July 2014 Volume 07 07

Renewed interest

There is no better
time
to
start
investing in equity
than right now this is the conclusion that many
FundsIndia investors are coming
to, as we have seen a level of
fresh
activity,
hitherto
unmatched, in our system over
the past six weeks.
Investors with accounts that
have been dormant for years are
starting to invest now. Stopped
SIPs are being restarted.

We are registering a sizeable

number of bank mandates to
enable people to setup their SIPs.
Perennial debt and liquid fund
investors are setting up
systematic transfer plans to
equity funds.
We agree, for once, with the
broader sentiment that is guiding
this activity. And we dont want
any FundsIndia investor to be
left behind in this ride. As of
now, about a third of FundsIndia
account holders still do not have
an active SIP.
Over the course of this month,
we are going to make an all-out
effort to reach out to these folks
and persuade them to join this
pursuit of prosperity.
Happy SIP investing!

Srikanth Meenakshi

Spacing out entry in risky assets

If you go through a phase in one asset class where prices have risen steadily,
as has been the case with Indian equities since mid 2013, there can be the urge
to get tempted and throw out the plan and prudence books. This is what has
to be avoided at all cost.
For those who have abundant surplus funds and can afford to take risks, lumpsum investment may pay off. For it to do so though, either the investor and /
or his advisor must be top notch in the ability to time the entry and exit so as
make good money and do this several times over the years. This is also not the
way for those starting off on savings and investment as a lifetime goal. The
last thing you can afford at this stage is to lose sizeable sums at one go.
When it comes to deploying short-term surplus or funds that are allocated to
asset class such as deposits and bonds, you could go ahead with investing lump
sums in fixed deposits and short-term bond funds. This would have to change
when it comes deploying funds in riskier asset classes such as long-term bonds,
equities, gold and commodities, to name a few.

Investing in phased manner would help most of the time, as you are entering
an asset class at multiple price points. You are avoiding getting locked in at one
price point, which can hurt you badly, especially if it was after a sizeable rally
in prices. If you are investing with long-term goals in mind and can be
disciplined about, phased investing usually works well.

Such investing, especially in difficult phases for the economy and market, tends
to pay rich dividend, as your average entry points would be lower. A good
example will be the 1998-mid 2003 when investors could persisted with
investing in equity through Systematic Investment Plans benefited immensely
with the rally post mid-2003.

Even if you go through such phased investing methods, you cannot and must
not assume that this should be invest, sit back and relax forever approach.
You must track your investments and market trends. If there is a protracted
bullish phase as between 2003-2007 in equities, you must be willing to take
funds off the table. Similarly, if you get a 30%-50% cut in prices, that would
usually be a good time to get back in. Even if you invest in a phased manner,
make sure at least about 70% of your equity investments track the large-cap
space. The rest can be spread across the rest of the cap curve and a few themes
such as consumer goods and healthcare that could stabilise the riskier parts of
your portfolio.
S Vaidya Nathan

FundsIndia
Winner CNBC TV18 UTI Award 2013-14
National Online Advisory Services
www.fundsindia.com

SIPs make anytime a good time to invest

With equity markets zooming from September 2013 until now, you may either be feeling left out
or fear entering the market rather late. You dont have to, if you decide to go the SIP (Systematic
Investment Plan) way. Why? Because SIPs are good all-weather tool you can have to invest,
especially in equities.
Vidya Bala

Do SIPs always offer me the best returns? - may be a question that many of you have asked
yourself or your advisor. My answer is a NO. But what SIPs do, is insulate you best against
worst returns. And because of such insulation, you earn optimal and very often superior returns.

SIPS build wealth by shielding your portfolio from market

extremes. SIPs offer the best downside protection by
simply averaging at lower costs and lowering your overall
investment cost. That said, many of you may have had
very forgettable experience with equity funds, and
therefore shut the door to this clear wealth building
option. Knowing when you can get hurt will help you do
away with this fear.
When you can get hurt

A few reasons why you may have burnt your fingers in

the equity mutual fund market are:

Very poor choice of funds (when I say very poor I

mean those at the bottom quartile of performance;
even the middle-rung ones would have fetched you
decent returns)

Investing lump sum or through SIP for very short

periods of say 1-2 years
Investing lump sum and such an investment was
unfortunately made in the market peak
Stopping SIPs way ahead of the stated goal

Points one and two are not difficult to tackle. On point

one, if your fund has been underperforming its
benchmark for over four quarters, then you should not
have stuck to it. Else, the best you can do is ask your
advisor to review your portfolio annually.

