Monday, March 31, 2008

Types of Mutual Fund Scheme

Mutual fund schemes may be classified on the basis of its structure and its investment objective.

1. By Structure

  • Open-end Funds
An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is liquidity.
  • Closed-end Funds
A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor.
  • Interval Funds
Interval funds combine the features of open-ended and close-ended schemes. They are open for sale or redemption during pre-determined intervals at NAV related prices.

2. By Investment Objective
  • Growth Funds
The aim of growth funds is to provide capital appreciation over the medium to long term. Such schemes normally invest a majority of their corpus in equities. It has been proved that returns from stocks, have outperformed most other kind of investments held over the long term. Growth schemes are ideal for investors having a long term outlook seeking growth over a period of time.
  • Income Funds
The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and Government securities. Income Funds are ideal for capital stability and regular income.
  • Balanced Funds
The aim of balanced funds is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. In a rising stock market, the NAV of these schemes may not normally keep pace, or fall equally when the market falls. These are ideal for investors looking for a combination of income and moderate growth.
  • Money Market Funds
The aim of money market funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market. These are ideal for Corporate and individual investors as a means to park their surplus funds for short periods.

3. Other Schemes

  • Tax Saving Schemes
These schemes offer tax rebates to the investors under specific provisions of the Indian Income Tax laws as the Government offers tax incentives for investment in specified avenues. Investments made in Equity Linked Savings Schemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act also provides opportunities to investors to save capital gains u/s 54EA and 54EB by investing in Mutual Funds.
  • Special Scheme
1. Industry Specific Schemes

Industry Specific Schemes invest only in the industries specified in the offer document. The investment of these funds is limited to specific industries like Infotech, FMCG, Pharmaceuticals etc.

2. Index Schemes
Index Funds attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50

3. Sectoral Schemes
Sectoral Funds are those which invest exclusively in a specified sector. This could be an industry or a group of industries or various segments such as 'A' Group shares or initial public offerings.

Mutual Fund - An Introduction

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is invested by the fund manager in different types of securities depending upon the objective of the scheme. These could range from shares to debentures to money market instruments. The income earned through these investments and the capital appreciation realized by the scheme are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed portfolio at a relatively low cost. The small savings of all the investors are put together to increase the buying power and hire a professional manager to invest and monitor the money. Anybody with an investible surplus of as little as a few thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective and strategy.

Regulation About Mutual Fund By SEBI

There was no uniform regulation of the mutual funds industry till a few years ago. The UTI was regulated by a special Act of Parliament while funds promoted by public sector banks were subject to RBI Guidelines of July 1989. The Securities & Exchange Board of India (SEBI) was formed in 1993 as a capital market regulator. One of its responsibilities was to regulate the mutual fund industry and it came up with comprehensive regulations for the industry in 1993. The rules for the formation, administration and management of mutual funds in India were clearly laid down. Regulations also prescribed disclosure requirements.
The regulations were thoroughly reviewed and re-notified in December 1996. The revised guidelines tighten the accounting and disclosure requirements in line with recommendations of The Expert Committee on Accounting Policies, Net Asset Values and Pricing of Mutual Funds. The SEBI (Mutual Funds) Regulations, 1996 have been further amended in 1997, 1998 and 1999. Today, all mutual funds are regulated by SEBI. Efforts have been made to bring UTI schemes under SEBI's ambit with the result that all schemes, with the exception of Unit 64, are now regulated by the capital market regulator.

