In the Reality.......

SEBI sholw be congratulated for being steadfast in the finalisation of regulations for Real estate MFs that were put for public opinion by December 2007.

Indian players are keen to utilise the Real Estate Opportunities is evidenced by the presence of two mutual fund houses already in the periphery of the theme: ICICI Pru Real Estate Securities Fund investing in debt/equity of companies in the real estate segment, a CES and the ING Global Real Estate Fund, a reality fund that takes global equity in its fold, an OES. If one looks at NAV of the both funds as on 25th April 2008, ICICI Pru Real Estate Securities Fund is down at Rs 9.6407 per unit when ING Global Real Estate Fund is Rs. 10.80 shows the effect of international diversification in the context of a falling domestic market in the Real Estate Sector.

REITs in India are called REMFs. The committee constituted by SEBI submitted its report way back in 2001 favouring MF mode than Collective Investment Schemes (CIS) mode. The public opinion was heard from December 2007 to January10, 2008 by SEBI. The Trustees could be banks/Financial Institutions/Insurance companies and Body Incorporated. It has to be CES listed on the bourses. The investments have to be rated, valued and appraised and regular NAV declared. The Appraiser, Valuer and Rating Agency needs to be recognized by SEBI. No investment in vacant land/ non-income earning assets is possible. Single project limit for investment put at 15% and for a group 25%.

Scheme sould declare NAV daily. Two independent valuers accedted with the recognised credit rating agency are to value the asset after 90 days of purchase and the lowest of it is to be taken for computation of NAV. 35% in real estate and rest in mortgage backed securities/securities of companies engaged in real estate/undertaking real estate development projects/others - all capped at 75%.

More than that there is city/Single Security/limits to ward off portfolio concentration. Sponsor/Associates cannot have their real estate assets or that in which they have substatial rights shunted to their own REMF.

Happy investing really!!

Naming Funds is Fun!?

Naming a Fund is akin to naming a child?
In good olden days, the child used to be named with Tharavadu, Illapperu, Grandfatther's name, Father's Name and the whatever name the child would be called about and finally the Religion salutation. subsequently, Grandfather's name and Illapperu slipped off, then Father's Name, followed by Religion salutation, and latest tail off being Tharavadu. Some names are such that one cannot infer the religion/sex of the person; What to say about names, even dressing up has made it impossible to make difference between boy or girl!!!

That being the societal background, how can we expect the Mutual funds to be different?

They are creation of Law. They have to follow the nomenclature as given in the SEBI MF Regulation 1996 and its ammendmends from time to time. If one fund has to called an equity Fund, it has to allocate 65% or more of portfolio into equity. If it is a sectoral fund, it can hold up to 80% of its assets in that segment specialised. The Offer Document gives the prospective investor all information required to make an investment decision. It contain in very clear terms the risk clause that says Past performance, Name of the Fund or its constituents do not gurantee any future performance or indicate anything about future.

Now look at these Names and guess what it holds for you. TIGER, LION, CUB, ACE, SMILE, COMMO, ATM, PRUDENCE, AGILE, GenNexT, Hi Fi, STAR, DISCOVERY and REAL; Now read on to find out what the OD really meant!

DSP ML TIGER Fund
The Infrastructure Growth and Economic Reforms got abbreviated into TIGER.

ING LION Fund
Large-Cap, Intermediate-Cap, Opportunities, New Fund Offering became LION.

ING CUB Fund
Competitive Upcoming Businesses got known as CUB

Morgan Stanley ACE Fund
After 14 years in India with their first equity scheme listed on the bourses, Morgan Stanley broke the silence offering "ACROSS CAPITALISATION EQUITY" Fund.

Sundaram BNP Paribus SMILE Fund
Small and Medium Indian Leading Equities came to be known as SMILE

SBI Magnum COMMO Fund
Invests in equity shares of companies that are into the commodities (metals/non-metals)business;

ING ATM Fund
It refers to "Against the Market" philosophy followed by the fund in its portfolio management.

