Stay cautious to the damaged Midcaps – MFs no longer hold it up

According to UBS, a global financial service provider, the most crucial wheels of the past two year’s rally in small-caps and mid-caps might be turned out to be cold now. If it seems like the damaged midcap and small-cap funds appear tempting in the market that is raising the benchmark indices to a record high in every next day, one must take a careful look.

mid cap

As per the survey by the global brokerage in July, both midcaps and small caps funds have lost support from the domestic mutual funds. The survey revealed that for more than last two years, flow from local mutual funds had a closer connection for small caps and mid-caps than foreign flows. Concerning the investors, the MF has reduced its rate of buying and the performance of small & mid-caps in the Nifty 2018 has not met the investors’ expectations.

The overall ranking of concerns (Investors’ outlook)

  1. Oil prices
  2. Local fund flows
  3. 2019 Elections
  4. Bank NPLs resolution
  5. INR exchange rate

How to choose the best mutual fund for your portfolio

The rankings are according to a small survey conducted by UBS where the investors were asked to rate the issues which are most critical for the Nifty on behalf of other investors. It has been predicted that the falling value of rupee is the most crucial issue but surprisingly, oil prices emerge out to be the most crucial issue by the investors. At present, even the 2019 elections is not a big worry for the investors. And the rupee depreciation is the last concern for the domestic equity investors.

The prime reason behind Nifty50’s underperformance across emerging market peers is the occurrence of rapid depreciation in the rate of INR along with a hike in the price of crude oil in the international market.

According to foreign brokerage, an increase of $10 per barrel in the price of crude oil might result into increase in India’s current account deficit by 0.3% of GDP and fiscal deficit by 0.1%. Moreover, CPI inflation may increase by almost 25 bps and cause a 30 bps impact on GDP growth if there is a 10% hike in the average prices of crude oil and if the raised fuel prices are passed on to buyers. Also, a hike of 10% in crude oil prices might not impact Nifty earnings so it may not change, but a drop in the rate of currency can push earnings up.

Refrain these mistakes while rebalancing the portfolio

“Nifty50 has usually did not met the expectations by its performance in relation to other rising markets in periods whenever there was a hike of more than 10% in oil prices and also when the currency rate dropped by more than 5%”, UBS revealed. Although crude oil prices and currency depreciation has affected the macro stability of India yet India is still far from the delicacy situation like in 2013.

The dollar to rupee value is somewhere near 70 and the crude oil prices have touched $70 per barrel in the global market for some time now. UBS said the fall in the currency affected the market in an assorted way. Although a 5% drop in the currency would drive up inflation by 10 to 15 bps, its influence on growth would be somehow beneficial, provided a pump to net exports.

Considering 2019 elections

One of the prime factors for the Indian markets in the upcoming months will be the outlook of the investors for the elections going to be conducted in 2019. According to some sources, there is a solid chance that Narendra Modi is going to win again in the 2019 elections. UBS said, ‘the majority of investors are assuming that Modi is supposed to be the Prime Minister again in 2019 elections.

Why is equity the most preferable long-term asset class?

It has been an eminent journey for the Indian mutual fund industry since now. The MF industry has made outstanding steps over the past few years. The investors have raised a substantial ₹1.3 lakh crores in equity mutual funds in 2017. But, the percentage of mutual fund assets in household savings is very less in India.

equity

According to the data from RBI, the percentage of mutual funds in financial assets is as low as 13%. The percentage of mutual funds will be even lesser if we add household savings in the physical assets, i.e., gold, petroleum, real estate etc. Even after the immense success of the Indian MF industry, the most selected choice for people is still bank deposits which are approx. 50% of the household financial assets.mutualSource: RBI

One can see that mutual funds savings are even less than 22% of the total bank deposits. The similar percentage in the US (United States) is around 101%. Moreover, almost the top 60 district of India hold the immense percentage of the mutual fund industry AUM. Except for those districts, the penetration of mutual funds in household savings in remaining part of India is appallingly less. One of the numerous reasons behind the low penetration of mutual funds in the country is the deficiency of financial awareness.

Risk factor

Doubtlessly equity is an uneasy and unpredictable asset class. There are sudden fluctuations in the stock market and this is called volatility. If you have invested in equity and your investment generally makes more hike in up-markets than it drops in down-markets, then it is a sign that your probability of getting impressive results are very high than of suffering loss over long investment tenure which is very low.

Mutual funds reached to 21% of total bank deposits

Performance in 5 years

The time period of five years, i.e. from 2014 to 2018 covers uncommon market conditions. 2014 was a year with a rising price. It was the year with a bull market with Lok Sabha elections and BJP coming to authority. 2015 was a good year stock market-wise having a correction worldwide as well as in India. 2016 started with a significant drop within the first 2 months, followed by an improvement. 2017 was a contrary year to a bull market. 2018 started with a volatility period of 3 months in the market, and since then the market is mostly seen as range-bound.

