NIMESH SHAH | Wed, 12 Jul 2017 – 07:35 am | DNA
Dynamic asset allocation funds is a smart way to invest in markets without worrying about market highs or lows
The stock markets are at all-time highs, and it’s understandable if you are confused whether to invest or wait for correction. Timing the market is not easy. And while piling up your savings or putting them into traditional investment options seems like an easier option, it lacks the growth opportunities which capital markets could present.
A smart investor would look to participate in the growth of capital markets but in conservative manner. Introduce yourself to dynamic asset allocation funds, a smart way to invest in markets without worrying about market highs or lows.
Investing in mutual funds which follows the principle of dynamic asset allocation gives you the flexibility of investing in both debt and equity depending on market conditions. These funds aim to benefit from growth of equities with a cushion of debt. Such funds work on an automatic mechanism switching from equity or debt, depending on the relative attractiveness of the asset class.
In a scenario when the equity market rallies, the fund is designed such that profits are booked and the allocation would shift towards debt. On the other hand, if the markets correct, the fund will allocate more to equity, in order to tap into the opportunities available. The basis for this allocation is based on certain models which takes into account various market yardsticks like Price to Book Value amongst several others for portfolio re-balancing.
This model based approach negates the anomaly of subjective decision making, thereby ensuring that the investment made is deployed at all times to tap into the opportunities of both debt and equity market. The other added benefit is that one gets to follow the adage – Buy low, sell high. For an equity investor, this is one maxim which is the hardest to execute, but this fund effectively manages to achieve this objective.
Also, investing in such funds renders an added benefit of tax efficiency as 65% of the portfolio is allocated to equities. Since this category of fund is held with a long tern view, capital gains on equity investment (if invested for over one year), are tax free, as per prevailing tax laws.
So, while the markets are soaring high, you can consider investing in dynamic asset allocation fund to keep you well footed in the market, even during volatile times.
The writer is MD & CEO, ICICI Prudential AMC
By Yogita Khatri, ET Bureau|Jul 17, 2017, 06.30 AM IST
The Metropolitan Stock Exchange of India (MSEI) is keen to extend trading hours to 5 pm. This might force top exchanges NSE and BSE to follow suit.
However, will the move benefit small investors? ET Wealth reached out to market participants to know their views.
Rahul Jain, Head of Retail Advisory, Edelweiss Wealth Management, says Yes
Extension of trading hours will help drive volumes, which helps market liquidity, increasing confidence of smaller participants.
For secular retail participation in the capital markets, two things are important. One, education about the asset class and two, the confidence in the markets. While institutions are investing in educating the clients, confidence of small investors in markets will be boosted by growth in volume and more broad-based participation.
Longer trading hours will benefit traders and expert participants in multiple ways. Benefits will accrue to smaller participants as well. Here’s how:
A. It will increase time overlap with global markets, thereby reducing, to some extent, open gap shocks. Minimising such shocks is good for retail and small investors as it helps reduce the volatility of returns. In a country like ours where retail investors have traditionally invested in FDs or physical assets like gold and real estate, low equity market volatility will be a confidence booster.
B. Extension of trading hours will also help drive volumes which is good for the overall market liquidity, thereby increasing the confidence of smaller participants in the equity markets. As it is evident that more overlap with global markets and increased volume is good for all market participants, extending trading hours is an idea worth exploring.
Sudip Bandyopadhyay Group Chairman, Inditrade (JRG) Group of Companies, says Yes
If India is to become a global financial powerhouse and if exchanges are to become truly international, we need to have extended trading hours.
The Indian capital market is significantly influenced by the global markets and global investors. No market participant can deny this influence and co-relation. The most influential global market is the US market. It starts trading long after the Indian markets close.
This creates a peculiar situation which leads to “gap-up” or “gap-down” of opening of Indian markets post any major global event. For the health of any market and its investors and in particular the retail investors, this is definitely detrimental. Extending Indian market hours to align with at least the opening of the US market, will prevent some uncertainties.