History and Role of SEBI in mutual funds in India

Unit Trust of India was the first mutual fund set up in India in the year 1963. In early 1990s, Government allowed public sector banks and institutions to set up mutual funds.
In the year 1992, Securities and exchange Board of India (SEBI) Act was passed. The objectives of SEBI are – to protect the interest of investors in securities and to promote the development of and to regulate the securities market.
As far as mutual funds are concerned, SEBI formulates policies and regulates the mutual funds to protect the interest of the investors. SEBI notified regulations for the mutual funds in 1993. Thereafter, mutual funds sponsored by private sector entities were allowed to enter the capital market. The regulations were fully revised in 1996 and have been amended thereafter from time to time. SEBI has also issued guidelines to the mutual funds from time to time to protect the interests of investors.
All mutual funds whether promoted by public sector or private sector entities including those promoted by foreign entities are governed by the same set of Regulations. There is no distinction in regulatory requirements for these mutual funds and all are subject to monitoring and inspections by SEBI. The risks associated with the schemes launched by the mutual funds sponsored by these entities are of similar type. It may be mentioned here that Unit Trust of India (UTI) is not registered with SEBI as a mutual fund (as on January 15, 2002).

MUTUAL FUNDS - A NEW WINDOW TO THE INVESTMENT WORLD

The mutual funds are becoming the most popular investment vehicle offering various kinds of schemes with different investment objectives. We believe that investments through mutual funds is one of the most safest, easiest and convenient way of successful investment making. The investments are in congruence to the laid down investment objectives securing the goals & objectives of the unit holders.
A plethora of mutual fund schemes with different features makes the right choice for an investor difficult.
We at NJ have a dedicated task force to analyse the different schemes of mutual funds across various parameters on an ongoing basis. An arduous process with strict disciplinary levels is followed before offering any product, scheme or recommendation as we believe that we are morally bound as trustees to our clients investments.

Mutual Funds - A Globally Proven Investment

All investments whether in shares, debentures or deposits involve risk. Share value may go down depending upon the performance of the company, the industry, state of capital markets and the economy. Generally however, longer the term, lesser the risk. Companies may default in payment of interest and principal on their debentures/bonds/deposits. While risk cannot be eliminated, skillful management can minimize risk. Mutual Funds help to reduce risk through diversification and professional management. The experience and expertise of Mutual Fund managers in selecting fundamentally sound securities and timing their purchases and sales help them to build a diversified portfolio that minimizes risk and maximizes returns.
Worldwide, the Mutual Fund, or Unit Trust as it is called in some parts of the world, have almost overtaken bank deposits and total assets of insurance funds. As of date, in the US alone there are over 5,000 Mutual Funds with total assets of over US $ 3 trillion (Rs.l00 lakh cores). In India there are 38 Mutual Funds and over 300 schemes with total assets of approximately Rs. 100,000 cores. All mutual funds in India are regulated by the Securities and Exchange Board of India (SEBI)

How much money do I need to invest?

There is no statutory amount that an investor needs to invest in order to generate adequate returns from his savings. The amount that you invest will eventually depend on factors such as:
Your risk profile
Your Time horizon
Savings made
All the above three factors will be discussed in brief in the latter part of the course.

Why should you invest?

Simply put, you should invest so that your money grows and shields you against rising inflation. The rate of return on investments should be greater than the rate of inflation, leaving you with a nice surplus over a period of time. Whether your money is invested in stocks, bonds, mutual funds or certificates of deposit (CD), the end result is to create wealth for retirement, marriage, college fees, vacations, better standard of living or to just pass on the money to the next generation. Also, it's exciting to review your investment returns and to see how they are accumulating at a faster rate than your salary.

Knowledge is power

Knowledge is power. It is common knowledge that money has to be invested wisely. If you are a novice at investing, terms such as stocks, bonds, badla, undha badla, yield, P/E ratio may sound Greek and Latin. Relax. It takes years to understand the art of investing. You're not alone in the quest to crack the jargon. To start with, take your investment decisions with as many facts as you can assimilate. But, understand that you can never know everything. Learning to live with the anxiety of the unknown is part of investing. Being enthusiastic about getting started is the first step, though daunting at the first instance. That's why our investment course begins with a dose of encouragement: With enough time and a little discipline, you are all but guaranteed to make the right moves in the market. Patience and the willingness to pepper your savings across a portfolio of securities tailored to suit your age and risk profile will propel your revenues at the same time cushion you against any major losses. Investing is not about putting all your money into the "Next Infosys," hoping to make a killing. Investing isn't gambling or speculation; it's about taking reasonable risks to reap steady rewards. Investing is a method of purchasing assets in order to gain profit in the form of reasonably predictable income (dividends, interest, or rentals) and appreciation over the long term.

