Review of HDFC small cap fund

It was almost a decade from now when the HDFC small-cap fund was introduced on 10th April 2008. Well, at that time it was named as Morgan Stanley ACE fund and a multi-cap scheme was followed. But in mid-2014, Morgan Stanley MF was procured by HDFC Mutual Fund, that time the investments scheme were changed and the scheme was renamed as HDFC small and mid-cap fund. Again in November 2016, it was rechristened as HDFC small-cap fund.

The fund invests primarily in small-cap corporations and pursues to deliver long-term capital income. CMFR (Crisil Mutual Fund Ranking) rated it as the number one in the small-cap funds’ list for the first quarter of 2018. The manager of the fund since June 2014 is Mr. Chirag Setalvad who has more than 20 years of experience.

hdfc small

The fund’s AUM (Assets under Management) of the month-end arose more than 4 times which is ₹4578 Crores in May’18 from ₹909 Crores in June’15. Also, the fund has provided much higher average daily returns in more than last three years in comparison to the standard and rivals and with lesser volatility.

Refrain these mistakes while rebalancing the portfolio

Download the Fund Factsheet

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SIP Performance

chart1

Amount SIP Date  Start Date End Date Total Inv. Amount Worth of Investment CAGR
Rs.10000/- 25 1 st Aug. 2013 13 th Aug. 2016 Rs.610000/- Rs.1055000/- 21.66 % p.a.
1 Years 3 Years 5 Years
Fund 23.70% 18.71% 24.62%
Sector 5.99% 11.16% 26.82%

Overall returns

The fund has constantly surpassed the standard (BSE 200 TRI) and the listing (illustrated by funds placed in the small-cap funds listing in Crisil MF rank) overall dragging phase under analysis.

Risk analysis

Alpha 7.69
Beta 0.95
Downside Risk 18.91
Info Ratio Rel. 1.99
Jensens Alpha 7.34
Max. Drawdown -18.11
Max Gain 36.70
Max Loss -18.11
Negative Periods 11
Positive Periods 25
r2 0.96
Relative Return 7.17
Return 18.24
Sharp 0.62
Sortino 0.59
Tracking Error 3.60
Trenyor 11.25
Volatility 17.43

Portfolio analysis

Since last 3 years, the fund’s small-cap provided an average of 61.04%. The small-cap allocation has made a hike since November’16 after the fund was rechristened as a small-cap fund. Talking about sectoral level, in the last three years there were 5 primary sectors which contributed approx. 47% of the fund’s equity portfolio. During that phase, the main sector allocations involve construction projects, pharma companies, banks, industrial products and auto auxiliaries.

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One of the major contributors during that phase was VIP industries, Balkrishna industries, Aarti industries and KEC international.

In this listing, Dilip Buildcon has been the biggest contributor to the fund’s achievement. Up to May’18 Industrial products has been the highest component of the fund’s equity portfolio which was 16.2% then software-13.12%, banks-8.3%, auto auxiliaries-6.75% and pharma industries-5.3% respectively.

How to disclose mutual funds capital gains while filing ITR

The fund has invested in 124 stocks in the last 3 years, of which 22 were constantly clutched. The biggest contributors to the fund’s achievement between the constantly held stocks were Banco products, Swaraj Engines, NIIT technologies, Kalpataru power transmission and Carborundum Universal.

Note : Past performance of fund does not guarantee the future returns.

Mutual Fund Investment are Subjected to Market Risks, Read all Scheme Related Document Carefully.

Disclaimer: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here.

A significant 25 years journey of Mutual Funds

“Active fund managers in India have convincingly outperformed benchmarks over 5, 10 and 20-year time frame.” The industry of mutual fund was open to private sector encounter for the first time in 1993.

The former Kothari Pioneer Mutual Fund which is named as Franklin Templeton MF introduced Prima & Blue chip fund on 1st Dec.’93. Initiating from these two funds, there were 9 equity fund schemes obtainable in India. A total of six schemes were introduced in 1993 and two were introduced before ’93. to develop the assets under their enclosure to nearly ₹7 lakh crores from ₹48,000 crores, it takes almost 20 years of efficiently period.

mf

Indian MFs have multiplied their assets to more the ₹23 lakh crores in the past 5 years without any exertion. Almost ₹70,000 crores of the yearly MF Flows now floats in through the SIP (Systematic Investment Plan). These days the SIPs capture prime recall for the new and upcoming investors but competing with the old preferences like insurance plans and bank deposits have never been such easy-going.

For the current position of the industry, the excellent ones are the asset managers, advisors, and the regulators. The credit must go to these three positives of the MF industry. There was a time when the fund managers have struggled in the developed markets to keep it and match up with the markets, active fund managers in India have definitely outperformed benchmarks over 5, 10 and 20-year time frames. The 10-year category returns on sincerely organized small-cap, mid and large-cap funds are ahead on the Nifty50, Nifty Midcap100 and Nifty Small cap 100 by compelling margins of 100, 300 and 700 basis points even in spite of recent fluctuations. The supremacy of the open-end funds has also made it clear that the worst performing ones lose assets to the good performing ones.

Fact sheet of Women fund managers who have outperformed or Underperform over the long-term

By continuously prioritizing investor’s concerns, SEBI has shown that it’s a strong regulator. SEBI has played a crucial role in establishing MFs by the’ advanced tightening of its rules on revelation, efficient exposures, and governance.

