capital letter december 2011 - fundsindia.com

8/10/2019 Capital Letter December 2011 - Fundsindia.com

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Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing.

Keep your head while all about you are losing theirs

Greetings from FundsIndia!

November was not a happy month for the equity market in India. The indices gave back all the gains ofOctober and then some during this past month. In fact, there have been only three positive return monthsof the 11 months this year. And, as I write this, the year-to-date losses of both Sensex and Nifty are morethan 17%.

Out here in FundsIndia, no advisory call that we field is without a question regarding the markets, and what would bethe right strategy to adopt given these market conditions. It always makes me smile a bit since the word strategyshould be properly used in the context of long-term planning, and if ones strategy keeps changing with market con-ditions, it is not much of a strategy to begin with. :-)

However, although the market is volatile, I am glad that our investors have been consistently investing using ourplatform through SIPs as well as bulk investments. Our AUM has been growing at 12% month on month even inthese market conditions. It is heartening to note that we have a large number of goal oriented investors who are

planning for the long term.

Analysts and prognosticators from across the land have cited reasons for the market downturn and have predictionsfor when/how things will turn around etc. For my moneys worth, the constant voice of stable reason amidst all thischatter has been the relentlessly steady tone adopted by Value Researchs Dhirendra Kumar. His advice in summaryhas been to use the current attractive debt market returns for the short term and to not lose faith in the equity mar-kets for the long term.

This issue carries a full essay by him in this regard. Please read it if, as Kipling said, youd like to keep your headwhile all about you are losing theirs.

A couple of quick programming notes from us

1. Two infra bonds, from IDFC and L&T, both with attractive post-tax yields are on offer on our platform cur-

rently till probably till the end of this month. Of course, a full palate of tax saving mutual funds are alwaysavailable!

2. Our referral incentive program met with fantastic reception from many of you, and we are happy to informyou that we have extended it till December 31st.

Merry Christmas, Happy New year, and, of course, Happy Investing!

CAPITAL LETTER

Volume 3 December 08, 2011 Issue 12

CAPITAL LETTER


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Deposits from Top rated Companies

Company Name Rating 1 Year 2 Year 3 year

HDFC LIMITED FAAAA 9.5% 9.65% 9.75%

ICICI HOME FINANCE COMPANY LIMITED MAAA 8.25% 8.75% 8.75%

LIC HOUSING FINANACE LTD FAAA 7.0% 7.4% 7.65%

MAHINDRA AND MAHINDRA FAA 9.5% 10% 10.25%

SHRIRAM TRANSPORT FINANCE CO.LTD TAA 9.25% 9.75% 10.75%

DHFL AA+ 10.25% 10.25% 10.25%

Get upto Rs.1,20,000 exempted from your Income-tax when

You invest in ELSS Mutual Fund schemes and Infrastructure Bonds!

Why tax saving mutual funds?

1. Get upto Rs.1,00,000 exempted from tax under section 80cc.

2. Lowest lock-in period - just 3 years - of all tax saving investments.

3. 100% equity market exposure - best return potential of all investment classes

4. Easy and free - no demat account required, no entry load, no transaction fees to invest

So, tax saving mutual funds are easy to invest in, offer the best return potential, and has the lowest lock-in pe-riod of all tax saving investments!

For example, if you had invested Rs. 20,000 in HDFC Tax Saver fund (one of our current recommended funds)in the year 2008, not only would you have saved upto Rs. 6000 in taxes in the same year, your investmentswould have grown to Rs. 30,592 now (*as of September 22, 2011) - an annual return of 15.22%! . What'smore, the profit of Rs. 10,592 would be tax free as well!

Why infrastructure bonds?

