Tagged: Mutual Fund

ATM :: The advent of mutual fund SIPs in India

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

ATM

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

Source: https://goo.gl/Y5WWs8

Interview :: Invest cautiously, stocks over-valued: Nimesh Shah

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

ATM :: Pick the best NPS funds

Babar Zaidi | May 8, 2017, 03.15 AM IST | Times of India

ATM

Though it was thrown open to the public eight years ago, investors started showing interest in the National Pension System (NPS) only two years ago. Almost 80% of the 4.39 lakh voluntary subscribers joined the scheme only in the past two years. Also, 75% of the 5.85 lakh corporate sector investors joined NPS in the past four years. Clearly, these investors have been attracted by the tax benefits offered on the scheme. Four years ago, it was announced that up to 10% of the basic salary put in the NPS would be tax free. The benefit under Section 80CCD(2d) led to a jump in the corporate NPS registrations. The number of subscribers shot up 83%: from 1.43 lakh in 2012-13 to 2.62 lakh in 2013-14.

Two years ago, the government announced an additional tax deduction of `50,000 under Sec 80CCD(1b). The number of voluntary contributors shot up 148% from 86,774 to 2.15 lakh. It turned into a deluge after the 2016 Budget made 40% of the NPS corpus tax free, with the number of subscribers in the unorganised sector more than doubling to 4.39 lakh. This indicates that tax savings, define the flow of investments in India. However, many investors are unable to decide which pension fund they should invest in. The problem is further compounded by the fact that the NPS investments are spread across 2-3 fund classes.

So, we studied the blended returns of four different combinations of the equity, corporate debt and gilt funds. Ultrasafe investors are assumed to have put 60% in gilt funds, 40% in corporate bond funds and nothing in equity funds. A conservative investor would put 20% in stocks, 30% in corporate bonds and 50% in gilts. A balanced allocation would put 33.3% in each class of funds, while an aggressive investor would invest the maximum 50% in the equity fund, 30% in corporate bonds and 20% in gilts.

Ultra safe investors
Bond funds of the NPS have generated over 12% returns in the past one year, but the performance has not been good in recent months. The average G class gilt fund of the NPS has given 0.55% returns in the past six months. The change in the RBI stance on interest rates pushed up bond yields significantly in February, which led to a sharp decline in bond fund NAVs.

Before they hit a speed bump, gilt and corporate bond funds had been on a roll. Rate cuts in 2015-16 were followed by demonetisation, which boosted the returns of gilt and corporate bond funds. Risk-averse investors who stayed away from equity funds and put their corpus in gilt and corporate bond funds have earned rich rewards.

Unsurprisingly, the LIC Pension Fund is the best performing pension fund for this allocation. “Team LIC has rich experience in the bond market and is perhaps the best suited to handle bond funds,” says a financial planner.

The gilt funds of NPS usually invest in long-term bonds and are therefore very sensitive to interest rate changes. Going forward, the returns from gilt and corporate bond funds will be muted compared to the high returns in the past.

Conservative investors
In the long term, a 100% debt allocation is unlikely to beat inflation. This is why financial planners advise that at least some portion of the retirement corpus should be deployed in equities. Conservative investors in the NPS, who put 20% in equity funds and the rest in debt funds, have also earned good returns. Though the short-term performance has been pulled down by the debt portion, the medium- and long-term performances are quite attractive.

Here too, LIC Pension Fund is the best performer because 80% of the corpus is in debt. It has generated SIP returns of 10.25% in the past 3 years. NPS funds for government employees also follow a conservative allocation, with a 15% cap on equity exposure.

These funds have also done fairly well, beating the 100% debt-based EPF by almost 200-225 basis points in the past five years. Incidentally, the LIC Pension Fund for Central Government employees is the best performer in that category. Debt-oriented hybrid mutual funds, also known as monthly income plans, have given similar returns.

However, this performance may not be sustained in future. The equity markets could correct and the debt investments might also give muted returns.