Despite the outstanding performance of the MF industry, there are some misses that should be developed. Indian MF industry is mainly marketed on their current 1-year, 3-year, and 5-year records. According to the sources, approx. 55% of retail investors had only 2-year holding period on equity funds and that time is too less and barely provide the benefits of investing in equity. A large number of domestic equity funds exhibit portfolio turnover ratios of more than 50% that means minimum half stocks are replaced within a year. The industry must shift the goal-line to more long-term performance course to entice better fund managers and more stable assets. The salary of fund managers must benefit into constancy and tenure, and not just to master the 1 to 3-year rankings.

Mutual funds reached to 21% of total bank deposits

In India, Equity MFs are still categorized on the basis of a sole-dimensional market-cap viewpoint which is an idea introduced in 1993 by the Kothari Pioneer MF. Debt funds are even adapted more to corporate treasuries than the new and retail investors. Also, ETFs and good passive funds are lost in action while there is a group of many active funds. In the past years, new launches have focused around common closed-end funds, thematic funds or equity saving funds, intended to utilize tiny loopholes in constantly changing tax laws. Rather than, investors will like to invest in 10 to 15-year debt funds and pension funds that provide tax-efficient income or ETFs with micro-cap or wide-market portfolios.

After putting barriers on liquidity and declaration with their open-end funds MFs have been reverting recently, by turning out series after series of closed-end funds with indefinite instruction. Close-end schemes at 1002 are numerous than open-end schemes i.e. 811.

It can be strange to worry about diminishing competition in an industry with about 2000 schemes and 40-odd players. But the reality is that the industry is rapidly becoming a horse race. Talking about today, the topmost 5 AMC in the industry manage almost 57% of the assets. Moreover, this listing has rarely any changes in the past 10 years with large AMCs easily growing larger.

In addition, it seems to be a far better option that MF industry self-regulates itself on these particular outlooks. Without remaining awaited for the SEBI to add some more pages to its already long rule-book.

 

Note : Past performance of fund does not guarantee the future returns.

DISCLAIMER

No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here.

CreditAccess IPO Review and the list of anchor investors

CreditAccess Grameen is a Bengaluru-based leading micro-finance institution, focused on providing micro-loans to women customers predominantly in rural areas in India. It is the third largest NBFC-MFI in India by gross loan portfolio end March 2017. The wide range of lending products addresses the critical needs of customers throughout their life cycle and includes income generation, family welfare, home improvement and emergency loans. The customer-centric business model, wide range of product offerings, as well as well designed product delivery and collection systems, has enabled the company to achieve high customer retention rates and low credit costs.

The company focuses on customers in rural areas in India, who largely lack access to the formal banking sector and present a latent opportunity for offering micro-loans. The products are built on a deep understanding of the requirements of customers. The flexibility of products in terms of ticket sizes, end-uses and repayment options etc. and the manner of their delivery differentiates it from competitors and generates customer loyalty.

CreditAccess

CreditAccess Grameen raises Rs 339 cr from anchor investors.

The company has allotted 80,41,617 equity shares to 21 anchor investors

Among the anchor investors are Neuberger Berman Emerging Markets Equity Fund, Eastspring Investments India Equity Open, Pictet – Indian Equities, ICICI Prudential Banking and Financial Services Fund, Sundaram Mutual Fund, Citigroup Global Markets Mauritius and BNP Paribas Arbitrage.

List of anchor investor

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IPO Dates & Price Band:

  • IPO Open: 08-August-2018
  • IPO Close: 10-August-2018
  • IPO Size: Approx Rs.1130 Crore (Approx)
  • Face Value: Rs.10 Per Equity Share
  • Price Band: Rs.418 to 422  Per Share
  • Listing on: BSE & NSE
  • Retail Portion: 35%
  • Equity: 1,02,81,317 Shares

Market Lot:

  • Shares: Apply for 35 Shares (Minimum Lot Size)
  • Amount: Rs.14,770

Allotment & Listing:

  • Basis of Allotment: 16-August-2018
  • Refunds: 20-August-2018
  • Credit to demat accounts: 21-August-2018
  • Listing: 23-August-2018
  • Category-wise Break up:

Anchor – 80,41,618 Shares = 339.36Crs

QIB – 53,61,079 Shares = 226.24Crs

NII – 40,20,809 Shares = 169.68Crs

RII – 93,81,888 Shares = 395.92Crs (Lot size: 35 = 2,68,054 Forms)

  • Total Issue – 2,68,05,394 Equity Shares = 1,131.19Crs.
  • Lead Managers:

ICICI Securities Limited

Credit Suisse Securities (India) Private
Limited

IIFL Holdings Limited

Kotak Mahindra Capital Company Limited

  •  Registrar to the IPO

Karvy Computershare Private Limited

The Promoters:

The  Promoter is CreditAccess Asia N.V., a multinational company specializing in MSE financing (micro and small enterprise financing), which is backed by institutional investors and has micro-lending experience through its subsidiaries in four countries in Asia. The Promoter has provided capital funding to the company, from time to time and provides with access to potential fundraising opportunities in the debt capital markets.

Objects of the Issue:

The Offer comprises of the Fresh Issue and the Offer for Sale.
The Company will not receive any proceeds from the Offer for Sale.
The net Proceeds from the Fresh Issue will be utilized towards augmenting the capital base to meet future capital requirements of the company which are expected to arise out of growth in the Company’s assets, primarily the Company’s loans and advances and other investments.

HDFC AMC IPO Review, Current GMP and List of Anchor Investors

Adult population with bank account

111

Strengths:

Customer-centric business model resulting in high customer retention.

Deep penetration in rural areas characterized by low competition and built through contiguous district-based expansion.