What is Mutual Fund

Mutual funds are investment vehicles, and you can use them to invest in asset classes such as equities or fixed income.
We go to a doctor when we need medical advice or a lawyer for legal guidance. Similarly, mutual funds are investment vehicles managed by professional fund managers. We recommend you use this option for investing. Mutual funds are like professional money managers, however a key factor in their favour is that they are more regulated and hence offer investors the ability to analyse and evaluate their track record.

Saturday, March 8, 2008

How a mutual fund set up


A mutual fund is set up in the form of a trust, which has sponsor, trustees, asset management company (AMC) and custodian. The trust is established by a sponsor or more than one sponsor who is like promoter of a company. The trustees of the mutual fund hold its property for the benefit of the unit holders. Asset Management Company (AMC) approved by SEBI manages the funds by making investments in various types of securities. Custodian, who is registered with SEBI, holds the securities of various schemes of the fund in its custody. The trustees are vested with the general power of superintendence and direction over AMC. They monitor the performance and compliance of SEBI Regulations by the mutual fund.
SEBI Regulations require that at least two thirds of the directors of trustee company or board of trustees must be independent i.e. they should not be associated with the sponsors. Also, 50% of the directors of AMC must be independent. All mutual funds are required to be registered with SEBI before they launch any scheme. However, Unit Trust of India (UTI) is not registered with SEBI (as on January 15, 2002).

Friday, March 7, 2008

Mkts end with hefty losses; Sensex below 16,000

The markets closed with huge losses inline with its Asian peers. Markets across Asia closed in red on weak cues from US on account of credit concerns.

Even on weekly basis markets have shaved with Sensex down nearly 9.5%. Realty index down 19% and bankex down 17%. Today, Sensex closed at the lowest level since 2007. Nifty slipped below 4,800 levels and Sensex has breached 16,000 mark.

All the BSE sector indices ended in deep red. Bank, capital goods, power and realty stocks were the worst hit.

Adlabs, Ess Dee, Spice Jet, Mundra Port, Chambal Fertiliser, Welspun Gujarat were the top laggards.

Bajaj Auto, ICICI Bank, Reliance Energy and Siemens werre biggest losers.

Sensex closed down 566.56 points or 3.42% at 15975.52, and the Nifty down 149.80 points or 3.04% at 4771.60.

About 433 shares have advanced, 2560 shares declined, and 55 shares are unchanged.

The BSE Midcap Index ended at 6,804.39 down 4.4%.

The BSE Smallcap Index ended at 9,595.41 down 4.6%.

The BSE Bankex ended at 8,477.46 down 5%. Bank of India, Andhra Bank, Kotak Mahindra, Oriental Bank, Allahabad Bank moved downwards.

The BSE Capital Goods Index closed down 4.5% at 14,025.12. Astra Microwave, BEML, Crompton Greave, Thermax, Greaves Cotton, Areva T&D closed lower.

The BSE Auto Index closed at 4,634.70 down 4.4%. Escorts, TVS Motor, Amtek Auto, Cummins, Punj Tractors, MRF closed lower.

The BSE Metal Index closed at 15,453.60 down 3.5%. Hind Zinc, Sterlite, NALCO, Shree Precoated, Mah Seamless, Jindal Steel, Jindal Saw, JindalStainless closed lower.

The BSE FMCG Index closed down 1.1% at 2,207.71. Colgate, ITC, Bata India, Godrej Consumer, HUL, GlaxoSmith Con closed lower.

BSE Oil and Gas Index closed at 10,022.91 down 3%. GAIL, Reliance Natura, HPCL, RPL,ONGC, Reliance, ONGC ended in red
BSE power index closed at 3,155.16 down 5.6%. Torrent Power, NTPC, Reliance Energy, Tata Power, Power Grid Corp, Crompton Greave ended in red.