On point two, equities are for the long haul. If you had a
very short time frame, equity funds are not the place to be.
So the real problem comes from the other 2; and all they
require you to do is keep it simple, keep it going, with
SIPs.

Lump sum verses SIP

If you had invested in the market peak of January 2008,

losing about 52 per cent of your capital by the end of that
year is a classic example of the near-term impact of lumpsum investing. But had you held on and been a good longterm investor, the market would not have disappointed
you.

Better still, had you been doing an SIP, the equity market
would have rewarded you more. Take a look at a few
steady performing funds from our Select List and the
indices to know how SIP rewards you for patiently
continuing.
The table below shows returns lump sum investment
made in mid-2007 (July 2007) when markets were
trending upwards and the return on SIPs made from then
on till date.
Performance from SIP returns
July 2007-June 2014
(%)
HDFC Top 200
17.2
ICICI Value Discovery 24.6
UTI Opportunities
16.9
Sensex
12.0
CNX Mid Cap
13.3

SIP returns - IRR; SIP from July 2007 till date

Lump sum returns - compounded annualized

Lump sum
returns (%)
14.3
17.2
14.9
8.1
8.6

SIPs worked better. Why? Because of the opportunity to

average costs at lower levels in 2009, 2011 and partly in
2013.

Lesson: Long-term investing is a must for equities. Even

for the long term while lump sums are ok, SIPs work

What keeps me most excited and optimistic about India is how users have responded to Twitter and
how the country has now become one of the fastest-growing markets for us globally.
Rishi Jaitly, Head of Twitter, India

www.fundsindia.com

harder for you.

Stopping SIPs

Investors often stop their SIPs even with good funds for
two reasons:

One, equity market goes down and they get jittery and
stop investing
Two, equity market goes up and you therefore think
averaging at higher costs will not help and therefore
stop SIPs

Let us take a more recent three-year period to know what

happens when you stop SIPs but hold your funds. Had
you started SIPs in 2011 and continued for one year and
stopped SIPs thinking the market was going up, your
returns would have been 7-8 percentage points lower than
continuing SIPs till date.
Returns between July 2011 and June 2014(%)

SIPs
Uninterrupted
HDFC Top 200
20.4
ICICI Value Discovery
29.8
UTI Opportunities
18.3
Sensex
17.0
CNX Mid Cap
16.8

SIPs**
Stopped*
27.2
37.8
22.3
21.0
24.2

* SIPs between July 2011 to June 2012 and then stopped

** SIPs between July 2011 to June 2014
Returns as of June 13, 2014; SIP returns are IRR

Why? 2013 offered enough opportunities to average costs

at lower levels. And with markets going up now, the
average returns tend to be higher with the SIP that you
continued.
Lesson: If you started your SIP for a specific long-term

goal, keep the SIP running until you near the goal.
Stopping either because the equity market has gone up or
gone down, not only disrupts returns, but prevents you
from saving the necessary amount for the goal.
The bounce back

Above all these, the bounce back in the market is felt

immediately in SIP portfolios. Just take a look at the data
below. Not only has the SIP returns between March and
now bounced back, the returns are also far superior to
lump-sum investing as a result of better averaging.
Investment in July 2011

Returns as
Returns as
of March 1, 2014 (%) of June 13, 2014 (%)
SIP Lump sum SIP
Lump sum
7.0
0.6
22.8
9.3
13.7
6.1
32.2
16.4
9.8
5.2
19.7
10.9
8.5
0.9
17.6
6.1
2.1
-4.1
19.8
5.3

HDFC Top 200

ICICI Value Discovery
UTI Opportunities
Sensex
CNX Mid Cap
SIP from July 2011
Returns as of June 13, 2014; SIP returns are IRR
Lump sum returns - compounded annualized

Lesson: The effect of all your averaging is felt in your

portfolio in a market revival and quite fast too. Hence, the
key is to keep it to SIPs and keep it going if you want to
ride the bullish and bearish phases in the equity market.
The above data points clearly substantiate that with SIPs,
you can enter the market any time and still gain over the
long term.
Use SIPs to build your wealth efficiently and to avoid rude
shocks to your portfolio.