Robust customer selection and risk management policies resulting in healthy asset quality.

Strong track record of financial performance and operating efficiency.

Diversified sources of borrowings and effective asset-liability management

graph

Negative:

Operations of the company are concentrated in Karnataka and Maharashtra, with 191 of 516 branches located in Karnataka and 144 branches located in Maharashtra. About 58.1% of gross AUM is originated in Karnataka and 26.7% in Maharashtra. In the event of a regional slowdown in the economic activity in these states, or any other developments including political unrest, drought/floods and other natural calamities, or social upheaval in these states can affect its financials and prospects adversely.

Microfinance loans are unsecured and are susceptible to various operational and credit risks which may result in increased levels of NPAs, thereby adversely affecting business. Furthermore, as there is typically limited financial information available about focus customer segment and many of customers do not have any credit history supported by tax returns, bank or credit card statements, statements of previous loan exposures, or other related documents, it is difficult to consistently carry out credit risk analyses on customers.

An increase in its portfolio of non-performing assets and its provisions may materially and adversely affect its business and results of operations.

The past performance and growth of its business are not indicative of its future performance and growth.

Creditaccess’s business is particularly vulnerable to interest rate risk, and volatility in interest rates could have a material adverse effect on its net interest income, net interest margin and its financial performance.

Any downgrade of its credit ratings may increase its borrowing costs and constrain its access to capital and debt markets and, as a result, may adversely affect its net interest margin and its results of operations.

Creditaccess’s Promoter has invested in Sahayata Microfinance Private Limited, which has been involved in various financial irregularities and discrepancies in the past.

Competition from banks and financial institutions, as well as state-sponsored social programs, may adversely affect its profitability and position in the Indian microcredit lending industry.

There are outstanding legal proceedings involving its Company and some of its Directors, and adverse outcomes in such proceedings may negatively affect its business and results of operations.

There is significant competition from other MFIs and banks in India (including SFBs). Some commercial banks are also beginning to directly compete with for-profit MFIs for lower income segment customers in certain geographies.

The rise of digital platforms and payment solutions may adversely impact the business model and there may be disintermediation in the loan market by fintech companies.

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Au Financiers (India) Limited IPO! Put in or out ?

Valuation:

The annualized EPS on post-issue equity works out to Rs 8.69 for FY2018. At the price band of Rs 418 to Rs 422, P/E works out 48.1 to 48.5 times.

Post-issue, the book value (BV) is Rs 143.41 at the issue price of 418 and Rs 143.55 at the issue price of Rs 422. P/BV works out to 2.91 times at lower price band and 2.94 times at the upper price band.

Among peers, Bharat Financial Inclusion is trading at P/BV of 5.69 times, Satin Creditcare at P/BV of 1.55 times and Equitas Holdings at P/BV of 2.19 times.

CreditAccess Grameen: Financials
1403 (12) 1503 (12) 1603 (12) 1703 (12) 1803 (12)
Income from operations 142.34 268.16 456.95 701.75 865.55
Other Income 5.49 13.27 9.77 7.52 9.65
Total Income 147.83 281.43 466.72 709.26 875.21
Interest Expended 72.25 129.05 208.25 316.54 354.57
Operating Expense 44.52 68.70 112.31 155.39 194.50
Operating Profits 31.05 83.68 146.17 237.33 326.14
Depreciation / Amortization 0.53 1.92 2.61 4.43 5.17
Profit before tax and Provisions 30.53 81.76 143.56 232.90 320.97
Provisions and write off 5.73 6.84 14.02 108.60 128.12
Profit before tax 24.80 74.92 129.54 124.30 192.86
Provision for tax 8.17 26.19 46.30 44.00 68.22
PAT 16.63 48.73 83.24 80.30 124.64
EPS*(Rs) 1.16 3.40 5.81 5.60 8.69
* Annualized on post issue equity of Rs 143.36 crore, Face value Rs 10 per share, Figures in Rs crore
Source: Source: CreditAccess Grameen Prospectus

The following table sets forth our key financial and operational metrics as of or for the periods indicated

The following table sets forth our key financial and operational metrics as of or for the periods indicated

Comparison with Listed Industry Peers

PE

Grey market premium:

GMP as on 8th Aug 2018 @ 16.00 is Rs. 10 /- , Kostak is Nil /- 

DISCLAIMER:

No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here

Analysing the Axis Long – Term Equity Fund

Axis Long Term Equity Fund is an ELSS (equity-linked savings scheme) fund managed by the AMC Axis Mutual Funds. It is designed to provide subscribers with tax savings benefits under section 80C of the IT Act 1961. This fund invests exclusively in equity and equity-linked instruments such that it features a high degree of growth with the potential of providing high returns to those investing the Axis Long-Term Equity Fund scheme. Like any other equity mutual fund, the Axis Long-Term ELSS is traded in stock markets, and its unit price is subject to daily change.

axis

Fund features:

This ELSS mutual fund is an open-end scheme, i.e. investors are free to invest in it or liquidate it as per their investment requirements. Additionally, it is an equity-linked savings scheme (ELSS) hence it provides tax deduction benefits under section 80C with the mandatory 3-year lock-in requirement. It is, however, important to note that investors can choose to remain invested in the scheme beyond the mandatory 3 year lock-in period to make his/her wealth grow even further.

Risk Level:

The expected level of risk undertaken by an investor of this key mutual fund is classified as moderately high due to its high equity exposure. However, this does increase the chances of potentially high returns for those remaining invested in the scheme for a longer tenure.

