Volume 4, Issue 6

08June2012

The monthly newsletter from FundsIndia

Tough Times

Inside this issue:

Tough Times Srikanth
Meenakshi

The month ahead

- Equity recommendations B.Krishna Kumar

Consistent Performers - Srikanth Meenakshi

The RGESS might

get Riskier
Dhirendra Kumar

Srikanth Meenakshi

Greetings from FundsIndia!

It has been habitual for us to close this lead article in our monthly
newsletter with a signoff that says 'Happy Investing!'. However, investing has not been a happy endeavor over the past few weeks/months. There is turmoil
all around us - weaker rupee, costlier petrol, rising prices, stagnating growth rate - and
this is just the domestic scene. Overseas, the dragging troubles of Europe is doing a slow
burn on the global economy. Even US economy which looked promising a few months ago,
is showing signs of faltering. With all these happening, investing, especially in the equity
markets has been anything but fun. From what we see, read and hear, it does appear that
this pain will sustain at least over the near term.
I had a chat in this regard with my friend and fellow financial advisor Rajaraman Kumbeswaran in Chennai and asked him what he is recommending to his clients. His advice was
that given the potential downside left in the market, it would be prudent to avoid large
lump sum investments in the equity market. He is asking his clients to park any surplus
money in liquid or short term debt funds but to keep on continuing their SIP investments.

I thought that was sound advice and I'm happy to pass it on.
On a different note, I hope FundsIndia account holders got an opportunity to try out the Morningstar portfolio x-ray reports that we have launched. It is a very useful tool that provides a report (in one click) for any of your portfolio with detailed information about all your holdings, their performances, stock overlap etc. Please give it a spin if you have not already done so.
Also, I hope you noticed that we have shifted premises in Chennai. FundsIndia is now in a larger and (slightly) nicer office premise in Nungambakkam in the heart of the city where financial services firms traditionally place themselves. We
are happy and proud to join this fraternity geographically. Once we spruce up the place a bit, we'll share some photographs as well :-) Please note our new address in our 'Contact us' page and direct all communications there. Our phone
numbers remain the same.

As always, Happy Investing!

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

Volume 4, Issue 6

Page 2

The month ahead - Equity recommendations

B.Krishna Kumar
The Nifty continues to drift lower, weighed down by deteriorating economic fundamentals and the uncertainty in the
Euro-region. The depreciation in the value of the Rupee in relation to the US Dollar has not helped the cause either.
The corporate earnings season is now done and dusted. The focus would now shift to the progress of the monsoon and
the policy stance that the Reserve Bank of India would take. Technically, the Nifty has been drifting lower and is treading
close to the key support at the 4,750-4,800 region.
If this zone breaks, expect a slide to the next support at 4,650-4,680. As long as the index trades below 5,050, there is a
strong possibility of a slide to 4,650. A breakout past 5,050 would be the minimum requirement to increase allocation to
the equity assets. Else, the path of least resistance for the Nifty would be on the way down.
We had discussed the prospects for the two-wheelers stocks last month. As anticipated, both Bajaj Auto and Hero MotoCorp have ruled weak and appear poised to fall further. We turn our attention to two stocks that have been star performers since January.

We recommend taking profits / reducing

exposure to Bata India and Jubilant FoodWorks. Both the stocks have been outperformers this year. A look at the chart patterns indicates that these stocks are ripe
for a correction. Those holding these
stocks may take some profits.
As highlighted in the chart, the series of
negative divergence between the price
action and the 14-day Relative Strength
Index (RSI) is a sign of waning upside momentum. While the stock has made new highs, the 14-day RSI has been unable to do so, which is forewarning of an impending correction.
Unless the stock does a quick sprint past the resistance at Rs.900, it would be reasonable to expect a fall to the immediate support at Rs.730. Shareholders may use any rally to reduce exposure while those willing to take risk may consider
short position with a stop loss at
Rs.905, for a target of Rs.730.

Jubilant FoodWorks runs the Dominos Pizza franchisee in the country.

Similar to Bata, this stock too has
been an out performer in relation to
the benchmark indices. The recent
chart pattern however suggests that
the stock could get into a downside
correction.

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

Volume 4, Issue 6

Page 3

Continued from page 2 . . .