Balanced investors
Balanced investors who spread their investments equally across all three fund classes have done better than the ultra-safe and conservative investors. The twin rallies in bonds and equities have helped balanced portfolios churn out impressive returns. Though debt funds slipped in the short term, the spectacular performance of equity funds pulled up the overall returns. Reliance Capital Pension Fund is the best performer in the past six months with 4.03% returns, but it is Kotak Pension Fund that has delivered the most impressive numbers over the long term. Its three-year SIP returns are 10.39% while five-year SIP returns are 11.22%. For investors above 40, the balanced allocation closely mirrors the Moderate Lifecycle Fund. This fund puts 50% of the corpus in equities and reduces the equity exposure by 2% every year after the investor turns 35. By the age of 43, the allocation to equities is down to 34%. However, some financial planners argue that since retirement is still 15-16 years away, a 42-43-year olds should not reduce the equity exposure to 34-35%. But it is prudent to start reducing the risk in the portfolio as one grows older.

Aggressive investors
Aggressive investors, who put the maximum 50% in equity funds and the rest in gilt and corporate bond funds have earned the highest returns, with stock markets touching their all-time highs. Kotak Pension Fund gave 16.3% returns in the past year. The best performing UTI Retirement Solutions has given SIP returns of 11.78% in five years. Though equity exposure has been capped at 50%, young investors can put in up to 75% of the corpus in equities if they opt for the Aggressive Lifecycle Fund. It was introduced late last year, (along with a Conservative Lifecycle Fund that put only 25% in equities), and investors who opted for it earned an average 10.8% in the past 6 months.

But the equity allocation of the Aggressive Lifecycle Fund starts reducing by 4% after the investor turns 35. The reduction slows down to 3% a year after he turns 45. Even so, by the late 40s, his allocation to equities is not very different from the Moderate Lifecycle Fund. Critics say investors should be allowed to invest more in equities if they want.

Source: https://goo.gl/oUp9FP

ATM :: To realise your crorepati dream, all you need is Rs 5,000 per month

Kshitij Anand | Mar 26, 2017 06:11 PM IST | Source: Moneycontrol.com
A detailed study by Karvy Stock Broking reveals that if somebody who would have invested just Rs 5,000 per month for the last 20 years in these five funds, you would have earned you more than Rs 1 crore now.

ATM

This can’t be true! That would be your first reaction. Making money in the stock market is tough especially when you are a working professional and can’t devote much of your time to read company balance sheets, track quarterly results or learn complicated futures & options.

The simpler way is to give that money on a regular basis via systematic investment plan (SIP) to a fund manager who would use it to invest in stocks, bonds or other fixed income instruments depending on the choice of plan you have taken.

A detailed study by Karvy Stock Broking reveals that if somebody who would have invested just Rs 5,000 per month for the last 20 years in these five funds, you would have earned you more than Rs 1 crore now.

Crorepati1

The math behind it is simple. If you had done a monthly SIP of Rs. 5,000 for the past 20 years, your total investment would be Rs 12 lakh according to Karvy estimates, and your money would have multiplied by:

Reliance Growth Fund 18.27x: Rs 2.19 crore

HDFC Equity Fund 15.68x: Rs 1.8 crore

Reliance Vision Fund 11.81x: Rs 1.4 crore

HDFC Top 200 Fund 11.5x: Rs 1.3 crore

Birla SL Equity Fund 7.58x: Rs 0.9 crore

“We believe SIP is a wonderful tool available for investors who wish to create wealth in the long-run. Investors are already aware of the numerous benefits that it offers to them,” AV Suresh of Karvy Stock Broking told Moneycontrol.com.

“It makes the best use of the power of compounding and creates huge wealth for investors. Apart from this, it also helps one to sail through different market cycles by investing at different market levels,” he said.

If you believe in the power of compounding, then equity markets offer you the best tool to harness such a strong force via mutual funds, which let you create wealth in the long-term.

Einstein once said that ‘Power of Compounding is 8th Wonder of the World. He who understands it, earns it … he who doesn’t … pays it.’ Compounding is the first step towards long-term wealth creation.

The idea is to remain patient and allows your wealth to grow. When you buy a mutual fund, compounding allows you to earn interest on your principal and then again when you reinvest the interest it helps you build a huge corpus over a period of time with the small amount of initial investment.

“You just planted a mango tree and you want fruit tomorrow. Oh no. You just can’t. Similar to your investments. A tree undergoes challenges like pest attack, drought etc. before it yields the first fruit. Similarly, business entities are succumbed to internal and external growth barriers,” Vijayananda Prabhu, Investment Analyst at Geojit Financial Services told Moneycontrol.com.