Facts about the fund:

Launching date- 29th December’09

Categorisation- Equity

Type- ELSS (Equity Linked Saving Schemes)

Average AUM – ₹ 17,299.43 Crores

Benchmark – S&P BSE 200 Index

NAVs {as on 06 Aug ’18}

Growth option – ₹ 45.12

Dividend option – ₹23.53

Minimum investment amount – ₹ 500

Minimum SIP – ₹ 500

Exit load- nil

Manager of the fund- Mr. Jinesh Gopani

Tenancy period- 7 years 4 months

Education (degree)- B.Com (H), MMS

10 things I have learned about investing

Fund manager:

Mr. Gopani is a B. Com (H) and MMS from Bharati Vidyapeeth Institute of Management Studies and Research. Before joining Axis AMC he has worked with Birla Sun Life AMC, Voyager India Capital Pvt. Ltd., Emkay Shares & Stock Brokers Limited and Net worth Stock Broking Limited.

Investment Philosophy:

As mentioned earlier, this scheme is designed to provide income and long-term capital appreciation to investors by investing in a wide range of equity and equity-linked investments. As a rule, this ELSS mutual fund from Axis has focused on organizations that have robust growth prospects or have proven performance track record in their area of expertise. The fund invests in company equities across key segments such as large cap, mid cap and small cap irrespective of the sector the companies belong to.

Performance of the fund so far:

The fund has surpassed the benchmark index (12.07%) and the bracket average i.e., 13.66% providing a return of 19.22% within 7 years. The fund has made an outstanding track record of outshining since the initiation.

BENCHMARKAnnual performance (in percentage):

The fund has provided exceptionally good performance beyond time periods.

axis graph

‘Ujjwal Bharat’: ABSL Resurgent India Fund – Series 6 Review

Year-wise performance (in percentage):

The fund saw a drop in return profile in the past 2 years

axis graph 2Where does the fund make its’ investments?

The fund draws huge positions in its uppermost picks, keeping a compact portfolio.

Latest Portfolio:

portfolio axis

Download the portfolio:

Download (PDF, 115KB)

Risk factor:

ratio final

The fund has appeared to be more vigorous in this year, overcoming all its peers easily after a small drop in the return profile in past two years. The fund manager’s uncompromising attention on the standard of underlying portfolio and leaning towards large caps has improved it to deliver outperformance between the deficiencies in the broader market. The fund takes a top-heavy approach with a huge position in its uppermost picks even it constantly runs a compact portfolio with a gush in its asset base. It also acquires a high benchmark skeptic perspective, comfortable in taking remarkably higher exposure about an index. With its big skew to towards financials, this adds a portion of aggression to the fund even its firm stance on retaining the quality. A supportable pick-up in return profile will show its long-term achievements.

 

Note: Past performance of fund does not guarantee the future returns.

Mutual Fund Investment are Subjected to Market Risks, Read all Scheme Related Document Carefully.

Disclaimer: 

No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here.

 

What are Indian Bond Fund Managers Purchasing Despite Inconstancy?

A rapidly increasing trade war and an escalation-focusing RBI (Reserve Bank of India) is thrusting the local fund and money managers into low-risk and shorter debt securities. Take a look at their plans and what they said about it –

Choose the 3-year segment

Mahendra Jajoo, Head of India Fixed-Income (Mirae Asset Management)

  • “The most appealing segment is the three-year segment because after that there are a lot of riskiness and challenges to face.”
  • The most beneficial thing about the three-year segment is that if you are to manage in a situation where you predict that the macros are somewhat risky and uncertain, but probably have ended being worse, what you think you do in that situation? I things started being worse from here, then you are not freaking out much because, at the very end of 3 years, you will get the capital back.

DEBT

Being defensive is a good option

Lakshmi Iyer, Chief Investment Officer for Debt (Kotak Asset Management)

  • “As there are a plenty of riskiness and uncertainties regarding policy decisions and macros, make your portfolio defensive. By being defensive, I mean purchasing two or three-year sovereign bond i.e. short-duration.”
  • “Short-end of curve provides the most comfort at this point. The delta risk to take for maturities which are long-term is not equivalent to the available return.”
  • She said that she suggests state bonds of the same duration rather than AAA and sovereign bonds.

Want to invest your FD proceeds in mutual funds? Here is how to do it

Liquidity is the key

Suyash Choudhary, Head of Fixed Income (IDFC Asset Management)

  • “Target on sovereign bonds and AAA bond is extremely sharp this year as does not desire illiquidity risk.”
  • “Shifted to standard paper as much as possible. Want to be as much AAA as possible.
  • Stop disclosure to some of the less-rated bonds in some of the portfolios between frights of refinancing shocks.
  • “Government bond return curve is very precipitous until five years and then very flat after that.”
  • The noted correlative value in front-end of the return curve- mostly 4 to 6 govt. bonds, which is the core excessive holding.

Accrual & liquid funds

 Killol Pandya, Head of Fixed Income (Essel Finance)

  • Stick to the briefest possible end of the duration curve like accrual, ultra short-term funds, and liquid.
  • September-October is the month of fund cut duration. Have not included it yet.
  • Wish that investors constantly move towards liquid funds else it will turn out to be a mistake.

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Upmost corporate paper

 R Sivakumar, Head of Fixed Income (Axis Asset Management)

  • Suggests short-end bonds which are less than 5 years tenor in sovereign and also the corporate space because they provide more value. Prefers AAA-rated paper above sovereign bonds.
  • Sees a more combative RBI and an upright number of rate hikes proceeding.
  • Does not see any onward remarkable selloff in sovereign bonds with markets being much more stable.

