme. For simplicity, assume the NAVs are as given below : In this case, we have different absolute returns for different periods. The simple average annual return since inception is 16 per cent. The absolute return for the first six months is 20 per cent, whereas for the first year it is only 10 per cent. If you calculate the return from June 30, 2008, to June 30, 2009, it is zero. The above example makes it clear that a return by itself m...

  How it makes sense to go in for life insurance at an early age as the amount of premium to be paid is lower    There are some charges besides the premium that one pays on a life insurance plan. These include commission paid to the insurance agent, administration charges towards your policy, mortality charges etc. The major argument for taking a life insurance policy at an early age is that you can get it at a very low premium. The premium for a traditional term plan increases with age. Whenever you buy a life insurance policy the company will levy a charge for the life cover and to cover certain other expenses.    Mortality charge is a part of a life insurance premium. This is the actual cost of insurance in a life policy. In most policies, the bulk of the premium goes towards investing in a savings fund which is returned to the policyholder when the policy matures. Mortality charge is deducted from the policy's account value.    Most companies go by a table of charges pr...

This article outlines the benefits of investing in a ULIP that is both an insurance and investment    Insurance has long been an instrument of risk mitigation, an investment avenue, and tax-saving option. Insurance companies offer investment plans that give investors the option of choosing the risk exposure in the insurance policy. This affects the returns offered by the policy. This sort of a plan is called a unit-linked insurance plan ULIP).    ULIPs are dynamic plans and flexible by nature. Hence, they allow changes and offer a high degree of customisation, as opposed to most of the financial plans that once purchased cannot be modified. It is because of the embedded characteristics of transparency, flexibility, liquidity and goal-based savings that ULIPs have emerged as a preferred investment option.     These plans offer: • Flexibility • Transparency • Tax benefits • Savings • Capital appreciation Insurance and risk cover     The premiums paid by investors are divided into ...

  With global warming leading to more natural disasters, need for house insurance is greater   DO YOU really need home insurance? Victims of the Mumbai or Andhra Pradesh floods or those hit by the earthquake in Gujarat and Uttarkhand will say you definitely do. Most Indians do not bother to take a home insurance policy, even though the rates for a basic home and contents cover are very low. So how much cover do you require and what do you need from your home insurance cover? Here are a few pointers: Cover against fire: If you are a homeowner, then the structure of your home itself is highly important and needs to be covered against fire. Cover against natural calamities: Make sure that the home insurance product you choose gives you adequate cover against unforeseeable risks and natural calamities such as earthquake, flood and cyclone. With global warming leading to more frequent natural disasters the need for such insurance is even greater now. Terrorist activities: This is...

  House rent allowance is one of the most important components of one's salary, and gets taxed if not claimed for    HOUSE rent allowance, or HRA, is a major component of your salary. This is given by an employer to an employee to meet the cost of renting a home. As a salaried employee you can claim a tax exemption on such an amount. But there are certain conditions that you need to understand to claim such exemptions. How is the exemption on HRA calculated? The tax exemption on HRA is computed as the minimum of following three conditions: i)                     Actual HRA as per you pay slip; ii)                   40%/ 50% of your basic salary; iii)                  The rent amount minus 10% of the salary    If you stay in a metro —Mumbai, Kolkata, Delhi or Chennai — your HRA would be 50% of your salary. In other cities/towns, it would be 40% of salary. For example, if your salary is Rs 40,000 and you live in Mumbai, HRA would be Rs 20,000 (50% of the salary). Let...

    WE LIKE this fund for its solid long-term record and skilled management. Its historical performance has been impressive. But its performance in recent years has kept investors worried. In 2006, it was a very average performer due to high exposure to defensives. In 2007, its category underperformance was a result of wrong sector moves. Energy was offloaded even when the going was good. "The portfolio moves were, in my opinion, consistent with our investment approach. The criteria that go into selecting stocks/sectors are quality, our understanding, growth prospects, valuation of businesses and the composition of the benchmark — BSE 200," says fund manager Prashant Jain. So why do we continue to think highly of this offering? Ever since Jain took over in early 2002, the fund shed less than the category average in all declining quarters, barring June 2004 when the fall was in line with the average. The fund's success in standing upright in a bear market, such ...