Public sector banks are, if anything, in a worse position than private sector banks... As low risk
enterprises migrate to financing from the markets, banks are left both with very large risky
infrastructure projects and with lending to small and medium sized firms. The alternative to
taking these risks is to plunge into very competitive retail lending, so public sector banks may
have little option especially if the government pushes them to lend to infrastructure. Many of
the projects being financed today, however, require sophisticated project evaluation skills and
careful design of the capital structure. Successful lending requires the lender to act to secure
his position at the first sign of trouble, otherwise the slow banker ends up providing the loss
cover for more agile bankers or for unscrupulous promoters. To survive in the changing
business of lending, public sector banks need to have strong capabilities, undertake careful
project monitoring, and move quickly to rectify problems when necessary.
Dr Raghuram Rajan, Governor, Reserve Bank of India

Viewpoint

source: www.rbi.org.in
www.fundsindia.com

www.fundsindia.com

Market Place

The Sin of Late Payment

FundsIndia Blog

Wouldnt it be great if missing a payment once in a while

was no big deal? With the busy schedules these days, it
really is easy to forget datesI mean due dates. But sadly,
it is no casual matter and it is a big deal. And the big deal
is that late payments hurtyour credit score and more.

Late Fees: Better late than never is a passits better on

time than late! If you pay your bills a single day after the
scheduled due date, then be ready to pay the late payment
charge. In case of credit cards, it either would be a fixed
amount or a certain percentage of the minimum amount
due. In case of loans, you would be charged with a fixed
amount as penalty for paying late plus interest on the
delayed payment.

High Interest Rate: Here is the second oneyour

interest rates could be reset to a higher level. Your late
payment or rather series of late payments could have just
cautioned the bank to cover its risk of lending to you.
Charging you a higher interest rate is one way of how the
bank would minimize its risk.
Credit Report: And if you thought that the story of your
late payments is known only to the bank then, well, heres
a surprise! The credit bureaus, which store and update
data of all borrowers, also have a record of your payment
history. Your credit report would reflect the fact that you
have been delaying your repayments.
You can read the full version of this article by Satish Mehta is the
Founder and Director of www.credexpert.in a credit and debt
counseling company and other regular articles, check out the Market
Place FundsIndia, the official blog of FundsIndia.com, on a regular
basis at http://www.fundsindia.com/blog.

Did you know?

Blog Pick
The quarantine

Just as important as finding people with an excellent track

record of providing investing insights is avoiding the
people who will result in money lost. Learning who
should be ignored is the flip side of the favourites. I have
spilled plenty of ink about the kinds of pundits who have
been wrong too often to be taken seriously anymore. My
approach is to quarantine these people like they have
deadly bubonic plague. Here is how I do that: Whenever
I see a suspect analysis, an outrageous statement or any
sort of forecast, I diary it for a year or two in the future.
My favourite technique is to use any calendar.
It takes you some time, but you will eventually be able to
identify a bevy of people worthy of your disdain.
Aggressively ignore their money losing blather. Snicker
each time you see their latest nonsense. Once you figure
out whose track record stinks, it is easy to not be fooled
by their noise. You now have the makings of your own set
of personal researchers. Find a balance that allows you to
consume as much information as you need. My
experience has been that most investors can make much
better use of their time. That means less mindless
financial television viewing, and more reading of the
classic financial books.
Source: Barry Ritholtz is chief investment officer of Ritholtz Wealth
Management. He is the author of Bailout Nation and runs a
finance blog, the Big Picture (www.ritholtz.com). Read the full version
of his article at The Washington Post website at
http://www.washingtonpost.com.