Different asset class

In this exploration, BSE-100 is taken as the proxy for the equities. BSE-100 symbolizes the large-cap province of stocks. Large-cap stocks hold the immense majority of overall market capitalization in the stock markets. CRISIL Composite Bond index represents the long-term i.e. more than 5 years, medium i.e. 3 to 5 years and short-term i.e. 1 to 3 years fixed income investment. CRISIL liquid fund index represents very short-term fixed investments i.e. less than a year and this index is similar to the savings bank.

Performance in 2014

2014Source: CRISIL, BSE, Goldprice.org

As mentioned 2014 was a year with a rising or a bull market year. All the asset classes performed well in 2014 except gold. And BSE-100 was outperformed.

Performance in 2015

20141Source: CRISIL, BSE, Goldprice.org

2015 started amazingly for equities but there was a great rectification in the month of March and there was high volatility in the stock market for the rest of the 9 months period with a downward bias. Predictably, equity not performed so well in such market-conditions but still is the best performer if we combine the 2014 and 2015 performance of all asset classes.

Warren Buffett that may help you to create wealth in long-term

Performance in 2016

2016Source: CRISIL, BSE, Goldprice.org

2016 started with under-performance by equity, driven mostly because of the slowdown in economy on the back of dropping prices of crude oil. But the stock market made a recovery in the month of March and maintained it or the remaining year.

Performance in 2017

2017Source: CRISIL, BSE, Goldprice.org

2017 was the great year for the stock market. Equity performed exceptionally well in 2017 and after the under-performing period of 2 years, BSE-100 provides more than 30% returns.

Performance in 2018

2018Source: CRISIL, BSE, Goldprice.org

2018, as many investors know, saw a lot of volatility and the market has been range-bound over the last few months. Let us how different asset classes have performed so far this year.

Large-cap equity vs. mid and small-cap

According to the data, mid-cap and small-cap stocks have dropped 20% to 30% in 2018. Even though mid-cap and small-cap funds are capable enough to provide high returns in the long-term period but large-cap funds and stocks are less volatile than them. Large-cap funds deliver balance to the investment portfolio and these funds should contain the core of the portfolio.

Conclusion

CONCLUSIONSource: CRISIL, BSE, Goldprice.org

Equity seems to be the worst performing asset class in 2018 but the outstanding performance between the period of 2014 and 2017 ensures that equity shows itself as the best performer over the entire period.

 

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.

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

Download (PDF, 158KB)

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.

Download (PDF, 120KB)

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.

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.

 

How Small cap Funds beat Nifty : A complete analysis of Different charts and Fact sheet

1. Cumulative Performance Chart (%)
 
2. Discrete Bar Chart
 
3. FACT SHEET OF SMALL CAP INDEX
 
4. Interactive Performance chart
 
5. Distribution Chart Period Type 3 years
 
6. Ratio Table
 
7. Rolling Bar Chart
 
8. Systematic Investment plan ( SIP ) Chart for last 5 Years SIP of Rs. 50000/- p.m.
 
9. Regular Withdrawal chart

Initial Investment: 10000000.00

Data Frequency: Monthly

Withdrawals Date: 10th of the Month

Withdrawals Amount: 100000.00 Monthly For 5 years

Data Frequency: Monthly

Withdrawals Date: 10th of the Month

Withdrawals Amount: 100000.00 Monthly For 5 years

10. Static Scatter Chart
 

Cumulative Performance Chart  (%)

Cumulative Performance (%) Cumulative PerformanceDiscrete Bar Chart

Discrete Bar Chart

FACT SHEET OF SMALL CAP INDEX

Download (PDF, 172KB)

What are Dynamic Funds? ( Video )

Interactive Performance chartInteractive Performance chart 1Distribution Chart Period Type 3 years

Distribution Chart Period Type 3 years

Retirement Fund : What is a Systematic Withdrawal Plan ( VIDEO )

Ratio TableRatio TableRolling Bar Chart

Rolling Bar Chart

Do Not Compare Yourself with Other Investors While Making Investment

Systematic Investment plan ( SIP ) Chart for last 5 Years SIP of Rs. 50000/- p.m.

SIP CHART 4Regular Withdrawal chart

Initial Investment: 10000000.00

Data Frequency: Monthly

Withdrawals Date: 10th of the Month

Withdrawals Amount: 100000.00 Monthly For 5 years

Data Frequency: Monthly

Withdrawals Date: 10th of the Month

Withdrawals Amount: 100000.00 Monthly For 5 years

 

Regular withdrwal chart 2Static Scatter Chart

Static Scatter Chart

DISCLAIMER

Past performance of fund does not guarantee the future returns

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.