What type of funds should you consider?

To generate wealth over a period of time, selection of funds is very necessary. If you get stuck with a wrong fund then chances of wealth creation reduce significantly.

Equity funds need a holding period of at least 5 years to avoid negative returns. But the next question is how much to expect from them in the long term. After all, you don’t invest in equity to just preserve capital.

“You invest in building wealth. High return expectations, arising from very short-term abnormal rallies in markets, make investors miscalculate what equity funds can deliver. The result? They save less, hoping that high returns will make up for it,” Vidya Bala, Head, Mutual Fund Research, FundsIndia.com told Moneycontrol.com.

“Large-cap and diversified equity funds deliver superior returns over prolonged time frames. As seen about, there is a 43 per cent chance of this category delivering returns of over 15 per cent over any 7-year time frames in the past 10 years (rolled daily),” she said.

Bala further added that this is simply because, over longer periods, they contain down markets (that would have happened during the period) better than midcap funds. Mid-cap funds’ ability to sustain steady periods of high returns is low at 26 per cent.

Top five funds to consider for next 20 years:

How to pick up a fund is critical. Some analysts advise investors just to choose a fund manager and the rest will be all taken care of. The market always rewards risk and we know that risk and return always go hand in hand; hence, any short terms should not lead you to discontinue your SIPs.

“In mutual funds, it’s not the fund that performs but the fund manager. Just hand pick the top 5 fund managers and choose their consistent funds,” said Prabhu of Geojit Financial Services.

“A few things to look for is the ability to protect the downside during volatility, their information ratio (consistency in beating the benchmark) and market experience,” he said.

But, we all are aware of one fact that all past performance is not an indicator of future performance. Moreover, with ever changing markets, it becomes quite difficult to predict the best performers for the next 20 years.

However, Karvy lists out five funds which have the potential to deliver consistent returns. ICICI Pru Top 100 (G), Birla SL Frontline Equity (G), Canara Rob Emerging Equity (G), Franklin India Prima Plus (G), and ICICI Pru Value Discovery (G).

Source: https://goo.gl/tdwAhC

POW :: Franklin India Taxshield: Old warhorse with a commendable record – Buy

NALINAKANTHI V | January 28, 2017 | Hindu BusinessLine
The fund has contained market downsides well while making the most of rallies

POW

As we enter the final quarter of the current fiscal, tax saver funds are now in focus. If you haven’t made your tax saver investment yet, you could use the next two months to invest in tax saver mutual fund schemes.

If you are looking for a fund with a consistent track record, old warhorse Franklin India Taxshield is an option to consider. Of course, equity tax saver schemes are only for those with a moderately high risk appetite and investment horizon of at least three years, since you cannot redeem your investment before that. Even though the lock-in period is three years, this fund will better suit investors with a minimum time frame of five years. Lumpsum investment may be a better option, given the lock-in period.

Launched in 1999, Franklin India Taxshield is among the most consistent performers in the equity linked saving schemes (ELSS) category. Over the last five years, the scheme’s daily one-year return has been higher than its benchmark, the Nifty 500 Index, almost 90 per cent of the time. It scores well on a risk-adjusted performance basis too, with a Sharpe ratio of 0.93. While this is a tad lower than that of peers such as Axis Long Term Equity (1.05) and Birla Sun Life Tax Relief 96 (0.97), it is higher than the average of funds in the category of 0.8.

While the fund has delivered benchmark-beating returns across three, five and ten-year time frame, its performance over a one-year period slipped due to the correction in banking and pharma stocks during September-October 2016. The fund has marginally reduced exposure to these two themes.

Strategies that worked

The fund has been able to contain downsides well during market falls and this has been on three counts.

One, higher large-cap slant compared to other funds in this category cushioned it during turbulent phases.

Second, the fund’s focus on quality stocks and strategy to stay away from momentum stocks also possibly aided performance during down cycles. Moving into defensive themes such as pharma and IT also shielded the fund from volatility.

Likewise, during recovery rallies too, the fund has managed to beat the benchmark by a considerable margin. Right sector shifts aided performance during the pull-back rallies.

Consider this — during the August 2013-March 2015 period, the fund gained nearly 110 per cent. This is higher than the 80 per cent gain for the benchmark during the same period.