There was an interesting state-wise contribution of the Assets Under Management (AUM) of Mutual Funds in
India in The Hindu Business Line. Just 10 of the 30-plus states and union territories account for 90% of the AUM
of all mutual funds. Maharasthra accounts for about 48% - this is a both a reflection of reality as well as the location
of the registered / head offices of many of the major corporate and banking sector outfits. That 10 states hold such
a large share indicates the low penetration levels of not just mutual funds, but banking and financial services as
well. This also falls in line with the fact that a vast share of the industry AUM comes from the top 8 cities and most
mutual funds focus on them in a big way for development of business.
A lot of SBI customers opt for our products because of the brand and the trust factor. We dont
want to take undue advantage of that. We want to educate the customer before selling.
Bhaskar J Sarma, MD & CEO, SBI General Insurance

www.fundsindia.com

www.fundsindia.com

Invest With A Plan

Be Realistic about Returns

It is absolutely important for proper financial planning

and investing that the goals relating to returns are realistic
at all times and from every asset class. An investor must
have an idea of realistic returns that should be expected
from a portfolio of investments. This number cannot be
plucked out of thin air. It must have a solid underpinning
if you are not to make mistakes. It would be good to
factor in the following variables while addressing the
aspect of returns.
Government T-Bill Rate
Expected Inflation
Risk Premium for long-term government bonds,
bonds by other issuers, asset classes that are riskier and
different grades of risk in a few asset classes

We may not be able to quantify each at all times. Even if

we do, it is important to use historical data over long
periods that cover different phases of a market cycle. For
most investors in India, several fixed-income options have
offered anywhere between 8 10 per cent per annum
without undue risks. Yes, there are investors who go for
fixed deposits offering anywhere between 15-30 per cent
only to burn their fingers as capital itself is lost.
If you look at a risky asset class such as equity, large-cap
stocks have offered compounded annual returns of about
15 per cent over the long term. Mid- and small-cap stocks
may offer a couple of percentage points more but those
who can afford the higher risks can add them while we
pass them over at this basic stage. So you have a range of
8 15 per cent across different financial asset classes. Of
course, you cannot be 100 per cent in equities. So you
expected returns should be somewhere in the middle of
this range. Such a rate would also keep your overall returns
above inflation levels over the long term.

Where you peg your expectations in this range will also

depend on your risk taking ability, need for liquidity,
financial goals over different time periods and your ability
to invest in the asset classes in an informed manner. A
realistic base is a good start.

wisdom

Wall Street gurus come and go, but in the case of Bob
Farrell, legend status was achieved. Farrell retired in 1992,
but his famous 10 Market Rules to Remember have
lived on.
# 1 Markets tend to return to the mean over time

# 2 Excesses in one direction will lead to an excess in

the opposite direction

# 3 There are no new eras excesses are never

permanent

# 4 Exponential rapidly rising or falling markets usually

go further than you think, but they do not correct
by going sideways
# 5 The public buys the most at the top and the least at
the bottom

# 6 Fear and greed are stronger than long-term resolve

# 7 Markets are strongest when they are broad and

weakest when they narrow to a handful of bluechip names This is why breadth and volume are so
important.
# 8 Bear markets have three stages sharp down,
reflexive rebound and a drawn-out fundamental
downtrend
# 9 When all the experts and forecasts agree
something else is going to happen
# 10 Bull markets are more fun than bear markets
Source: www.ritholtz.com

www.fundsindia.com

Q&A

Equity Performance Snapshot

Index

CNX Nifty

S&P BSE Sensex

Q. I feel that even in SIP mode of investment, if one

carefully watches market movements and for every
fall of the index, one utilizes the chance to enter the
market under SIP mode, it will marginally improve
the prospects by better averaging costs. That means
one need not formally set up SIP schedule but do it
by watching the market trend. Please let me know if
I am right.