    LOOKING for a consistent and steady offering, and value a good night's sleep? This one is for you. An average performer in rising markets, it has made its mark in downturns. But its longterm track record will keep its investors happy. Its 3-year annualised return of 14 per cent (April 30, 2010), is ahead of the category average of 10 per cent. The fund manager will not chase performance at any cost. So sectors riding on a momentum, as was the case in 2007 with metals and construction, will not lead him to bite the bullet. Even if he has to compromise with lower returns. It 2008 it was the third best performing fund among its category. Instead of resorting to aggressive cash calls (averaged at just 5 per cent), it increased exposure to FMCG and healthcare. Dabur India, United Spirits, Lupin and Dr Reddy's Laboratories were added to the portfolio and more purchases were made in HUL, Marico and Nestle. Apart from this, the distinct large-cap bias of the fund came ...

      VEHICLE financing firm Magma Fincorp expects regulatory clearance for its general insurance venture with a Germany-based company during this year. "We have applied to Irda for approval and expects its nod during the year," Magma Fincorp chief financial officer V Lakshmi Narasimhan said. The joint venture with HDI-Gerling International Holding is expecting R1 (initial approval) clearance soon as the process is almost complete, he said. Asked if the proposed company can start its operation in the present financial year, Narasimhan said that it will depend on the clearance from the regulator Irda as well as product s approval which also takes e about 2-3 months. The proposed joint venture, where foreign partner a will have 26 per cent stake, s will leverage on the " strengths of the two companies to offer general insurance products through the existing strong distribution and service network l of the Kolkata-based Magma with deep penetration in rural India,...

    URI Dividend Yield has shown its worthiness by successfully navigated through good and bad times The mandate demands an investment of at least 65 per cent of the portfolio in equity shares that have a high dividend yield at the time of investment. A look at the track record makes one wonder whether the fund manager follows this principle diligently. Its impressive performance in 2007 was because Kulkarni hopped on to the Energy and Metals bandwagon by re-entering Tata Power and adding RIL , SAIL and Tata Steel . That year, the BSE Power, BSE Oil & Gas, and BSE Metals all delivered handsomely. But Kulkarni says that she has never deviated from the mandate. "Almost always 70 per cent of the portfolio will be in stocks qualifying as high dividend yield," she says. "Even in the peak of the bull run in January 2008 we were within these limits and never deviated from our mandate."   The objective is best suited to those who want decent returns with good ...

    ICICI Prudential Mutual Fund has launched a new fund, ICICI Prudential Nifty Junior Index Fund. It is India's first open-ended index fund that will track the CNX Nifty Junior. The new issue closes on 21 June, 2010. The scheme will allocate 90 to 95 per cent of its assets to equity and equity-related securities of companies constituting the CNX Nifty Junior and exchange traded derivatives on the CNX Nifty Junior Index. It will further allocate 5 to 10 per cent of assets to debt and money market instruments (including securitised debt).   CNX Nifty Junior represents about 12 per cent of the free float market capitalisation (as on December 31, 2009) of the National Stock Exchange. The index has a combination of mid-caps and large-caps and is more volatile than the S&P CNX Nifty. CNX Nifty Junior is made up of 27 industries, with the top five industries contributing 46.6 per cent of the index's total weight.   Presently, two options are available under the scheme ...

  This ones huge and one of the best. Reliance Growth is the largest fund in its category. Yet, this big size hasnt stopped fund manager Sunil Singhania from earning it the top performers position as well. The funds five-year annualised returns are its categorys highest. Since 2001, it has beaten the category average every single year. The fund manager has managed to achieve all this by chasing growthoriented companies. He likes to stay invested for longer periods and doesnt adhere to quick exits. Some of his all-time favourites have been Jindal Steel & Power, Reliance Industries Ltd, Divis Laboratory and State Bank of India. On sectors, his top picks are financial Services, metals and energy. This preference for metals, along with aggressive cash calls, exposure to derivatives and a high amount of diversification, is what helped the fund stay afloat in 2008. Big ships can sink fast, but Reliance Growth didnt. Its able captain managed to restrict its fall to 54 per cent (category ...