Shorter-maturing liabilities

 Rajeev Radhakrishnan, Head of Fixed Income (SBI Mutual Funds)

  • “Rates are only predicted to go up in the upcoming seven to eight months, would be properly conservative in position over a period, liquidity.”
  • “Credit spreads- corporate returns vs. govt. bonds- are fixed and probably remain so in the very near term because of demand and supply issues.”
  • The fund’s portfolio is suddenly changed toward shorter-maturity AA & AAA note, he said.
  • Probably there will be two or three more rate hikes as per recent pricing followed by relatively long pause after that. Additional policy action is on the cards with clarity.

 

DISCLAIMER

No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here.

Refrain these mistakes while rebalancing the portfolio

Rebalancing portfolio has its own compulsion as rebalancing can help you to return on the route if you have deviated away from your primary asset allocation. Also, rebalancing can secure your portfolio from the volatility of the market in the case you want to minimize your investment risk. There can be several reasons that may lead you to rebalance your portfolio like a change in your financial situation or in the case if you have acquired your goals, rebalancing the portfolio is a must.

portfolio

But there is a set of rules while rebalancing the portfolio otherwise you will end up going beyond the defined level for your debt as well as an equity component. There are a lot of consequences and implications in terms of taxes, the effect on goals etc. while rebalancing the portfolio.

There are some common and avoidable mistakes that one must not do while rebalancing.

Focusing on the losers only rather than current winners

While rebalancing, it is a most important thing to keep in mind that it is necessary to take a look at the investments that are performing well while it’s alright to replace the investments that are leading you to lose your money otherwise you will end up exposing yourself to a big risk. It’s always a better plan to take a step back if you are willing to reorganize things throughout your portfolio.

LONG TERM AVERAGING OF EQUITY SIP’S IS RAPIDLY BUILDING WEALTH

To manage rebalancing by presumptions

Rebalancing is too important to be done only by one’s presumptions as you may assume that rates are going to get down in upcoming months and you move your debt portfolio in favor of funds that are long-dated. Reversely, you may have a feeling that the equities are going to get overpriced and a result of that you may want to shift more into low beta equities. Both views are based on just presumptions and may vary in reality. So, it is good to do rebalancing according to the rules.

Disregarding the tax factors

It’s very important to rebalance carefully when it comes to the tax bill. One must be attentive to how it might affect. You need to know while rebalancing that even the equity funds have to pay the LTCG tax on profits more than ₹1 lakh per year which is 10%. When you are exiting out of debt funds, tax bills can be higher. The taxes can be at the highest rate that is 20% after evaluating the benefit of indexation if you are selling out in less than 3 years. The tax costs can change the economics of rebalancing the portfolio.

Rebalancing without any supervision

It’s always a great decision to be on yourself and to do things on your own but sometimes a little guidance can take you out of the future risks. Like in rebalancing, it is always a better decision to take an advice of any expert while rebalancing your portfolio. An expert can help you in making quick and fruitful decisions and may tell you the do’s and dont’s of rebalancing. Those will make more comfortable for you to make further decisions about your long-term goals.

Rebalancing without any particular investment goal

One of the most common mistakes is rebalancing without any particular investment goal. Also, It is always a better decision to stay in liquid funds and not to rebalance it when you are close to your goals. Rebalancing is an important decision concerning the portfolio, the only thing is it must always be linked with your long-term goals and the costs do not exceed your benefits of rebalancing.

Conclusion –

Rebalancing portfolio is not as hard as it seems but if one is willing to take proper gains from the benefits it gives, then there is a necessity to follow some rules and take some guidance in order to maximize the returns of your investments and minimize the risk factor.

 

HDFC AMC IPO Review, Current GMP and List of Anchor Investors

HDFC Asset Management Corporation (HDFC AMC) coming up with an IPO. The company got SEBI’s nod for the initial public offer. The company incorporated in 1999 based in Mumbai. HDFC Mutual Fund is asset management company which provides services in savings and investments. The company is JV between Housing Development Finance Corporation Limited (“HDFC”) and Standard Life Investments Limited (“SLI”). HDFC is a bigger name in finance and housing market. The company is doing well in India and the coming years will be good for the company as per the financial results. It caters various products portfolio covering five principal segments across the individual and group categories, namely participating, non-participating protection term, non-participating protection health, other nonparticipating and unit-linked insurance products. HDFC Standard life has 66,372 individual agents along with 414 branches across India.

HDFC AMC offers a wide range of savings and investment products across asset classes. As of December 31, 2017, it offered 127 schemes categorized into-

  • 28 equity-oriented schemes
  • 91 debt schemes
  • 3 liquid schemes
  • 5 other schemes (including exchange-traded schemes and funds of fund schemes).

The company also provides portfolio management and segregated account services to HNIs, family offices, trusts, domestic corporates and provident funds etc. As of December 31, 2017, it managed a total AUM of ₹75.78 billion as part of its portfolio management and segregated account services’ business.

HDFC AMC raises Rs 732 cr from anchor investors.

Download (PDF, 1.12MB)

HDFC MF
Outlook of the Firm:

Strong support from established parentage and trusted brand i.e. HDFC, Standard Life;

Reliable and consistent financial performance growth;

Focus towards multi-channel distribution footprint to access the customers;

Leading digital platform which helps customers and distributors.