A. Timing the market is never easy. Market swings too

much to catch it at the right time. Also, by waiting
for the 'right time' to invest, you may end up delaying
the investment and also your wealth accumulation
plan especially when you are investing towards a
specific goal within a defined time frame.
What you said is a very ideal thing to do with stocks
if one understands the reason behind a stock's fall.
The advantage of mutual funds is that one need not
time the market; the fund manager does the job of
timing, by buying the right stocks at the right time
or accumulating them or exiting them. That is more
important and when you have a good fund manager
to do it, market timing is secondary for a fund
investor. Disciplined investment becomes the
primary goal.
If you are still keen to time the market using tools
such as triggers, the best way is to keep an SIP
running and make additional purchases on the same
funds when you are able to identify market falls. This
way, you may continue to do your disciplined
monthly investments and save the required amount
for your goals even as you average better by buying
more on dips.
Vidya Bala

1 Year

5 Years

10 Years

29.5

11.6

18.0

14.7

21.0

28.6

11.9

CNX Mid Cap

48.0

14.9

CNX 100

30.2

12.4

CNX Small Cap

CNX 500

CNX Bank

82.1

34.9
29.1

CNX Energy

22.5

CNX Infrastructure

46.1

CNX FMCG
CNX IT

15.4

17.6
17.2
20.9

13.3

-1.4

13.3

24.2

48.2

23.0

17.7

18.8

3.2

3.5

MSCI Emerging Markets 10.4

MSCI World

11.9

17.4

18.9

22.9

23.3
16.6

13.1

10.2

Returns (in per cent as of June 30, 2014) for less than one year is on an absolute
basis and for more than one year on a compounded annual basis.

Must Read

Mish makes mincemeat of Bloomberg

Bad economic analysis abounds. Some of it is so bad

you wonder if the authors understand how any
markets work, not just the topic of discussion. For
example, please consider Gold Euphoria Wont Last
With Yellens Rally Fading, a truly remarkable exercise
because it took three Bloomberg writers to produce.
In taking apart this article termed as Truly Inance
Bloomberg Analysis on Gold, blogger Mike Sherlock
opines: `I do not know the future price of gold, nor
does anyone else. But I do know the fundamental
drivers as well as the reasons to hold gold. And
neither of those has changed. I also know truly inane
economic reporting when I see it, and the Bloomberg
article quoted above is a perfect example.
(http://globaleconomicanalysis.blogspot.in)

I would argue that the tendency to cash out is not entirely irrational. The industry will soon be
getting through this phase of continued redemptions and I expect to see fresh flows come in during
the next quarter and beyond.
Leo Puri, Managing Director, UTI Asset Management Company

www.fundsindia.com

Technical View

Shriram Transport Finance

The sharp recovery on June 26, backed by increased

volume, suggests that buyers are active at the support
zone of Rs 830-840. Buy Shriram Transport with a stop
loss at Rs 810 and target of Rs 1,050. Buy the stock at the
current levels as well as on a decline to Rs.855-865. A
move past the initial target at Rs 1,050 would trigger a
rally to Rs 1,150.

Nifty

The Nifty scaled new highs in June but a spike in volatility

underscored the price action. Technically, the outlook for
the Nifty remains positive from a longer-term perspective.
From a short-term perspective, the recent rally has pushed
the Nifty to an overbought region. The Nifty is, therefore,
likely to remain under pressure in the short-term. Until
the Nifty moves past the resistance zone at 7,670-7,700,
there would be a strong case for a slide to the major
support at 7,200-7,250. Investors may use any weakness to
buy fundamentally sound large-cap stocks from the
banking, infrastructure and metal sectors.

Bosch

Bosch is the other stock in the buy list for this month.
The stock has been on a minor downward since May 26,
2014. The decline was arrested at the important support
zone at Rs 11,000-11,600. The sharp rise on June 26
suggests that the next leg of the upward trend is
underway. Investors may buy this stock with a stop loss at
Rs 11,500 and target of Rs 14,500-15,000.