From the Daily chart it is apparent that the stock has failed to get past the upper red trend line. A failure at the upper
boundary is a sign of weakness and the price could now slide to the lower parallel at Rs.900. There is an intermediate
support at the green line displayed in the chart. A fall below this line at Rs.1,010 would strengthen the case for a slide to
Rs.900. Those owning the shares may take some profits and reduce exposures.
Mr. B.Krishnakumar is the Head of Equity Research at FundsIndia. With extensive experience in tracking the stock
market (over 15 years) he has worked with companies such as The Hindu , Business Line and Dow Jones Newswires.
He will be contributing to our monthly newsletter with his stock market outlook which shall hold good for a month.
Mr.B.Krishnakumar can be reached at b.krishnakumar@fundsindia.com

Consistent Performers
FundsIndia Research
In this page, we feature mutual fund schemes in popular categories that have stood the test of time and delivered performance consistently. These
schemes have consistently featured in the top quartile of their category in terms of performance over multiple time periods in the past. For equity funds
and income funds, we have chosen three, five and seven year time periods for such ranking. For short term and ultra-short term funds, we have chosen
shorter time frames. Please note that in some cases, we have pruned the list for length - we have removed institutional schemes and those that have
very high initial investment amounts (in the debt side) from this list. This list will be updated every month, although we do not anticipate significant
changes on a month-on-month basis. Rankings data for this report has been sourced from Value Research Online.

Large Cap Funds

Fund Name

3-Y Return
5-Y Return
7-Y Return
(%)
3-Y Rank
(%)
5-Y Rank
(%)
7-Y Rank

Average

VRO Rating

10.19

6/63

7.2

2/43

17.41

3/38

7.36%

YYYY

DSPBR Top 100 Equity Reg

ICICI Prudential Top 100

8.83
9.16

12/63
8/63

7.82
5.39

1/43
8/43

18.99
16.03

1/38
4/38

8.00%
13.94%

YYYY
YYYY

SBI Magnum Equity

8.85

11/63

6.47

4/43

17.46

2/38

10.68%

YYYY

HDFC Index Sensex Plus

8.24

13/63

5.75

6/43

15.93

5/38

15.92%

YYYY

Franklin India Bluechip

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

Volume 4, Issue 6

Page 4

Continued Consistent Performers

Large & Mid Cap

Fund Name

3-Y Return
5-Y Return
7-Y Return
(%)
3-Y Rank
(%)
5-Y Rank
(%)
7-Y Rank

Average

VRO Rating

13.73

4/60

7.5

10/45

19.6

1/28

10.82%

YYYY

HDFC Top 200

10.1

14/60

9.33

5/45

19.03

2/28

13.86%

YYYY

HDFC Growth

11.54

9/60

8.26

7/45

17.56

4/28

14.95%

YYYY

ICICI Prudential Dynamic

Mid & Small Cap

Fund Name

3-Y Return
5-Y Return
7-Y Return
(%)
3-Y Rank
(%)
5-Y Rank
(%)
7-Y Rank

Average

VRO Rating

Tata Dividend Yield

17.95

12/51

11.01

4/38

15.35

6/22

Reliance Equity Opportunities

20.95

7/51

9.34

6/38

19.42

1/22

20.44% YYYYY
11.35%
YYYY

ICICI Prudential Discovery

20.89

8/51

10.93

5/38

18.02

3/22

14.16% YYYYY

Multi Cap

Fund Name

HDFC Equity

3-Y Return
5-Y Return
7-Y Return
(%)
3-Y Rank
(%)
5-Y Rank
(%)
7-Y Rank

12.51

5/34

8.46

4/29

19.02

2/18

Average

VRO Rating

13.20% YYYYY

Hybrid: Equity-oriented

Fund Name

3-Y Return
5-Y Return
7-Y Return
(%)
3-Y Rank
(%)
5-Y Rank
(%)
7-Y Rank

HDFC Prudence

15.49

3/25

11.3

3/25

18.16

1/22

HDFC Balanced

16.52

2/25

11.91

2/25

15.44

4/22

12.1

6/25

8.58

6/25

15.13

6/22

Tata Balanced

Average

9.52%

VRO Rating

YYYY

11.39% YYYYY
25.09%
YYYY

Tax Planning

Fund Name

3-Y Return
(%)
3-Y Rank

5-Y Return
(%)
5-Y Rank

7-Y Return
(%)
7-Y Rank Average

Canara Robeco Equity Tax Saver

12.31

8/35

11.48

1/28

20.03

1/19

Franklin India Taxshield

12.35

7/35

8.13

5/28

16.07

3/19

VRO Rating

10.56% YYYYY
17.88%
YYYY
Continued on page 5 . . .

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

Volume 4, Issue 6

Page 5

Continued from page 4. . .

Debt Ultra Short Term
Fund Name

3-M Return
6-M Return
1-Y Return
(%)
3-M Rank
(%)
6-M Rank
(%)
1-Y Rank

HDFC Floating Rate Income LT

Tata Fixed Income Portfolio Scheme
A3 Reg
Tata Fixed Income Portfolio Scheme
C2 Reg
SBI Magnum Floating Rate Savings
Plus Bond