IPO Dates & Price Band:

IPO Open: 25-July-2018
IPO Close: 27-July-2018
IPO Size: Approx Rs.2800 Crore (Approx)
Face Value: Rs.5 Per Equity Share
Price Band: Rs. 1095 to 1100  Per Share
Listing on: BSE & NSE
Retail Portion: 35%
Equity: 25,457,555 Shares

Market Lot:

Shares: Apply for 13 Shares (Minimum Lot Size)
Amount: Rs.14,300

IPO Allotment & Listing:

Basis of Allotment: 01-August-2018
Refunds: 02-August-2018
Credit to demat accounts: 03-August-2018
Listing: 06-August-2018

Registrar:

Karvy Computershare Private Limited

Lead Managers:

Axis Capital Limited
BoA Merrill Lynch
Citigroup Global Markets India Private Limited
CLSA India Private Limited
HDFC Bank Limited
ICICI Securities Limited
IIFL Holdings Limited
J.P. Morgan India Private Limited
JM Financial Consultants Private Limited
Kotak Mahindra Capital Company Limited
Morgan Stanley India Company Pvt Ltd
Nomura Financial Advisory And Securities (India) Pvt Ltd

Promoters Of the Company:

Housing Development Finance Corporation Limited,
Standard Life (Mauritius Holdings) 2006 Limited,
Standard Life Aberdeen PLC

Objects Of The Issue:-

To avail the benefits of listing the Equity Shares on the Stock Exchanges and;
To carry out the sale of Offered Shares by the Selling Shareholders.

HDFC SHAREHOLDER

Qualitative factors

Consistent market leadership position in the Indian mutual fund industry;

Trusted brand and strong parentage;

Strong investment performance supported by comprehensive investment philosophy and risk management;

Superior and diversified product mix distributed through a multi-channel distribution network;

Focus on individual customers and customer-centric approach;

Consistent profitable growth; and

Experienced and stable management and investment teams.

HOUSE HOLD SAVINGStrong growth is foreseen in household financial savings

India has historically been and is expected to remain a savings economy. The gross domestic savings rate (as a percentage of GDP) is higher than those of major economies such as the US, the UK, France, Japan and Germany.

As of 2016, India’s gross domestic savings rate stood at 29%, compared with the global average of 25%. Household savings in India has witnessed growth from ₹20.7 trillion in Fiscal 2012 to ₹24.8 trillion in Fiscal 2017, although its share as a percentage of GDP remained subdued during the period. The past two years have seen a quantum spurt in investments into capital markets, with the household allocation to shares and debentures increasing from 2% in Fiscal 2015 to 10% in Fiscal 2017 as well as a sharp increase in the mutual fund assets under management (“AUM”).

MFAUM AS PER GDPFor the period April 2015 to December 2017, the individual investors’ AUM grew at a CAGR of 33% to ₹11.4 trillion. In Fiscal 2018, CRISIL Research expects CPI inflation to fall further and average 4%. Over the long term, too, the RBI is committed to keeping inflation low and range-bound. Lower inflation gives an impetus to overall savings, as people can save more. CRISIL Research expects financial savings to increase with the government’s strong stance against black money and diminishing attractiveness of real estate and gold, along with improvement in financial education among households and measures taken towards financial inclusion.

SAVING

Reliance Nippon Life Asset Management ( First MF ) IPO Review

Current scenario

Robust AUM growth since Fiscal 2013, due to the rising individual investors’ participation and equity market.

Mutual funds have emerged as a strong counterweight to foreign institutional investors (“FIIs”)

Systematic Investment Plans (“SIPs”) book size has doubled since April 2016

Other revenue streams

Portfolio management services

Alternative investment funds

Offshore management /advisory services

INDIAGrowth Drivers

Equity mutual funds are perceived as long-term wealth creators.

Financial inclusion, investor education and investor-friendly regulations to boost mutual fund penetration.

Growing awareness can boost acceptability of mutual funds as an investment vehicle.

Spending on investor awareness rising.

Regulations to incentivise investments in smaller cities

Retirement money can be a big impetus

Tax benefits on equity-linked savings scheme (“ELSS”) a huge draw

Guidelines on a categorisation of schemes to make investing easier

Technology to be a key enabler for growth

Instant access facility a viable alternative to a savings account

EQUITY AUM

Key Challenges

Low level of financial awareness

Competition from other financial instruments

Retail expansion at a reasonable cost

EQUITY AUM TOP10Negative

There are outstanding proceedings against us, Promoters, Directors and Group Companies and any adverse outcome in any of these proceedings may adversely affect its profitability and reputation and may have an adverse effect on its business, results of operations and financial condition.

Adverse market fluctuations and/or adverse economic conditions could affect its business in many ways, including by reducing the value of our AUM, causing a decline in its investment management fees, portfolio management fees or fees from advisory services, reducing its systematic transactions, and causing its customers to withdraw their investments, each of which could materially reduce and adversely affect its revenue, business prospects, financial condition and results of operations.

If its investment products underperform, its AUM could decline and adversely affect its revenues, reputation and brand.

HDFC AMC AUM may be constrained by the unavailability of appropriate investment opportunities or if we close or discontinue some of its schemes, products and services.

ICICI Sec. IPO Review and the list of anchor investors

HDFC AMC’s historical growth rates may not be indicative of its future growth and if we do not manage its growth effectively, its financial performance could be adversely affected.

Failure to continue with its existing distribution relationships or to secure new distribution relationships may have a material adverse effect on its competitiveness, financial condition and results of operations.

HDFC AMC rely on third-party service providers in several areas of its operations and may not have full control over the services provided by them to us or to its customers.

If its techniques for managing risk are ineffective, HDFC AMC may be exposed to material unanticipated losses.

MF SCHEME

HDFC AMC may not be able to implement its growth strategies.

