Schemes, especially those focused on US, will gain on stronger dollar & US growth revival
The US economy is on strong recovery path and currently the best globally, which will also get reflected in their stock markets. Investors should make prudent decision in asset allocation and we would like to advise US focused international funds as they hold promise amid global slowdown.
Six domestic mutual funds, including Motilal Oswal Asset Management, DSP BlackRock, JP Morgan, ICICI Prudential, and Franklin Templeton, run schemes with exposure to US equities. The average returns from these schemes in 2014 were 14% against the 30% advance in the Sensex. But mutual fund officials and analysts paint a rosier picture for these schemes in 2015. The US markets are definitely better placed than most of the markets around the world, especially at the time when there is slowdown in Europe and Japan. As the US dollar continues to gain strength, it would be always wise to invest in international funds to hedge against local currently.
Expectation of a rate hike by the US Fed in 2015 is fuelling talk of a stronger dollar against global currencies. The US dollar is expected to strengthen against major currencies and if the domestic currency comes under pressure, then there will be additional gain in international funds.
The rupee weakened 2% against the dollar in 2014, and is currently trading around 13-month low of 63.36. The US benchmark index, Dow Jones, gained only 10% last year. Investors should always take wise decision and diversify e decision and diversify their portfolio risks by allocating 15-20% to US focused international funds, which is a strong economic recovery theme.
Some fund houses expect Chinese and European equities to also rally in 2015. Last year, Chinese equities outperformed India in a rally later in the year after the country's central bank cut rates. We expect Chinese markets to extend gains in 2015 as the price to earnings (PE) multiple is trading around attractive levels of 11 times. We expect further interest rate cuts in China with inflation at 1.5%, which may boost market sentiment.
Mutual fund managers say many high net-worth individuals (HNIs) and ultra HNIs generally invest in these funds as they look to diversify their fund allocation beyond India, especially during uncertainties in equity markets.
Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015
1. ICICI Prudential Tax Plan
2. Reliance Tax Saver (ELSS) Fund
3. HDFC TaxSaver
4. DSP BlackRock Tax Saver Fund
5. Religare Tax Plan
6. Franklin India TaxShield
7. Canara Robeco Equity Tax Saver
8. IDFC Tax Advantage (ELSS) Fund
9. Axis Tax Saver Fund
10. BNP Paribas Long Term Equity Fund
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