Further, Indian financial markets, systems and processes are now robust enough to support long market hours. Both back office processes and banking activities even in normal course, continue far beyond the present market closing hours. Thus, adopting extended trading hours should not pose any operational or banking issues.
If India has to become a global financial powerhouse and if Indian exchanges aspire to become truly international, we need to have extended trading hours. However this can be done over a period of time in phases. At this stage, extending trading hours up to New York opening time, should at least be considered.
Deepak Jasani, Head, Retail Research, HDFC Securities says No
Impact of moves in global stock exchanges do impact the opening levels of Indian markets but in most cases, that effect is overcome in a couple of hours.
For small investors, extended trading hours will not help in any way. The six hours available now for trading are sufficient for price discovery and execution. With mobile trading on the rise, even investors who are occupied at work till evening can track the markets and trade within the trading timings.
Though currency and commodity markets are open till late, this is mainly to allow hedgers/traders to track forex markets or commodity prices abroad. As far as equity markets are concerned, Indian stocks prices do not track any other prices on a minute-by-minute basis. Impact of moves in global stock exchanges do impact the opening levels of Indian stock markets but in most cases, that effect is overcome in a couple of hours.
Exchanges would like to extend time to offer differentiation, gain market share and boost income. Compulsive traders would like extended hours to get more opportunities to trade. Brokers would welcome extended hours provided the incremental revenues are more than the cost in terms of manpower and other running costs.
However, they currently feel that extending trading hours would bring more pressure on them and may not result in much higher volumes and revenues. Markets are trending for 25-35% time and are range-bound/trendless for the balance period. In the latter period, extending the trading hours could prove to be discomforting for all participants.
Sandip Raichura, Head, Retail, Prabhudas Lilladher, says No
A small trader has a defined risk appetite and that doesn’t change because more time is available. He will be looking at price levels, not the time.
Proponents of the benefit of longer trading hours have often justified this by giving examples of the commodity exchanges etc., which work for longer hours. While it may benefit certain segments of investors and traders, I don’t see any direct benefit to smaller investors, at least not immediately.
The small trader has a defined risk appetite and that doesn’t change just because more time is available. The small investor will typically be looking at price levels, and not necessarily the time of day to take decisions. Self-driven clients trading online may possibly do more trades, but that is a conjecture at this stage.
It might negatively affect relationships between small traders and sub-broker or RMs who typically meet in the evenings. This can affect fund flows with cheques not collected in time or that client feeling a deficiency in services if not met regularly.
In fact, brokers might desist from offering sit in or walk in services at low brokerage rates due to the enhanced costs of an extended day and attempt to pass on these costs. What’s most likely is that the same trades are likely to now get staggered over a longer period.
The benefits of an internationally aligned market are more likely to accrue to bigger investors. While European and Asian markets get factored into our markets adequately, the US markets open much later than 5 pm and therefore, it is unlikely that volatility would reduce due to the additional hours.
Equity investing have always been associated with high riskiness and the proverbial doom and crash in India
ANUPAM SINGHI | Fri, 16 Jun 2017-07:25am | DNA
Systematic investment plans (SIPs) were first introduced in India about 20 years ago by Franklin Templeton, a global investment firm. SIPs entail recurring disciplined investing via experienced portfolio managers. By necessitating fixed periodic (monthly, quarterly etc.) investments, it makes the timing of the markets, which can be risky, irrelevant, and at the same time, it typically provides above average market returns over a long period. Therefore, SIPs can be relatively less risky and also offer a hedge against inflation risk.
The top SIP funds have consistently given annualised returns of about 20% over the last two decades. The return from SIPs are calculated by a methodology called XIRR, which is a variant of internal rate of return (IRR). In the recent times, SIP fund managers usually tend to invest not more than 2% of the total capital available in a single stock. Portfolios are usually well diversified.