The BSE IT Index was down 3% at 3,638.44. I-Flex Solution, Patni Computer, Financial Tech, Mphasis, Tech Mahindra, TCS, Infosys closed lower.

The NSE cash turnover was at Rs 14948.3 crore and the NSE F&O turnover was at Rs 38712.25 crore. The BSE cash turnover was Rs 6261.94 crore. Total market wide turnover was at Rs 59922.49 crore.

Mkts still under selling pressure; BSE Midcap down 5%

The markets have recoverd by some points from day's low, some buying is happening at lower levels in major stocks but still witnessing huge selling pressure. The Sensex and Nifty are down over 4.5%. The market breadth is negative, advance:decline ratio at 1:20, improved from 1:30. Midcap and small cap stocks have hammered a lot, still down nearly 6%. On the global front, Asian markets closed lower with sharp cut. European markets are trading in deep red.

At 3.10 hrs IST, the Sensex is down 669.05 points or 4.04% at 15873.03, and the Nifty down 178.45 points or 3.63% at 4742.95.

About 353 shares have advanced, 2641 shares declined, and 54 shares are unchanged.

The BSE Midcap was down 5.06%. Adlabs, Ess Dee, Spice Jet, Mundra Port, Chambal Fertiliser, Welspun Gujarat were the top laggards.

Bajaj Auto, ICICI Bank, Reliance Energy and Siemens are biggest losers while ITC and Suzlon Energy are gainers on the bourses.

GSS America, Reliance Industries, Reliance Energy, ICICI Bank and Bharti Airtel are most active shares.

New listing - GSS America gained by Rs 76 at Rs 476.35. It is trading with volumes of 8,393,698 shares.

All BSE indices are still trading in red. The BSE Realty and Bankex are down over 6%, BSE Power, Auto, IT, Metal, Oil and Capital Goods indices down about 3-5%.

Indian rupee is trading around 40.63 per dollar.

Mkts see savage cut: Nifty slips below 4700 mark

The markets have slipped further and are trading deep in red as there is sustained selling pressure in scrips across sectors. Asian markets ended with significant losses. Cues from US were very discouraging, US markets dropped to 18-month low. Nifty has slipped below 4,800 levels and is hovering around 4,750 mark. Sensex has breached 16,000 mark.

At 2.00 hrs IST, the Sensex is down 793.22 points or 4.80% at 15748.86, and the Nifty down 227.85 points or 4.63% at 4693.55.

About 330 shares have advanced, 2672 shares declined, and 46 shares are unchanged.

Midcap index is down nearly 6%; Adlabs, Ess Dee, Spice Jet, Mundra Port, Chambal Fertiliser, Welspun Gujarat.

All the BSE sector indices are in deep red, down nearly 3% each. Bank, capital goods, power and realty stocks are the worst hit, down over 4% each.

Reliance Energy, Bajaj Auto, Hindalco, Siemens, DLF, ICICI Bank, Satyam, Zee Enetertainment, Maruti Suzuki, were among the top losers on the indices.

Largecap power stocks like Reliance Energy, Tata Power and Suzlon have taken it on their chin.

Mkts see savage cut: Nifty slips below 4700 mark

The markets have slipped further and are trading deep in red as there is sustained selling pressure in scrips across sectors. Asian markets ended with significant losses. Cues from US were very discouraging, US markets dropped to 18-month low. Nifty has slipped below 4,800 levels and is hovering around 4,750 mark. Sensex has breached 16,000 mark.

At 12.32 hrs IST, the Sensex is down 605.27 points or 3.66% at 15936.81, and the Nifty down 187.15 points or 3.80% at 4734.25.

About 378 shares have advanced, 2620 shares declined, and 49 shares are unchanged.

All the BSE sector indices are in deep red. Bank, capital goods, power and realty stocks are the worst hit, down over 4% each.

