Skip to main content

Sectoral Mutual Funds

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

 

 

We must have all heard the saying “Still Waters Run Deep”. Why does this saying remind me of Sectoral funds ?. Sectoral funds require a thorough understanding. We need to tread carefully here. These are funds if handled and used properly can give us great returns and if not thoroughly understood and used can soon bring us to grief. Here this is like a hunter with a single arrow. He has to hit the deer. If he misses he loses everything

 

 

What Is A Sectoral Fund?

Here a Sectoral fund is a mutual fund which basically invests in stocks of a particular sector. It basically remains focused on the stocks of a particular business. These may be the Technology, Financial services, Telecommunications, Metals and Mining, Healthcare and Pharma, Real Estate and Infrastructure, Power, Oil and Gas, Shipping, Airlines Industry, Banking, FMCG and so on .Under the Sectoral funds we have the thematic funds which basically identify themes based on global trends or certain unique criteria such as a rise in disposable income of youth in India. Here an FMCG fund has a portfolio of FMCG stocks and a theme based fund might invest only in MNC Companies or in lifestyle stocks.

So How Do We Go About Investing In Sectoral Funds:

When should you invest in a Sectoral Fund? What Sectors should you buy in? These are the questions which must be constantly circulating in our minds? Here one of the most common techniques followed is to enter a bull market when it is just forming. Here when you study the market you will notice that most of the leading companies will belong to two or three sectors. First we mark the particular sector that we are interested in. This might be the Information Technology sector. We choose a good Sectoral fund which incorporates these market leaders in the particular sector such as Information Technology. Your work doesn’t stop here. Here you need to evaluate the past performances of the Sectoral fund in both the Bull and Bear markets.

What were the returns it generated in the past bull market? Having chosen to invest in the particular Sectoral fund commit money to that sector. Wait for the bull run to pause called a correction. Commit additional funds at this time. Wait for the bull market to approach its peak. You will come to know this through excessive optimism among the public, Newspapers projecting a great future for that particular sector, CEO’s of those particular sectors being highly praised and so on. These are the warning signals. Here Technical analysis also provides a clue as to where the market is heading. Here the markets might be headed for a spike top. Here we request the fund manager to liquidate bulk of our units in the Sectoral funds.We keep a small number of units behind for the final surge of power before the bull run dies down. Don’t you think this is risky stuff indeed …..We then wait for the next bull run in another sector and repeat the procedure.

Things To Remember While Investing In A Sectoral Fund :

Don’t Blindly Follow The Crowd: We have all heard of the herd mentality. All sheep blindly follow each other. Here we read in the newspapers of a bull run. Everyone encourages everyone else to jump into the market. Most of the people jump into these Sectoral funds when it is too late and the market has peaked out. Ironically they are ready for the fall in the markets.

Patience A Vice Or A Virtue: Always plan or target your time horizons.Here it is very difficult to time the markets as one cannot be too sure when a bull run begins or ends. Here if we stay invested in the markets for long time periods we can realize profits because even if we miss a single bull run we get other opportunities if we stay invested for 3-5 years .Look at a sector which has been out of favour for some time even though its financial fundamentals are good.

Experience Is a Great Teacher: Here we must choose a Sectoral fund which has a very good fund manager. Here we need to check the track record of the fund manager .Many fund managers fill up a stop gap role and we need to choose the fund manager with good credentials as well as good experience. An Experienced fund manager would have seen many market cycles and would know what to do best.

Keep An Eye On The Reasons You Want To Invest :

Here let us consider you invested in the market to tap the benefits of Infrastructure and real estate maybe even the International real estate. These gave stupendous returns in the period before the market crash. After the crash in the stock markets in the month of September in the year 2008 due to the US Mortgage crisis investments in US Housing and International Real Estate took a big hit. With the core purpose gone investments in these Sectoral funds no longer mattered. Always remember never to make Sectoral funds a core part of your portfolio and use them only for speculative play.

A Study Of The Factors Which Influence Sectoral Funds:

Business Cycles: Here we have the early cycle phase which is categorized by a sharp V-Shaped recovery from a recession. Here we notice a sharp growth rate in GDP. Profits rise rapidly. Credit is available easily. We notice an improvement in Net Sales. We notice a growth in employment opportunities and a rise in IIP the index which specifies production in the economy. This is then followed by the mid-cycle phase. Here we notice a positive but more moderate or a slower growth rate than as seen in the early phase cycle. We notice a growth in sales and inventories. There is strong credit growth and profitability is healthy. We then see the late cycle phase which is categorized by a rise in inflation. Here we notice tightening credit and reducing profit margins of the corporates. Inventory levels rise and sales slows down. Lastly we enter the recessionary phase. Credit is scarce and corporate profits decline.