Currently, there are scores and scores of SIP funds to choose from. Different types of SIPs are available to suit an individual’s risk appetite, ROI goals, the time period of investment, and liquidity. Unlike PPF or Ulip, there are no restrictions and penalties on regular SIP payments and withdrawals. Investment can be as low as Rs 500 per month. Retail investors can look to invest in small-cap SIP funds initially, and once their capital builds up significantly, can shift to the less risky large-cap SIPs.
Equity investing have always been associated with high riskiness and the proverbial doom and crash in India. However, the trend is changing in recent times. Increased availability of information about investing, and greater digital marketing, has led to more and more individuals taking the SIP route. The number of SIP accounts has gone up by about 30% in the last 12-15 months alone. SIP monthly inflow volume now stands at about 3,000-3,500 crore, as opposed to about 1,000-1,500 crore in 2013. Retail participation is low India but is bound to increase at an accelerated rate.
Several brokerages are now waking up to the fact that higher P/E ratios are the new normal, as they are warranted by a fundamentally strong economy. Currently, the Indian stock market capitalisation to GDP ratio is approximately 98%, compared to 149% in 2007. With only about 250 Futures and Options (F&O) available out of approximately 4,200 individual securities, shorting opportunities are limited. Increased inflow SIP money could very well drive and support quality stocks in a growing economy.
The writer is COO, William O’Neil India
Sidhartha | TNN | May 5, 2017, 06.22 AM IST | Times of India
ICICI Prudential Asset Management Company managing director & CEO Nimesh Shah believes in speaking his mind. While most market players are euphoric about the recent rise in stock market indices, Shah cautions investors against chasing high returns, given that the valuations are high. But he is optimistic about the medium term prospects and insists that mutual funds will be the preferred mode of investment, given the “repair work” in real estate. Excerpts:
What should someone looking to enter the stock market either with cash or via SIP do at this time?
On a price-to-earnings basis, market is over-valued at current levels. Because of the persistent flows from both foreign and domestic portfolio investors, the market is currently running a year ahead given that earnings per share (EPS) is expected to improve significantly by 2018-19. This is because we believe that over the next twothree years, capacity utilisation can increase and so can the return on equity . Currently , the macros are strong but Indian companies are facing various pockets of challenges. But consumption across the spectrum is likely to hold strong. Given this expected improvement, it is likely that there could be a consistent flow of investment from institutional investors, thereby lending a reasonable investment experience over next twothree years. But since the market is already slightly over-priced, one cannot expect abnormal returns.
For those investing via SIP , they can continue with their investments because over the next three years, the investment price will average out, thereby yielding better returns. For someone who is coming in when sensex is at 30,000 level, can consider dynamic asset allocation funds which result in lower equity exposure when the equity level is up and vice versa.
But it gives you conservative returns…
Yes, it does. But it is good to opt for conservative returns when sensex is at 30,000 level.Even if the index were to head higher say 33,000 level, the only limitation here would be that the entire upside is not captured. But when market turns volatile at higher levels, this class of funds can limit downside. As we all acknowledge, there is more pain in losing Rs 5 than the joy in gaining Rs 30.
If you are investing in equity MFs, one should consider large-caps because mid-caps are over-valued at present. Continue investing but invest with caution because returns may not be too high from current levels. Just because banking funds as a category has delivered 40% plus returns, it does not mean everyone should invest in it based on past one-year return.
A few years ago, the government was worried about the huge inflows from FIIs and feared the impact post withdrawal. But now mutual funds seem to have emerged as an effective counter-balance. Has the domestic MF industry matured?
To a certain extent domestic institutions have emerged as a strong counterbalance. Over the last few months, mutual funds and foreigners have pumped in money into stock markets, thereby pushing up benchmark indices. However, even if foreign investors were to withdraw tomorrow, Indian MF and insurance industry which is putting in over $3 billion a month, will be able to balance it out, thereby limiting any adverse shocks. Today , people refrain from investing in real estate, gold and bank FDs, which is currently yielding 6-7% return pre-tax. In such an environment, equities are becoming a TINA factor -there is no alternative. So, we believe that steady inflows may continue.