Increasing exposure to cyclical themes such as financials, automobiles and industrials provided a leg-up to the fund’s performance.

The fund has managed good returns despite a relatively high expense ratio of 2.48 per cent. Peer funds such as Axis Long Term Equity (1.98 per cent), ICICI Prudential Long Term Equity (2.3 per cent) and Birla Sun Life Tax Relief 96 (2.29 per cent) have had a lower expense ratio.

Over a nine-month period, the fund has increased exposure to cyclicals such as financials, oil and gas, power and auto.

Stability in the economy post remonetisation and recovery thereafter should aid the fund’s performance. It has also reduced exposure to pharma stocks, which have been bogged down by regulatory woes.

Source: https://goo.gl/RJ0eK9

ATM :: Should equity mutual fund investors worry about likely long-term capital gains tax?

By Madhu T | ECONOMICTIMES.COM | Updated: Dec 26, 2016, 02.34 PM IST

ATM

The prime minister has spoken and the finance minister has clarified. It seems, long-term capital gains on your equity mutual funds are not likely to be taxed in the budget. Still, there are so many theories floating around: short-term capital gains tax may be hiked; holding period to qualify for long-term capital gains tax may be raised, and so on. Now, the big question: should equity mutual fund investors be worried?

The answer is a big no. Sure, taxes would take away a part of your returns. However, taxes are never the sole reason for making an investment, including equity mutual funds. If there is a change in taxation of your gains from your equity mutual funds, you will have to alter your investment plan to ensure that you meet your various financial goals without any difficulty.

Let us see why equity mutual fund investors should not unduly worry about a likely (or real) change in taxation. First, consider what will happen if the short-term capital gains tax rate is increased? Or the holding period is increased?

Well, it would hardly have an impact on your investments. Surprised? It seems, you have forgotten that you don’t invest in equity mutual funds for a short period.

Short-term capital gains tax of 15 per cent comes into the picture when an investor sells his equity mutual funds before a year. Since individual investors are expected to invest with an investment horizon of at least five years in equity mutual fund schemes, this change will not have any impact on them. Sure, they will take hit if they are forced to sell their investments due to an unforeseen event.

Now, what about the likely reintroduction of long-term capital gains tax? Or likely increase in holding period to qualify for long-term capital gains tax?

If equity mutual funds are sold after a year, the gains are treated as long-term capital gain. At the moment, the long-term capital gains on equity mutual funds are not taxed in India. As said before, if the holding period is raised to two or three years, it will not have an impact on your investment life, as you anyway invest in equity with a minimum holding period of five years.

What if long-term capital gains are taxed? Sure, that would hurt. You will have to part with a large chunk of your returns at the time of selling your investments. This would call for you to revisit your calculations done at the time of fixing various financial goals. Since the tax is likely to take away a part of your corpus, you will have to increase your investments to make up for it.

For example, if you have to part with 10 per cent of your gains as tax at the time of withdrawal, you will have to invest more to create the target you had in mind. Or pray you earn more than your return projections. Kidding, it is always better to err on the side of caution. So, check whether you can make extra allocations.

Similarly, if the holding period is changed, you will have to take that into account while deciding on the investment to meet your financial goal.

Now, should you fret about long-term capital gain taxes and pull out money from equity mutual funds? Well, that is not even an option for you. Remember, you have decided to put money in equity to build a corpus for your various long-term goals because equity has the potential to offer superior returns than other investments over a long period. That hasn’t changed even now. That means you will have to bet on it irrespective of the taxation.

Remember, long-term capital gains on equities were taxed earlier. It was abolished in 2004 and Securities Transaction Tax (STT) was introduced by the government because STT was easier to enforce and boost tax collections.

Source: https://goo.gl/1KKrvo

ATM :: Worried about volatility? These equity MF picks can help in 2017

CY2017 begins after a chain of events that has changed the investment landscape for Indian investors. It is better to take an informed decision than just chasing winners in the past.
Dec 16, 2016, 04.25 PM | Source: Moneycontrol.com | Nikhil Walavalkar

ATM

Uncertainty remained the buzzword for most investors throughout CY2016. Issues such as Brexit, presidential elections in USA, interest rate decision by US Federal Reserve along with OPEC’s changing stance on crude oil production ensured that the global investment climate remained volatile. The demonetization decision by the Indian government added some local flavor to the uncertain investment environment.