How To Choose A Sectoral Fund And The Factors Which Influence Them :

Let us consider the early phase where air freight, road and rail transport ,trucking and also Information Technology stocks rally with the hope of increased consumer spending with an anticipation of an economic recovery. Container and Packaging Industries stock prices tend to rise in this period. Laggards in this cycle include Power stocks as these are affected by inflationary pressures and energy costs are low. Telecommunication stocks which have a defensive component tend to lag behind during this phase.

In the mid-cycle phase we see a boom in Software and computer peripherals and a rise in prices of Information Technology stocks. Here utilities and material industry stocks have tended to lag behind in this phase.

Here in the late cycle phase we see a rise in the energy industry and power industry stocks and also materials sector whose fate is tied to prices of raw materials. Here we notice a rise in Inflation. Here healthcare and consumer staples tend to do well. Information technology and luxury goods, fine clothing tend to experience a slow down during this phase.

Here in the recessionary phase defensive stocks such as Pharma stocks tend to hold their own. Here we notice that in recessionary phases we would not cut down on our essentials such as soaps, tea or toothpastes. FMCG stocks tend to do well in these periods. We would not cut down on our medical and healthcare costs. Here in these recessionary periods these stocks hold on. Information Technology and Consumer discretionary stocks tend to fall in these periods.

Here I would like to conclude this article by stating that even in downtrends and recessionary phases in the market certain stocks do prop up the market. Identify these sectors and stocks .As per historical studies FMCG, Pharma and Banking stocks generally tend to perform well or at least hold their own during the recessionary phase. Here a combination of sectoral funds can create a well diversified fund. This will take care of the limitations of the Sectoral funds. Here there is a famous saying “Every Dog Is Valiant At His Own Door”. Here however good we are or we say we are in timing the market one bad day can wipe out all our gains. Who could predict the stock market crash in September 2008. Here it is wise to note that “Caution Is The Parent Of Safety”.

 

For More information leave a missed call on 94 8300 8300 – Prajna Capital

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

Popular posts from this blog

ULIP Review: ProGrowth Super II

  If you are interested in a death cover that's just big enough, HDFC SL ProGrowth Super II is something worth a try. The beauty is it has something for everybody — you name the risk profile, the category is right up there. But do a SWOT analysis of the basket, and the gloss fades     HDFC SL ProGrowth Super II is a type-II unit-linked insurance plan ( ULIP ). Launched in September 2010, this is a small ticket-size scheme with multiple rider options and adequate death cover. It offers five investment options (funds) — one in each category of large-cap equity, mid-cap equity, balanced, debt and money market fund. COST STRUCTURE: ProGrowth Super II is reasonably priced, with the premium allocation charge lower than most others in the category. However, the scheme's mortality charge is almost 60% that of LIC mortality table for those investing early in life. This charge reduces with age. BENEFITS: Investors can choose a sum assured between 10-40 times the annualised premium...

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

Bharat Bond ETF

Top SIP Funds Online   The government of India has paved the way for the launch of India's first corporate bond ETF called as Bharat Bond ETF. Edelweiss Mutual Fund will be managing it. The fund is mandated to invest in AAA-rated bonds of select public sector companies (see the table 'List of constituents and their proportions in the portfolio'). The government has a threefold objective behind launching this product. One, to deepen the liquidity of the Indian debt markets and provide a gateway for easy retail participation. Two, to solve investors' dilemma of picking premium bonds. Lastly, to help the underlying government-owned companies raise funding for their operations. But does it make sense for you, the investor, to invest in it? Lets find out. What is the product? As the name suggests, it is an exchange-traded fund which will be listed on a stock exchange from where its units can be bought and sold post launch. It will have two variants - one maturing in 3 ye...

What is Electronic Clearing Service (ECS)?

  As the name suggests, it's an electronic process through which money can be transferred from one bank account to another. According to RBI, this mode is usually used for regular payments and receipts, like distribution of dividend, interest, salary, pension etc. This mode is also used for collection of bills for telephone, electricity, water, various types of taxes, payment of EMIs , investments in mutual funds , payment of insurance premium etc. There are two types of ECS , like most other banking transactions, ECS credit and ECS debit. An ECS credit is used by a bank account holder , usually a large company or an institution for services like payment of dividend, in terest, salary, pension etc. If your mutual fund pays you dividend to your bank account, of all probability it is being paid through ECS credit.ECS debit, on the other hand, is used when a company or an institution is getting money from a large number of people. For example if you are investing in a mutual fund sc...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now