How much of small investor money is coming into the market?
Mutual fund in India is all about small investors; high net worth individuals form a very miniscule portion. We are opening nearly 120 offices across smaller towns such as Nadiad (Gujarat) and Arrah (Bihar) because we believe that MF is a viable business. We have ensured that we are present pan-India, including North East. If we can give a better alternative to unorganised investment avenues, people can invest. While people in Gujarat who are more evolved investors can move to value investing, in the East, money can be moved into mutual funds from unorganized sector, there by giving us an opportunity to show the importance of well-regulated businesses.
Will the recent change in regulations push MFs?
We are in an infinite market as the MF penetration is hardly 4% in the country . The one major challenge now is simplified onboarding process for investors. Today, 85% of our business comes from existing consumers and this shows that the market is not expanding adequately . As a fund house, we receive several queries on our website, but the conversion rate is disheartening. We have come to realize that investors are wary of the entire KYC process. Like insurance, AMCs too should be allowed to use the bank KYC details, thereby eliminating the duplication of paperwork.
The reason why bank KYC should suffice is because entire industry does not deal in cash transactions. MFs receive funds via bank accounts and at the time of redemption the funds are transferred to the same bank account. So there is absolute transparency .
Source : https://goo.gl/y2MtpW
Sun, 19 Mar 2017-12:14pm | PTI | DNA India
Buoyed by the surging stock markets, the Employees Provident Fund Organisation (EPFO) may propose to invest up to 15 per cent of its investable amount in equity markets during the next fiscal, Union Labour Minister Bandaru Dattatreya said.
“We are proposing to invest up to 15 per cent during the next year. Central Board of Trustees (CBT) meeting will be held on March 30. We will seek its opinion. So far, during the past one-and-half year we have invested Rs 18,069 crore. We are getting good yield. It is encouraging,” Dattatreya told
Just like its predecessor, 2017 promises to be a rollercoaster ride. A curtain-raiser on how to navigate the investing landscape
BY SAMAR SRIVASTAVA | Forbes India | PUBLISHED: Feb 20, 2017
2016 held an important lesson for investors—that surviving volatility is as important as making the right investment.
It was no ordinary year. The sharp market swings following Brexit, the election of Donald Trump as America’s president and Prime Minister Narendra Modi’s surprise demonetisation announcement singed investors. What is significant is that those who stayed put were none the worse off. Each time, each jolt later, the markets recovered.
This much is certain: 2017 promises to be no different. Brace for volatility, make it your friend, stay the course and profit from it.
It is against this uncertain investing backdrop that large Indian companies are looking attractive once again. Over the last three years, their smaller counterparts have delivered superlative returns. Could it be their turn now? Our story (page 58) points to an informed yes as a faster global growth forecast, rising commodity prices and lower relative valuations mean this is likely to be the year of large-caps.
Large-caps have propelled Birla Sun Life Frontline Equity Fund to the top of the fund size table. The story of how fund manager Mahesh Patil went back to the drawing board after the 2008 financial crisis and overhauled its investing process is a compelling one.
Rapid growth companies, such as those the Birla fund has invested in, are facing a peculiar problem—identifying investible opportunities with the cash they’ve generated. What should companies ideally do with this cash and how should an investor view the cash on the books of a company? There’s no one answer with different investors offering various suggestions.
While equity markets have outperformed other asset classes, real estate remains a sound bet for those wanting to buy a house to live in. “Just as you can’t time the top of the cycle, you can never time the bottom of the cycle,” says Srini Sriniwasan of Kotak Investment Advisors. We also ask him why he believes residential demand could come back faster than expected.
Commodities have been on a tear this past year. Those who took a contrarian call in 2015 were rewarded handsomely in 2016. While the first leg of the commodity rally has played out, investors are now waiting to see whether the new US president follows up on his promise of infrastructure spending. This could provide a further fillip to prices of iron-ore, zinc and copper. Any hint of fiscal expansion will be greeted cheerfully by commodity markets.