Gold Vs Equity Return ( Image and Video )

If you had invested Rs. 1 lakh in gold in 1979 then today its worth is Rs. 30.26 lakh…. while on the other hand, if you would have invested the same amount Of Rs.1 Lakh in equity then today its worth of Rs. 3.1 cr…..

gold

Top 10 largest gold reserves by country

Equity vs Gold ( Video )

Nifty 50 Journey to 10,000 level

gold vs equity

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.

Know more About P/E Ratio and its Significance

We all know about that there are ups and downs in the stock market every day, we often hear about that the market is more than its value today or under-valued today also, that this or that stock is expensive or cheap etc. So what does that really means in the subject to stocks?

For example, if the share price of a company is Rs.100 and share price of another company is Rs.500 that is the share price of one company are more than another one that does not mean the company having high share price is expensive than the company having low. Share prices of the companies are always identified regarding EPS (Earnings per Share).

PE RATIO

EPS

EPS is the portion of the profit of the company allocated to each outstanding share of common stock. EPS works as a calculator of profitability of any company. More often, sometimes the data sources make the calculation easier by using a number of shares that stands out at the end of a particular period. The term EPS represents the part of the net gross of a company, taxes and stock dividends. EPS is also a calculation of company’s profitability on the shareholder point of view.

EPS

When one is purchasing shares of any company then he is purchasing the future earnings on a stock of that company. Also, if the EPS is high you have to be prepared to pay the high price and if it is not, then you will not get prepared to pay a high price. EPS is calculated by dividing post-tax profits from the number of shares in issue.

P/E ratio

For a long time, the investors and stock analysts use price-earnings ratios which are named as P/E ratios. P/E ratios are the ratios of share prices to earnings. P/E ratio is calculated by the price of a share of a stock divided by EPS (Earnings per Share) of the stock.

PE

The P/E ratio is used to help the investors to know the time period in terms of years in the value of earnings a company will need to make the production to get its current market share value.

Two types of measurement issues are there while calculating P/E ratio. First one discusses the period at which price of the shares and earnings are calculated. The price shown in a P/E is generally the current market price of the stock such as weekly or monthly average ratio. Second one concerns about earning for the future predicted earnings for the next year.

Bharat-22 ETF Complete Portfolio – Will u buy this basket?

Limitations of P/E Ratio

P/E ratio shows nothing but the EPS growth prospects of a company to the investors and that is the big limitation of P/E ratio. The company having high growth rate seems comfortable to buy even having high P/E ratio, perceiving that increase in EPS will somehow assist the P/E back down to a low level. If the company has not that much growth rate, you may look after the stock has lower P/E ratio also it is often not easy to know whether a high P/E multiple is due to the growth or just the stock gets overvalued.

P/E ratio once calculated using an estimation of further earnings is not able enough to provide the information whether the P/E is suitable enough for the current growth rate of the company. To fulfill this limitation, another type of ratio is used named PEG (Price Earnings to Growth) ratio.

PEG

PEG Ratio is calculated by dividing PE to EPS growth rate over the next year. PEG ratio propose that the P/E is in the line of growth when a PEG is greater than one it means that the stock is overpriced.

Conclusion

Undoubtedly, the P/E ratio is very famous and easy to calculate, but also there are many drawbacks that the investors should keep in mind while using it to evaluate values of the stock market. Straightly, no single ratio can give you all the information you want to know about stocks. So, try to use multiple types of ratios to get full-proof information about stock and its valuation.

Bharat-22 ETF Complete Portfolio – Will u buy this basket?

Bharat-22 ETF Complete Portfolio to be launched on behalf of Govt by ICICI Pru MF Will u buy this basket?

The ETF will be a portfolio of six sectors–basic materials, energy, finance, FMCG, as well as industrial and utilities. There will be a sectoral capping of 20 percent and a single company stock cap of 15 percent.

Bharat22 is fairly diversified products which will represent the performance of India & Government’s agenda over the long-term.

Invest in 10 Maharatna’s and Navratna’s

ICICI Prudential AMC will be the ETF Manager and Asia Index Private Ltd (JV BSE and S& P Global) will be the Index Provider.

bharat22The government raised Rs 8,500 cr by divesting through CPSE ETF in the last financial year 2016-17.

For FY17, the government had revised the divestment target to Rs 45,500 crore and had over-achieved it by raising a total of Rs 46,247 crore.

If investors remember the first government ETF (CPSE ETF) was launched in March 2014. The fund has outperformed the index by a wide margin. It is up over 22 percent in the past one year, more than the near-18 percent rise in the Nifty50 index, and 17% which is the average of top 3 ETF linked to the index.

CPSE ETF Further Fund offer 2 (FFO 2) at 3.5% Discount

Globally, ETF assets have grown significantly. There is USD 4 trillion worth Assets Under Management (AUM) and are expected to touch USD 7 trillion by 2021.

“Bharat-22 is adverse to political risk, changes in government policy and governance of PSU which was less active historically.

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.