Any concentration in its investment portfolio could have a material adverse effect on its business, financial condition and results of operations.

HDFC AMC is dependent on the strength of its brand and reputation, as well as the brand and reputation of other HDFC group entities and Standard Life Investments group companies.

HDFC AMC face competition from other asset management companies, alternative investment funds and other companies providing portfolio management and segregated accounts services and from alternate investments products available in the market.

HDFC AMC’s business would suffer if we lose the services of its key management and other personnel and we are unable to adequately replace them.

HDFC AMC may have negative cash flows.

Valuation

Revenues of the company have increased at CAGR of 20% from Rs 858.55 crore in FY2014 to Rs 1759.75 crore in FY2018. The company has posted healthy 19% CAGR growth in net profit to Rs 721.62 crore in from FY2018 from Rs 357.77 crore in FY2014.

The company has consistently delivered RoE of above 40% for last five years to FY2018.

Post-issue valuation is Rs 23319 crore at the upper price band of Rs 1100 per share and Rs 23213 crore at the lower price band of Rs 1095 per share.

EPS for FY2018 works out to Rs 34.04 on post-IPO equity basis. The scrip is offered at P/E multiple of 32.3 times FY2018 EPS at the upper price band.

The post-issue book value (BV) is Rs 101.9. The scrip is offered at a P/BV multiple of 10.8 times at the upper price band of Rs 1100 per share.

The recently listed peer company, Reliance Nippon Life Asset Management Company is trading at P/E multiple of 25.4 times FY2018 EPS and a P/BV multiple of 5.8 times. Reliance Nippon Life AMC is the fourth largest mutual fund in India with average AUM of Rs 244903.56 crore end March 2018, which has recorded RoE of above 24% for last three years to FY2018.

Conclusion:

The company posted revenue of 19% CAGR in the last 5 years. It earns decent profits. However, its issue price is highly priced. I would have been excited if the issue price was on the lower side. Considering its brand in the mutual fund business and positive factors, investors can invest in this IPO for 4-5 year tenure.

Grey market premium:

GMP as on 25 July 2018 @ 18.00 is Rs.460 /- to 465/- , Kostak Rs.1650/- 
GMP has remained steady for whole day.

 

DISCLAIMER:

No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here

Mutual funds reached to 21% of total bank deposits

Mutual funds are now 21% of the bank deposits. On the other hand, the Indian mutual fund’s industry still has much to gain on with its worldwide squint regarding of the brisk and massive growth in the recent times.

mutual funds

In spite of a massive rise in the equity market and a stable inflow through the SIPs (Systematic Investment Plans), mutual funds had become successful in enticing the trade investors as their equity AUM (Assets under Management) rated for 8% of the bank deposits in the previous fiscal year. According to the data obtained by the RBI, the equity assets of the mutual funds were ₹9.3 lakh crores in averse to ₹115 lakh crores in bank deposits by March end.

10 things I have learned about investing

Progressively, the latest data reveals that the mutual funds are getting well-liked among the investors. The AUM of the mutual funds was counted at 10.44% of the total bank deposits by March 2013. This percentage has increased to 17.44% in March 2017 and then gains a hike to 21% in December 2017. In past 4 and half years, the mutual fund industry has added an amount of ₹ 14.25 lakh crores meanwhile ₹33.79 lakh crores increased the bank deposits.

Also, mutual funds AUM stances at 18% in March 2017, on the other side this ratio was 100% in the US. A huge growth possibility can be seen in India in terms of population dispersion and increasing per capita income from ₹75,000 to ₹2.5 lakhs. The mutual fund industry has attempted several campaigns like ‘Jan Nivesh’ and ‘Mutual Fund Sahi Hai’ to attract the investors towards MF. Also, in the past six years, the mutual fund industry has acquired the growth of 20%. Mutual fund AUM will touch ₹95 lakh crores by 2025 if the industry gets to attain this rate.

mf1Source– RBI, IRDAI (Insurance Regulatory and Development Authority of India)

How to choose the best mutual fund for your portfolio

mf2One of the biggest macroeconomic improvements in MFs is AUM to GDP ratio. Vast change can be seen between the percentage of GDP in FY 2000 and the GDP of FY 2018. Where the GDP was 5.6% in FY 2000, now it has risen to 12.8% and this growth indicates the huge growth potential of the MF industry.

mf3The chart shows that developed countries like the US (101%), France (76%), Canada (65%) and the UK (57%) have listed high-level mutual fund penetration. Similarly, the emerging countries like South Africa (49%) and Brazil (59%) have an outrageous allocation in mutual funds in comparison to India. The distribution of India indicates a significant scope for growth as the average of the mutual fund penetration of the world stances at 62%.

mf4This chart shows that the highest allocation percentage of equity mutual fund AUM to market cap ratio is of Germany that is 51%, the US stands second with 41%. While India has only 4% allocation and such low penetration suggests that there is a steady growth prospect for the MF industry, especially in equity mutual funds.

How to disclose mutual funds capital gains while filing ITR

Here’s what constitutes capital gains for mutual funds and how your existing investments need to be accounted for in your IT return.

Those who’ve sold mutual funds also fall under this ambit and have to declare their gains or losses. Let us find out what constitutes capital gains for MFs and how your existing investments need to be accounted for.

What is Capital Gain?

Capital assets could be any form of wealth like land, building, house property, vehicles, patents, trademarks, leasehold rights, machinery, jewellery, stocks and even mutual funds. Any profit or gain that arises from the sale of any of these ‘capital assets’ is a capital gain. These gains could be taxable in your hands, subject to the taxation rules of the year in which they occurred. The rules of taxation differ from one capital asset to another. For example, the rules for capital gains on equity mutual funds are different from those of debt mutual funds.