  Credit cards have become a part of life for most individuals. Obviously, they come with benefits. However, if used wrongly, the cardholder can also land up in trouble. Huge number of cards is one reason why most cardholders face problems. People keep adding cards as getting a card is very easy, especially for those with a regular income and a good record. This is one stage where an individual has to be alert: they need to be selective in their choice of a bank, as well as the total number of cards. With six to 10 cards, even managing the details becomes a problem. Here are a few areas that need attention: a little care can make a big difference. PAYMENT There are several benefits touted for using multiple cards. One of the biggest is the credit period for repayment. This can be done by using the card that has just started its credit period. For example, if the billing cycle for one card is from the 1st to the 30th of the month, with the payment due date on the 15th of the next mo...

    Despite high churn, Reliance Regular Savings Equity has managed to fetch good returns   In its short history, this one has made its mark. Though its annual and trailing returns are amazing, the fund started off on a lousy note (last two quarters of 2005). It managed to impress in 2006 and was turning out to be pretty average in 2007, till Omprakash Kuckian took over in November 2007 and wasted no time in changing the complexion of the portfolio. Exposure to Construction shot up to 28 per cent with almost 21 per cent cornered by Pratibha Industries and Madhucon Projects . Exposure to Engineering was yanked up (18.50%) while Financial Services lost its prime slot (dropped to 6.69%) and Auto was dumped. That quarter (December 2007), he delivered 54.66 per cent (category average: 25.70%).   When the market collapsed in 2008, thankfully the fund did not plummet abysmally. But even its high cash allocations could not cushion the fall which hovered around the category average. ...

    Launched in February 1995, Birla Sun Life Advantage Fund is the oldest diversified equity mutual fund from the Birla Sun Life basket. However, the fund has been overtaken by its newer diversified equity siblings, both in terms of performance as well as growth in assets under management ( AUM ). Thus, notwithstanding its 15-year long existence, the fund has just about Rs 400 crore of AUM today. PERFORMANCE From being one of the top-performers in the late '90s to an average performer since early 2000, Birla Sun Life Advantage Fund has had an eventful record. In fact, in the past five years, the fund's performance has just been more or less at par with its benchmark index - the Sensex.    In 2005, for instance, the fund returned about 43% against the Sensex gains of about 42% followed by a poor show in 2006 when it returned just about 34% against the Sensex returns of nearly 47% in that year. The fund, however, made a quick come back in 2007 when it outperformed the Sense...

        Peerless Mutual Fund, which has total asset under management ( AUM ) of Rs 823.38 crore (as on 31 May, 2010), has launched a new fund, Peerless Income Plus Fund. With this launch the fund house now offers three funds. The new entrant registered the highest, 65.9 per cent, growth in AUM in May.   Income Plus Fund is an open-ended debt scheme that belongs to the monthly income plan (MIP) category. The fund will invest 80-98 per cent in debt and money-market instruments and 2-20 per cent in equity and equity-related instruments. The scheme seeks to generate regular income through a portfolio of predominantly high-quality fixed-income securities, and capital appreciation with a marginal exposure to equity and equity-related instruments.   As for the investment philosophy of the fund, Akshay Gupta, chief executive officer, Peerless Mutual Fund says: "We will manage this fund conservatively so as to ensure minimum volatility and consistent returns. This is practically ...

  IDFC Premier Equitys fund manager, Kenneth Andrade, says it aims to capture shifts in the business environment with regard to new opportunities, technologies and trends. True to his belief, he doesnt hold back from taking bold, contrarian calls. He is one brave manager, but his convictions havent let him down. The fund has the highest three-year annualised return (27 per cent) in its category, as on April 30. If you think thats remarkable, hear this: in 2007, the fund was streets ahead of its category, delivering 110 per cent, 46 per cent more than the category average. The manager achieved this without going overboard on metals. He concentrated on services, his favourite sector. The fund remains focused on strong sectors and smaller companies. The portfolio is invariably tight. These traits might give it a risky appearance, but it isnt really. No stock ever goes beyond a seven per cent holding and the portfolio shuffles with around 30 stocks. The fund has not only done well in bul...