Reliance Energy, Bajaj Auto, Hindalco, Siemens, DLF, ICICI Bank, Satyam, Zee Enetertainment, Maruti Suzuki, were among the top losers on the indices.

Largecap power stocks like Reliance Energy, Tata Power and Suzlon have taken it on their chin.

Mkts tumble: Bajaj Auto, Rel Energy, ICICI Bk top losers

The markets are trading deep in red near the day's low as there is sustained selling pressure in scrips across sectors. Asia continues to trade weak. Cues from US were very discouraging, US markets dropped to 18-month low. Nifty has slipped below 4,800 levels and is hovering aroun 4,750 mark. Sensex has breached 16,000 mark.

At 11.08 am, the Sensex was down 551.96 points or 3.34% at 15990.12, and the Nifty was down 168.60 points or 3.43% at 4752.80.

About 424 shares have advanced, 2560 shares declined, and 63 shares are unchanged.

All the BSE sector indices are in deep red. Bank, capital goods, power and realty stocks are the worst hit, down over 4% each.

Reliance Enegy, Siemens, DLF, ICICI Bank, Satyam, Zee Enetertainment, Maruti Suzuki, were among the top gainers on the indices.

Largecap power stocks like Reliance Energy, Tata Power and Suzlon have taken it on their chin.

Markets plunge: Nifty slips below 4800

The markets have opened on shaky grounds inine with rest of the Asia. Selling is seen in scrips across sectors. Cues from US were very discouraging, US markets dropped to 18mth low. Sensex opened with a gap down of over 400 points and Nifty was down over 100 points.

Nifty has slipped below 4,800 levels in the opening trade.

At 10.08 hrs IST, the Sensex is down 431.19 points or 2.61% at 16110.89, and the Nifty down 138.15 points or 2.81% at 4783.25.

About 628 shares have advanced, 2332 shares declined, and 87 shares are unchanged.

All the BSE sector indices are in deep red. Bank, capital goods, power and realty stocks are the worst hit, down over 4% each.

Reliance Enegy, Siemens, DLF, ICICI Bank, Satyam, Zee Enetertainment, Maruti Suzuki, were among the top gainers on the indices.

Largecap power stocks like Reliance Energy, Tata Power and Suzlon have taken it on their chin.

Asian markets have slip further. Hong Kong's Hang Seng fell 756.19 points, Japan's Nikkei plunged 3.33%, Taiwan's Taiwan Weighted declined 1.23%, Singapore's Straits Times was down 2.28% and South Korea's Seoul Composite tumbled 2.46%.

The Dow plunged 214.60 points, or 1.75%, to 12,040.39 as credit concerns rattled the market and lacklustre retail sales compounded worries about the economy.

Market cues:

FIIs net sell $117.7 m in equity
MFs net sell Rs 151.6 cr in equity
NSE F&O Open Interest up by Rs 1,095 crore at Rs 65,131 crore
F&O cues:

Futures Open Interest up by Rs 199 crore and Options Open Interest up by Rs 896 crore
Nifty Futures shed 11 lakh shares in Open Interest; at 17-point discount
Nifty Open Interest Put-Call ratio at 1.19 Vs 1.17
Nifty Puts add 8.6 lakh shares in Open Interest
Nifty Calls add 5.9 lakh shares in Open Interest
Nifty 4600 Put adds 3.7 lakh shares in Open Interest
Nifty 5000 Call adds 1.6 lakh shares in Open Interest
Nifty 4900 Call adds 1.6 lakh shares in Open Interest
Stock Futures Open Interest unchanged

IDFC bags Standard Chartered AMC for USD205 million

Standard Chartered PLC announces that it has agreed to sell Standard Chartered AMC Private Limited, including minorities, to Infrastructure Development Finance Company Limited (IDFC) for a total cash consideration of approximately USD205 million. The consideration is before deductions for local taxes and deal expenses. The transaction does not include Standard Chartered's mutual fund distribution business which Standard Chartered will continue to pursue.