Gold, a safe haven asset, had a good year in 2016 as investors took shelter from political shocks like Brexit. The approach tends to be to not invest in gold to beat the markets as over long periods, it tends to underperform. But in 2017, gold should do well if the US dollar remains weak and investor demand climbs up during times of volatility.
The more cautious investor, who typically invests in fixed income, had a happy 2016 as bond yields fell rapidly. Their returns outpaced a large-cap index fund. For most, this was a pleasant surprise. At the same time, nothing lasts for too long and investors wanting to do better in bonds would be better off shifting to shorter maturity bonds. They’ll also have to keep a close eye on India’s credit rating as a cut could see yields spike.
To round off this special package, we bring you two interesting trends. One, on bottom-of-the-pyramid businesses where returns have been steady: Equity funds who invested in them have done well as a column by Viswanatha Prasad, CEO, Caspian Advisors, an impact investing fund, points out.
And two, on HNI investors, with a greater appetite for risk, who are investing in startups as a new asset class, seeing themselves as partners in their progress.
By Kshitij Anand, ETMarkets.com | Updated: Nov 02, 2016, 11.09 AM ISTPost a Comment
NEW DELHI: If you believe in the power of compounding, then equity market offers you the best tool to harness this strong force via the mutual fund route, which can let create good long-term wealth.
Compounding interest separates the haves from the haven’ts. Compounding is the first step towards long-term wealth creation. When you buy a mutual fund, compounding allows you to earn interest on your principal and on the interest that you reinvest. It helps you build a large corpus over time with the smallest of initial investment.
“Einstein said the power of compounding is the eighth wonder of the world. One who understands it, earns it and the one who does not, pays it. Please exploit the power of compounding for long-term wealth creation through equity mutual funds,” Raamdeo Agrawal, Co-Founder & JMD, MOFSL, said in an interview with ETMarkets.com
“God and the government have come together to make you rich in the Indian market this year. Rs 10,000 a month invested in any equity growth fund for 25 years (Rs 30 lakh) can earn you between Rs 3 crore and Rs 25 crore,” he said.
The prerequisite for creating serious wealth is to start early, have patience and not get swayed by daily market movement. Give your investment some time to yield fruits, say experts.
You don’t have to be rich to create wealth. Many salaried people have been able to create wealth just with the magic of compounding and by following a disciplined approach towards investing.
“I know many salaried investors, who have created significant wealth than their remuneration over time. The key is to remain invested without monkeying and attempting to time the market,” said Porinju Veliyath, MD & Portfolio Manager, at Equity Intelligence India.
“Equity Intelligence has changed the financial profile of hundreds of middle-class professionals through value investing in equities,” he said.
Veliyath said India’s capital market system has evolved to world-class standards, enabling even small savers to invest conveniently, thanks to our efficient regulators and institutions.
Making money in the market has never been easy, but mutual funds have made the job a lot easier.
Stock markets never move in one direction.
There will always be some concern and fear – if not domestic then global – which will keep the market on the edge. But with a disciplined approach towards investing, investors can use volatility to buy quality stocks on dips.
“In my career spanning 25 years, there has never been a quarter where everything has gone perfectly well for India. If I go back to 1989-1990, the year 1991 was of crisis, the BOP crisis, we had the Babri Masjid demolition, Bombay bomb blasts, fall of a government, something or the other had always been missing,” Rashesh Shah, Chairman, EdelweissBSE 0.13 % Group, said in an interview with ETNow.
“To use a cliché, it is a glass half full or half empty, but the half full is actually fairly good, because in the same 25 years, the index has given you more than 18 per cent return CAGR and that was after tax,” he pointed out.
Shah said even if investors just bought the index, complete passive investing has given investors more than 18 per cent return. “As you know, the index started in 1984 or around it, and it was 100 at that time and the 100 is close to 28,000 now.”