2.95

Peerless Short Term

JM Money Manager Reg

VRO Rating

2/180

5.38

6/179

10.7

2.78 21/180

5.63

5/179

10.4 10/177

2.93

3/180

5.16

23/179

10.13 24/177

2.8 16/180

5.25

13/179

10.15 23/177

2.71 40/180

5.23

16/179

10.82

2.72 36/180

5.25

14/179

10.35 14/177

11.14% YYYYY
11.91% YYYYY

Templeton India Low Duration

2.78 20/180

5.13

32/179

10.19 18/177

13.05% Unrated

SBI Magnum Floating Rate LT Retail

2.72 37/180

5.24

15/179

10.16 22/177

13.79%

JM Money Manager Super

Birla Sun Life Short Term Opportunities Ret

2.7 41/180

5.22

18/179

10.29 16/177

2.9

6/180

5.13

31/179

9.99 42/177

14.79%

YY

2.71 39/180

5.21

20/179

10.11 28/177

16.22%

YYYY

2.7 43/180

5.1

36/179

9.98 43/177

22.76%

YYYY

JM Money Manager Super Plus

Birla Sun Life Floating Rate LT Ret

7/177

Average

4/177

2.81%

6.70% YYYYY
Y

9.36%

9.72% YYYYY

YYY
13.96% YYYYY

Debt Income
Fund Name

3-M Return
6-M Return
1-Y Return
(%)
3-M Rank
(%)
6-M Rank
(%)
1-Y Rank

Average

VRO Rating

Kotak Bond Deposit

3.04

4/94

8.97

1/89

12.86

2/88

2.55%

YYY

Kotak Bond Regular

3.04

3/94

8.97

2/89

12.86

3/88

2.95%

YYY

IDFC Dynamic Bond Plan B

2.47

21/94

6.01

16/89

12.64

4/88

14.95%

YYY

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

Volume 4, Issue 6

Page 6

The RGESS might get Riskier

Dhirendra Kumar
If some news reports are to be believed, then the government has decided that equity mutual funds
are not going to be permissible investments under the Rajiv Gandhi Equity Savings Scheme. The
government seems to have decided that the scheme will only permit direct equity investments in
the top 100 companies of the NSE and the BSE. There will be a lock-in of three years. However,
according to an analysis done by Value Research, such a structure for this scheme could expose
novice investors to a lot of risk. A quick backgrounder: RGESS is a scheme that was announced in
this years budget. Under this, first-time equity investors can invest up to Rs 50,000 once to get a
tax rebate. Not many details were announced in the budget since the scheme was still being designed. Subsequently,
there was a widespread view that equity mutual funds would be the best vehicle for novice investors. It was reported that
this was also SEBIs recommendation to the finance ministry.
But the government has stuck to the original plan. Even though the exact details are still not formally announced, its expected that the scheme will be limited to direct investments on the stock markets and exclude investments made through
equity mutual funds. Clearly, the goal is not just to let investors enjoy the returns of equities (which are easier realised
through funds) but to actually have them open demat accounts and broker account and buy stocks in their own name.
As to the argument that it was risky for novices to dabble in stocks directly, the governments response seems to be that if
investors are limited to the 100 largest companies and forced into a three-year lock-in then they are bound to make
money. On the face of it, this makes sense. Surely, if you limit yourself to the largest companies and use a buy and hold
strategy then surely you should make money over three years. But does the data support this assumption? I decided to
check it out. I pulled up the rolling three returns of each company in the BSE 100 for a period of five years. That means
that if you had invested in a company for a period of three years ending at any point in the last five years, then what
would your returns have been. The calculation was done for each month over the five year period. This would be a total of
6100 data points had all companies existed through all periods but since some were newer companies, there were actually 5408 data points. Of these, fully 1108 were negative. Far from being a shield against losses because of their size and
the long period, fully 20 per cent of possible investments would be loss-making.
Moreover, there are periods where this number rises to one-third of the total. Interestingly, if one sees the average return
of these companies, one gets nice, healthy total returns of 193 per cent, representing a doubling of money in just three
years. The fact that the average is so good when a good number of the individual returns are poor indicates the value of
diversification and is a solid argument for mutual funds.
There are two more issues with the structure of the scheme. One is the lack of liquidity. It would be terrible to trap novice
investors into one or two or handful of stocks that turn out to be wrong choices. The markets have many large stocks like
Reliance Comm and Unitech which lost around 90 per cent of their value over given three year periods. Long- term lockin would be the enemy of investors in these once solid-looking companies. Theres another issue which is to do with the
business model and the culture of broking in India. A broker would earn a commission of no more than Rs 350 or so
from the Rs 50,000 that an RGESS investor would invest. For brokers, the scheme would be nothing more than a lure
with which to hook novices into the routine cycle of short-term leveraged punting which forms the bulk of Indian investing activity. For many investors, that would eventually become the real problem
Syndicated from Value Research OnlineArticle can be viewed online herehttp://www.valueresearchonline.com/
story/h2_storyView.asp?str=20060

Wealth India Financial Services Pvt. Ltd.,

H.M Center, Second Floor,
29, Nungambakkam High Road,
Nungambakkam,
Chennai - 600 034.

Phone: 044-4344 3100

E-mail: contact@fundsindia.com

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