1. Get an additional Rs.20,000 exempted from your income-tax (under section 80ccf)

2. Attractive interest rates

3. Can be acquired in physical form or by using your existing demat account

Click here to start investing now! - https://www.fundsindia.com/content/jsp/taxSaver/InvestOnTaxSaversAction.do?method=showTaxSaverLanding&from=home


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Advertisement


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The Silver Debt LiningBY DHIRENDRA KUMAR

From the investors perspective, its a noisy time right now. Trying to make senseof the investment environment right now is like being in a room with five or six

people, all talking simultaneously. One is concerned about interest rates, anotherwith the falling rupee, and another with Europe. Theres someone whos obsessedwith political paralysis and someone else with the governments revenue shortfallsand its fiscal woes. Another one is shouting at the top of his voice that all of Indiasproblems would be over if only Walmart were allowed to open stores here.

If you are looking to formulate an equation which will give you the solution forwhat for inputs to understand whats happening, then it would have far too manyvariables to solve. However, theres no need to do all that. As far as the equity mar-

kets are concerned, theres one master variable that overrides everything else and can tell you whether itstime for a sustained and secular equity rally; and thats interest rates. We could see plenty little moodswings that depending on which side of the bed Angela Merkel got up from, but if you want the excitement

to be sustained, then wait for a time when business across the board can get much cheaper money. If thatdoesnt happen for five years, then thats that.

Meanwhile, its best for investors to focus on the silver lining of this high-interest cloud, and thats the re-turn you are getting from fixed-income investments. From fixed deposits to post office to NSCs to PPF liq-uid funds, everything is fetching returns that look very attractive compared to the prospects of an equity-

backed investment strategy. Deep believers in long-term equity can continue with their SIPs with a five orten year perspective, but everyone else will see the value in knowing what their money will earn, safely.

-Syndicated from Value Research Online


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What Should your Strategy be?

MOHAMMED EKRAMUL HAQUE

The global economy could well be on the brink of another crisis owing to the state of affairs in US andEurope. As has been witnessed during past crises, sentiments have taken a knocking. Investors (includingFIIs) have begun pulling money out of high-risk investments such as equities and moving to lower-risk

assets (such as cash). Yet, one must remember that markets do bounce back in due course. Says AnupMaheshwari of DSP Blackrock Investment Managers: As we have seen in previous crises the Russiandefault or the Asian crisis eventually markets come back strongly. That is the view we are going with. If

you view the current crisis from this standpoint, then the current state of the markets presents a buyingopportunity to investors who have a long-term horizon of three to five years.

Besides the many valuation tools used to decide whether to buy a stock price to earnings ratio and priceto book value, discounted cash flow method, and so on one fail-safe indicator of equities being availableat attractive valuations is insider buying. Company insiders tend to raise their stakes in their companiesonly when valuations are dirt cheap. And insiders are buying now. This is a good sign, says Maheshwari.This signal works well over a six-month to one-year period.

Consensus opinion holds that Sensex earnings will grow at 12-13 per cent this year to close FY12 at the`1,180-1,200 level. If one goes by this estimate, then the Sensex is currently trading at 14 times FY12 earn-ings. This is an attractive valuation compared to the uber-optimistic 20x level that it was trading at priorto the 2008 crisis.

According to Sivasubramanian KN, chief investment officer, Franklin Templeton Investments, Indianequity valuations are currently below their long-term averages and look attractive vis--vis long-term fun-damentals. Echoes Navneet Munot, chief investment officer, SBI Mutual Fund: At present valuations arefavourable with the Sensex P/E at about 14x.

All eyes are currently glued to Q2 corporate results, which will provide an inkling of how companies arelikely to perform this year. One thing is for sure: the years of very high revenue and profit growth are out.In fact, according to some pundits, profit growth in this quarter could be at the lowest level seen in the lastsix-seven years. High commodity prices and high interest rates are expected to take a heavy toll on corpo-rate bottomlines.

Sector-wise performances are likely to vary. While FMCG, IT and auto are expected to do well, PSU banks,oil marketing companies, construction and non-ferrous metals and mining may perform below par. Ac-cording to Sivasubramanian, A key factor to watch out for is the extent of escalation in interest costs dueto the recent rate hikes.

-Syndicated from Value Research Online

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capital letter december 2011 - fundsindia.com

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