B Krishna Kumar

This column is targeted at investors who are registered customers with FundsIndia for trading and investing in equity as well as prospective
investors who wish to open an equity account with FundsIndia. B Krishna Kumar hosts a weekly webinar that discusses the market outlook
for the following week. You can follow him on Livestream. If you wish to receive reminders for his webinars, go to
https://www4.gotomeeting.com/register/131985103

Throughout all my years of investing, I have found the big money was never made in the buying or the selling. The
big money was made in the waiting.
Jessse Lauriston Livermore

India is under-exploited as far as solar energy is concerned. The potential to grow in solar is very
high. The Government aims to achieve 10 GW capacity by 2017. There is focus on solar and the
good intention needs to be converted into action on the ground.
Subir Pal, Head of Discrete Automation & Motion, ABB India

www.fundsindia.com

FundsIndia Select Funds

FundsIndia's Select Funds is a list of mutual funds that we

think are most investment worthy for a regular investor.

There remains a larger buy list of funds, Select Funds

may be viewed as a more what to buy today list; taking
in account more qualitative factors such as market
conditions and a funds positioning to ride the same.
For a full list of FundsIndia Select funds, please go to
http://www.fundsindia.com/select-funds. We review this
list on a quarterly basis.
At this juncture, we think it is worthwhile considering
funds with a growth approach, or those with higher
weights to cyclical sectors than those loaded with
defensives.

It is for this reason that you may see some exits by

otherwise sound funds. This is a relative call we have to
take and is done to keep our list compact; not so much
because the funds that exited are underperformers.

We have quite a few funds that made the cut to our equity
fund list. We added BNP Paribas Equity, ICICI Pru Top
100, Birla Sun Life Top 100, Reliance Tax Saver (ELSS),
SBI Magnum Global and Mirae Asset Emerging Bluechip.
We removed Canara Robeco Equity Diversified, HDFC
Index Fund Sensex Plus, Religare Tax Plan, SBI Emerging
Businesses and DSP BR Small and Midcap.

We have kept aside HDFC Index Fund Sensex Plus from

our Select list for now, given that in markets such as the
present one, actively managed funds tend to outperform.

DSP BlackRock Small & Mid-Cap, as expected by us,

made a lightning comeback, given that it is a high beta
fund. Its volatility, though, worries us a bit. We have
therefore put it in on our watch list.
To know the reasons for the other changes, check out the
FundsIndia Blog.

Disclaimer: Mutual Fund Investments are subject to market risks. Please read the offer
documents available at the website of each mutual fund carefully before investing. Past
performance does not indicate or guarantee future performance. There is risk of capital
loss and uncertainty of dividend distribution. Think FundsIndia, a monthly publication
of Wealth India Financial Services, is for information purposes only. Think FundsIndia
is not and should not be construed as a prospectus, scheme information document or
offer document Information in this document has been obtained from sources that are
credible and reliable.
Publisher: Wealth India Financial Services
Editor: Srikanth Meenakshi

Quiz
1 1 Name the first Exchange-Traded Funds-focused
fund house in India?
2 Which were the first, sector specific mutual funds
launched in India?
3 Who is the author of The Intelligent Investor?
4 Who is considered to be the founder of the concept
of index funds?
5 Name the person in the image? She
occupies one of the more influential
positions of power in the world of
economics and finance.
Answers can be emailed to quiz@fundsindia.com. The
first three to send in all correct answers will be entitled to
a must-have book on investment. Answers for June 2014
Quiz: 1) Arun Jaitley 2) Wholesale Debt Market Segment 3)
Kothari Pioneer Money Market Scheme 4) Greed & Fear 5) R H
Patil, first Chairman and Managing Director of National Stock
Exchange.
Prize Winner: There were no winners for June 2014.
-

@fundsindia.com in June

Simplifying SIPs for instant investing

Starting June, we have made it easier for our instant

investing customers to save through the SIP route.
Earlier, they were required to register one mandate for
every SIP but now they will be able to use a single
mandate for all their SIPs.
Smart Solutions Updates

As indicated in the last update, we have rolled out the

reviews of Your Smart Solutions by email. We have also
enabled the ability to redeem money from Your Smart
Solutions. The redemption can be done only at the
portfolio level and will be done as per the asset allocation.

To invest, call 0 7667 166 166

...for every mid-cap stock that is a multi-bagger, there could be many that destroyed wealth... as much as 90 per
cent of investors wealth following the 2008 downturn writes Vidya Bala. Read more at FundsIndia Blog at
http://www.fundsindia.com/blog
www.fundsindia.com