“Barring the rate hike decision by US Federal Reserve, CY2016 has seen many events worldwide unfolding contrary to what was expected,” says Ashish Shanker, head- investment advisory, Motilal Oswal Wealth Management Services. “These black swan events, including demonetisation have led to a lot of disruption caused to investments. In CY2017 investors have to focus on opportunities keeping in mind this changed environment, than just chasing winners in the past.”

Equity has given tepid returns in last one year. Benchmark CNX Nifty has given 2.38% returns in CY2016. The numbers for the large cap funds and the midcap funds as category for the same time frame stand at 4.34% and 6.02%, respectively. Though mid cap and small cap funds have been flavor of the season and have ruled the performance charts for last two years, it is the time to revisit your allocation.

“Large cap funds should do well in CY2017 given the relatively attractive valuations of large cap stocks. Though mid and small cap funds have done well over last two years, it makes more sense to avoid fresh bets on them now due to their swollen sizes and the possibility of mid and small sized companies getting hit more due to demonetization as compared with their larger counterparts,” advises Ashish Shanker.

Most investment experts have been advising investing in stocks either through systematic investment plans or on dips given the fair valuations Indian stocks enjoy. Though the diversified equity funds always form the core part of aggressive investors’ portfolios, savvy investors prefer to take some extra risk in search of higher returns through sector funds.

Infrastructure is one such theme experts are bullish about. Investors have not seen much action after the initial bull-run went bust in 2008. However, last two years have seen changes in the government policies and the scenario has improved due to increased government support. “Infrastructure spending should go up in India which should benefit companies in infrastructure space,” says Feroze Azeez, deputy CEO – private wealth management, Anand Rathi Financial Services. He recommends investing in ICICI Pru Infrastructure Fund and DSP Blackrock TIGER Fund. “Infrastructure sector is beaten down and it offers a good opportunity to invest. Correction in market can be used to invest in this space. Invest if the NAV of the funds you want to invest fall by 10% from current levels,” he advises.

Rupesh Bhansali, head of mutual funds at GEPL Capital says, “Demonetisation has ensured that the banks have high levels of CASA. This situation should continue for at least couple of quarters. Focus on digital payments and cashless economy should benefit banks.” Government has invested capital in public sector banks and banks too are going after non-performing assets. Interest rates are on their way down which should revive private sector’s capital expenditure. This should ensure that banks make a strong come back. Bhansali recommends investing in Birla Sunlife Banking and Financial Services Fund.

Feroze Azeez is optimist about the fortunes of banking sector and recommends investing in Reliance Banking Fund.

Pharmaceuticals and healthcare is one more sector that is back on investor’s radar. Pharma and healthcare funds as a category has lost 4.3% in the last one year. If you have been holding these funds for last two years, you have earned 3.5% returns. “Pharma sector has been under pressure for last two years and is attractively valued,” says Ashish Shanker. Over last two years regulatory issues cropped up for Indian pharma companies in USA. Some companies have faced temporary bans and some were forced to withdraw products. Market has taken note of these developments and punished the companies, which is evident in the price erosion these stocks have seen. However, the companies too have taken right steps to take corrective measures and brought in changes in their business to comply with the norms.

“On the one hand there are pharma companies that have taken corrective steps and can do the same amount of business worldwide quoting at much lower prices compared to a year ago and on the other hand there are new investment opportunities by ways of new entrants in the listed space by way of recent IPOs that make pharma funds an investment opportunity worth exploring,” explains Rupesh Bhansali. He likes Reliance Pharma Fund and SBI Pharma Fund.

Information Technology is another sector many savvy investors prefer to invest into. However, most investment experts prefer to wait for the clarity on visa issues before taking any fresh bets on this sector.

Sector funds though offer an opportunity to make some extra return they face concentration risk. “On an average sector funds are 1.5 times riskier than the average diversified equity funds. To make money in sector funds, you have to get both – your entry as well as your exit right,” warns Feroze Azeez. If you are not one of those who can keep a track of sectors and markets, it is better to go with diversified equity funds with long term track record.

Source: https://goo.gl/Or5Jg3