Prajna Capital - An Investment Guide

The ICICI Pru Banking & Financial Services Fund has yet to make a mark. If you look at its year-to-date or 1-year return (as on November 30, 2009), the fund underperforms its benchmark. On the other hand, it’s fairly good in a peer comparison. Benchmarked against the BSE Bankex, the majority of the fund’s investments are not components of this index. Currently the fund has 64 per cent of its assets in such stocks while the average allocation since launch is 61 per cent. That would explain the underperformance in comparison to the benchmark. It would also explain why the fund fell by a lesser amount in the December 2008 and March 2009 quarter. HDFC, IDFC, Srei Infrastructure Finance, Sundaram Finance, Max India, Aditya Birla Nuvo and Reliance Capital are some other stocks that have made an appearance. While he refused to comment on individual stocks Launched in August 2008, it seemed natural that the fund manager would hold onto cash till the crisis tided over. But surprisingly, the...

Ready to take a home loan? The bank may recommend a particular EMI scheme as the best, but one should look at the loan agreement for details before signing on the dotted lines Bear in mind, very little is known to most people about the different EMI repayment options beyond what the banks recommend to you when you take a home loan. Banks and home financing companies such as SBI, HDFC, HSBC, LIC Housing Finance and others may have one or many options that they may recommend as the right scheme for you. The criteria taken into account by the loan-giving agency include age, income, saving history, educational qualifications, job profile, number of dependants, type of property (including the builder) and so on. Here’s what you need to know about different EMI options available in case you are planning to take one. First things first. The simple ground rule for all EMI options is that the longer the term of your loan, the smaller will be your EMI. The EMI also has two components —...

IN AN economic slowdown, when the salaries are either on a freeze or going south - every penny counts. This is, in fact, a good time to review the loyalty programmes that retail chains, credit card companies and banks have on offer. If used wisely, these programmes can make purchases weigh lighter on your wallet and can even bring you a gift or two occasionally. But to use loyalty programmes to the best of your advantage, you need to plan a bit. To begin, you must compare the value of the rewards against your spend. The value of points can be calculated by checking worth of the reward against spends made to earn that reward. Therefore, you should chose a programme offering higher reward earning potential. You must also compare the minimum number of points required for rewards. A programme that offers one point per Rs 100 spend and rewards start at 2,000 points, for example, is a better deal than one that offers two points per Rs 100 spent and rewards start at 20,000 points. Bu...

THE impending realignment of NSE indices on the basis of free-float market capitalisation has put index funds and exchange traded funds in a spot of bother. According to mutual fund analysts, the exchange-proposed changes in stock weightages will result in widening of tracking error in index funds. Index funds are passively-managed funds wherein the fund manager attempts to mirror the performance of a benchmark index, by investing the corpus in the index components in proportion to their weightage in the index. Tracking error is the difference between returns from the index fund to that of the index. Lower the tracking error, closer are the returns of the fund to that of the target index. Funds with tracking error lower than 1% are good performers, according to mutual fund analysts. The NSE-proposed shift in stock weightages could deviate fund returns (from index returns) in the range of 6-10%, industry sources said. There could be some tracking error as weightage realignment ...

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...

SEBI Likely To Accept Panel’s Recommendations For Friendly & Uniform Norms THERE’S good news for legal heirs awaiting the transmission of shares of deceased shareholders. Market regulator Sebi is expected to accept most of the recommendations of the group that was formed to look into the matter. This will pave way for quick transmission of shares and benefit those who have inherited them in physical form. Currently, companies follow different systems for transmission of shares in physical form. For instance, HDFC asks its local manager in some cases where the legal heir does not possess succession certificate or the probated will, to carry out verification once it receives the application. The manager then submits a report and the company then acts based on the recommendation. But market participants say this can be a tedious exercise. The companies would have to fix a threshold limit of 200 shares or Rs 100,000 whichever is higher for transmission of shares after submitting the s...