Jaspal Bindra, Chief Executive Officer, Asia, Standard Chartered, said: “IDFC is a well respected financial services company and we are delighted to have reached an agreement with them for the sale of this business. Standard Chartered will remain a distributor of asset management products in India. India is a key market and delivered record results in 2007.”

This was for the second time that Standard Chartered Asset Management business was up for sale after the UBS deal was called off by the Reserve Bank in December last year, citing regulatory issues. This time Standard Chartered did manage to up the price by USD87 million from USD118 million agreed upon earlier with UBS.

IDFC will be paying USD205 million for Standard Chartered's USD3.25 billion AUM. The transaction of course subject to certain regulatory approvals and other closing conditions, and both parties expect to seal the deal in the second quarter of 2008.

Dr. Rajiv Lall, Managing Director and Chief Executive Officer of IDFC said: “We are pleased to acquire a quality asset management platform. This is in line with our wider strategy of broadening our footprint in the asset management business and diversifying our fee-based revenue streams.”

Incorporated in March 2000, Standard Chartered AMC had a total of USD3.25 billion, as on January 31, 2008 out of which 22 per cent was in equities and the remaining in debt.

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Aggrasive Portfolio

  • Principal Emerging Bluechip fund (Stock picker Fund) 11%
  • Reliance Growth Fund (Stock Picker Fund) 11%
  • IDFC Premier Equity Fund (Stock picker Fund) (STP) 11%
  • HDFC Equity Fund (Mid cap Fund) 11%
  • Birla Sun Life Front Line Equity Fund (Large Cap Fund) 10%
  • HDFC TOP 200 Fund (Large Cap Fund) 8%
  • Sundram BNP Paribas Select Midcap Fund (Midcap Fund) 8%
  • Fidelity Special Situation Fund (Stock picker Fund) 8%
  • Principal MIP Fund (15% Equity oriented) 10%
  • IDFC Savings Advantage Fund (Liquid Fund) 6%
  • Kotak Flexi Fund (Liquid Fund) 6%

Moderate Portfolio

  • HDFC TOP 200 Fund (Large Cap Fund) 11%
  • Principal Large Cap Fund (Largecap Equity Fund) 10%
  • Reliance Vision Fund (Large Cap Fund) 10%
  • IDFC Imperial Equity Fund (Large Cap Fund) 10%
  • Reliance Regular Saving Fund (Stock Picker Fund) 10%
  • Birla Sun Life Front Line Equity Fund (Large Cap Fund) 9%
  • HDFC Prudence Fund (Balance Fund) 9%
  • ICICI Prudential Dynamic Plan (Dynamic Fund) 9%
  • Principal MIP Fund (15% Equity oriented) 10%
  • IDFC Savings Advantage Fund (Liquid Fund) 6%
  • Kotak Flexi Fund (Liquid Fund) 6%

Conservative Portfolio

  • ICICI Prudential Index Fund (Index Fund) 16%
  • HDFC Prudence Fund (Balance Fund) 16%
  • Reliance Regular Savings Fund - Balanced Option (Balance Fund) 16%
  • Principal Monthly Income Plan (MIP Fund) 16%
  • HDFC TOP 200 Fund (Large Cap Fund) 8%
  • Principal Large Cap Fund (Largecap Equity Fund) 8%
  • JM Arbitrage Advantage Fund (Arbitrage Fund) 16%
  • IDFC Savings Advantage Fund (Liquid Fund) 14%

Best SIP Fund For 10 Years

  • IDFC Premier Equity Fund (Stock Picker Fund)
  • Principal Emerging Bluechip Fund (Stock Picker Fund)
  • Sundram BNP Paribas Select Midcap Fund (Midcap Fund)
  • JM Emerging Leader Fund (Multicap Fund)
  • Reliance Regular Saving Scheme (Equity Stock Picker)
  • Biral Mid cap Fund (Mid cap Fund)
  • Fidility Special Situation Fund (Stock Picker)
  • DSP Gold Fund (Equity oriented Gold Sector Fund)