  When the markets are falling, ICICI Prudential Dynamic is the fund to go with   The very nature of this fund ensures that it will have excellent defending capabilities during market downturns. Its market strategy causes it to reduce exposure to equities when the stock market is high and get fully invested when valuations are low as the risk return trade off is better and opportunity is greater.   The fund manager has the discretion to go fully (100%) into equity or liquidate his holdings to zilch (0%). Over the past few years, his equity holdings dropped to a low of 76 per cent. And, true to mandate, that was not in 2008 when the market collapsed but in July 2009 when the rally began to gain in momentum.   Besides the asset allocation, this portfolio stands out with regard to its defensive nature. "As the valuation of a theme expands and enters into a bubble territory, we tend to be underweight in it which helps the fund mitigate downside risks well," explains Na...

    Scouting for value stocks might make it different, but Tata Equity PE's performance speaks for itselfï   Tata Equity PE got its act together in 2007 when its bold allocations to Metals, Energy and Financials delivered impressive returns.   The fund's strategy is to invest at least 70 per cent of its net assets in stocks that have a trailing P/E less than that of the Sensex at the time of investment. But this does not necessarily imply that the portfolio would naturally be value based. Simply because the fund managers gravitate towards low PE stocks does not translate into them offloading when it goes up. Moreover, they have a free hand with the balance 30 per cent.   The fund's mandate to scout for value will result in a portfolio that is quite different from its peers. In 2008, the fund managers cast their lot with Metals. While the category average allocation to that sector was around 6 per cent that year, there were times when this fund had it at 29 per cen...

  What is the Banking Ombudsman Scheme? The Banking Ombudsman Scheme provides an expeditious and inexpensive forum to bank customers for resolution of complaints relating to certain services rendered by banks.    The Banking Ombudsman Scheme was introduced under Section 35 A of the Banking Regulation Act, 1949, by RBI in 1995. The Banking Ombudsman is a senior official appointed by RBI to redress customer complaints against deficiency in certain banking services. Where can one lodge his/her complaint? One may lodge his/her complaint at the office of the Banking Ombudsman, under whose jurisdiction, the bank branch complained against is situated. For complaints relating to credit cards and other types of services with centralised operations, complaints may be filed before the Banking Ombudsman within whose territorial jurisdiction, the billing address of the customer is located. Can compensation be claimed for mental agony and harassment? The Banking Ombudsman may award compe...

    This impressive multi-cap fund boasts of a good long-term track record   Though not particularly true to its calling, it's an impressive multi cap player. The fund's objective is to invest in undervalued scrips which could be out of favour at the time of investing, but are likely to show attractive growth over the long term. So if one invests in such a fund, there would be periods when the fund would underperform the category average simply because of its stock picks. But Magnum Contra has underperformed the category average in just two years, out of the 10 of its existence. And both those periods were in its initial years. That's because the fund has toned down on aggression and transformed into a diversified equity offering that tends to stick more with consensus sectors, which would explain its rally in bull runs.   In its initial years, its contrarian sector moves and concentrated stock allocations made it a bold choice. A case in point were the allocation...

Karvy on Patel Engineering - Target Rs 529:   Karvy Stock Broking is bullish on Patel Engineering and has recommended buy rating on the stock with a target of Rs 529, in its research report . "Patel Engineering (PEL)'s Q4FY10 result was below our expectation at operational level due to higher cost recognition against actual revenue booking. During the quarter the company has reported net sales growth of 24.1% to Rs. 11.97bn in Q4FY10 (against our expectation of Rs 10.68bn) from Rs. 9.65bn in Q4FY09. Though the company has largely maintained its EBITDA margins in the range of 16%-18%, since last 6 quarters, this quarter is there has been a dent of 280bps in its EBITDA margin to 12.6%.  We have introduced our earning estimates for FY12 and expect revenue growth of 26% to Rs 45bn based on robust order book position and EPS of Rs 45. PEL is currently trading at PER multiple of 9.3x, EV/ EBIDTA multiple of 6.7x on FY12 earnings." "We have valued the core business of...