Fact sheet of Women fund managers who have outperformed or Underperform over the long-term

Mutual Fund Gains & Losses

Investing in MFs does not immediately concern the I-T Department. However, if you make a profit or loss after redeeming your MF investment, the I-T Department wants to know about it. The nature of the investment, whether it is a debt fund or an equity fund, determines the exact tax impact on the investor.

In a debt MFs, capital gains earned on investments held for under three years are called Short Term Capital Gains. Gains on investments held longer than three years are called Long Term Capital Gains. For equity MFs, gains become long-term if held for one year.

Depending on what your gains (or losses) are, they need to be disclosed appropriately while filing your tax returns.

11

All funds will attract tax to some level on redemption. The short-term taxes are higher, of course, as shown in the table above, while long-term taxes are lesser. One can also claim short-term and long-term capital losses incurred during redemption of both debt and equity mutual funds.

Dividend

Mutual fund schemes have dividend plans where the fund house releases dividends to investors periodically. The dividend that is received in the hands of the investor is tax free up to Rs 10 lakh in a year. The dividend earnings of a large majority of retail MF investors would fall within this limit. However, the income still needs to be declared.

10 things I have learned about investing

Listing on the Correct ITR Form

ITR Form 2 is for Individuals and HUF not carrying out business or profession under any proprietorship, but having income from sources other than salary. Make sure to take out FY-2017-18’s transaction statements from all your fund holding platforms before you get ready to file the ITR.

Remember that tax is calculated on the entire value of redeemed funds and not on an individual fund. For instance, you will be liable to pay LTCG of 10% only if gains from your entire portfolio exceed Rs 1 lakh, and not from a single fund.

Unlike ITR-Form 1 and For 4, you cannot file this form online. You will have to download the Income Tax XML for ITR 2 from the Income Tax Department’s website, fill it, and submit a return by logging in and uploading the XML, in the income tax portal.

For those seeking deductions, if you have not claimed the same while submitting investment to your employer, you can do that in the form here. Remember for MFs, only pension and ELSS category of funds can be claimed for deductions under Section 80C up to a maximum of Rs 1,50,000.

Remember that other than MFs if you hold other capital assets like property, gold and more and have made gains by their sale, you will have to list the same in the same XML form. Income accumulated from renting out property also has to be listed on the form.

 

Why should you get a standalone cancer insurance plan?

According to a report by the Indian Council of Medical Research (ICMR) based on its National Cancer Registry Programme, the number of new cancer cases is expected to rise from 13 lakhs in 2015 to 18 lakhs in 2020. Around 60-70 percent cancer cases are in the age group of 35-64 years.

The cost of treating this dreaded disease can range anywhere between Rs 15 lakhs and Rs 25 lakhs, or even more, which makes it imperative to have an insurance cover. Since the amount of coverage provided by a normal health insurance policy is likely to be inadequate, many insurance companies offer stand-alone policies that cover all types of cancers.

health

Standalone cancer insurance plans are fixed benefit plans that offer lump-sum payouts at different stages. The sum assured for these policy starts from Rs 200,000 and goes up to Rs 50 lakhs. The term of the policy can range from five to 70 years. As these are pure protection plans, they do not offer any benefit in case the policyholder survives the policy term.

Cancer-specific policies cover different stages of diagnosis, be it minor, major or critical. They cover various treatments, including chemotherapy, radiation therapy, hospitalization, and surgery.

What is the treatment cost of Cancer and how to protect it Financially?

The three stages of cancer that are covered include Carcinoma in Situ (CIS) or the making of a tumour, minor stage, and major or critical stage. The pay-out happens depending on the stage the person is diagnosed with. Around 20-25 percent of the sum assured is paid out if the policyholder is diagnosed at an early or minor stage (the exact percentage varies from one insurer to another). If partial payment has been made by the insurer at an early stage, it is then deducted from the payment at the major stage. For instance, if 25 percent payment has been made in the minor stage, then only 75 percent of the sum insured will be paid at the major stage.

Pre-existing cancer is not covered by these policies. Certain cancers such as skin cancer and cancer caused by sexually transmitted diseases are also not covered by these policies. “Exclusions are important and those buying these policies should read the policy wording carefully,”

HOW CAN YOU SETTLE YOUR INSURANCE CLAIM IF REJECTED?

Critical illness covers too provide lump sum cover for a number of critical illnesses, including cancer. But they don’t cover all the expenses incurred during cancer treatment. They pay only a pre-defined amount upon diagnosis of any critical illnesses listed in the policy document. If you have a mediclaim policy, it will pay for the cost of treatment up to a certain limit. On the other hand, these standalone cancer covers will pay a pre-defined amount on diagnosis of the disease, and at a couple of other stages, which you can use for treatment and meet various other expenses that may arise.

A health insurance policy provides cover for hospitalization expenses, but there are always several additional expenses that are not covered. These cancer plans act as a supplementary cover in addition to the basic health insurance plans. “If one is at an average risk of developing cancer depending on one’s family history, one should have a standalone cancer product. But one should remember that a cancer plan cannot be a substitute for a basic health insurance policy,”

On diagnosis of cancer, future premiums are waived off. One can also claim tax benefit under Section 80D on the premium paid. The premium for this cover is calculated based on the sum assured, policyholder’s gender and age, term of the policy, existing health issues, and family history. A person is not covered if he has already got cancer due to the risk of recurrence.