HDFC Prudence Fund
It is a balanced fund following 60:40 asset allocation

Lotus India AGILE Tax Fund
Alpha Generated From Industry Leaders got shortened to AGILE

Birla Sun Life GenNexT Fund
Invests in equity of companies whose products are sought after by Indian Youth.

J M Hi Fi Fund
Housing, Infrastructure, Financial services became Hi Fi

Taurus Starshare Fund, Optimix 5 Star MultiManager Fund and ICICI Prudential Emerging Star Fund wear STAR in their Name.
Taurus Starshare is an opened end equity scheme offering long term capital appreciation.
Optimix 5 Star MultiManager Fund aims at using MultiManager style in managing the portfolio of Fund of Funds as an open end equity scheme.
ICICI Prudential Emerging STAR Fund defines STAR as" Stocks Targeted At Returns"

Taurus Discovery Stock Fund and ICICI Prudential Discovery Fund have attached discovery to tehir Names.
Taurus Discovery Fund aims at utitising Price Discovery Mechanism for identification and selection of of low priced securities.
ICICI Prudential Discovery Fund promises to use lot of research to identify currently underpriced, fundamentally strong shares.



Sahara REAL Fund
REAL stands for Retailing, Entertainment and Media Leaders; The AMC has not given any link so far on website for this product.

International Funds by Indian MFs

Principal Global Opportunities Fund (March 2004)
Franklin Asian Equity (Dec 2007)
Fidelity Internatioanl Opportunities Fund(Apr 2007)
DWS Global Thematic Offshore Fund (Aug 2007)
DSP ML World Gold Fund(Aug 2007)
Birla Sunlife International Equity Plan A(Oct 2007)
ABN AMRO Chian-Indo Fund(Oct 2007)
HSBC Emerging Markets Fund ( Feb 2008)

Even among the International theme, one can find the sub-theme as infrastructure or Gold or country specific/Region specific isues; By Apr 2008, 13 such funds exists and hardly two of them have exceeded the limit prescribed. However, SEBI is taking anticipatory action along with RBI directing funds outside.

Apr 08, 2008 Limit enhanced to USD 7 billion; all other conditions remain same.

Sep 26, 2007 Limit enhanced to USD 5 billion with overall limit per MF up to USD 300 million

May 14, 2007 Limit enhanced to USD 4 billion with overall limit per MF lifted to USD 200million
Jan 04, 2007 Limit enhanced to USD 3 billion subject to individual fund sub-ceiling of 10% of Asset Under Mgt in any year with overall limit to USD 150 million per mutual fund.

Apr 04, 2003 Foreign equities of companies that have shareholding atleast 10% in an Indian listed company; overall MFs Limit USD 1 billion

Wealth Creation in 21st century

An article on how to plan Wealth Creation for 21st Century was published in COGNIZANCE a Research Journal published from Commerce Dept of St. Alberts College, Ernakulam. As you get a fresh job, youngsters have lot of expenses; lot of dreams to realise. The article helps to plan sensibly. As an indicator you may recall Kautilyas rule of thumb: Operational expenses for tax collection should not be more than 20% of the collection. Use the same anlogy in your case:spend not more than 20% of your pay for maintaining that job(including life style expenses).

Make Up Room News

Since March 11, 2008 more than a dozen Fund Houses have filed their OD on the SEBI website waiting for the Muhoorta for a good launch. It included 6 Equity schemes, 3 Derivative Funds, some Interval Funds and Several FMPs. What was interesting to note was
1. Bharati Axa Investment Managers are planning to make thier entry by a big splash offering three products: one each in Equity, Treasury and the Liquid category.
2. Both Birla sun Life and HSBC have named their Debt Funds that use derivatives as "Equity Linked" to denote that the portfolio contain floating coupon bonds that has got the coupons linked to some equity index or equity scheme!!! Is n't it a surrogate attempt to sell on the market familiar terms like "ULIP" and "ELSS".
3. The FMPs that are now selling is getting dried up by 24th April 2008; The lining up from 7 fund houses may get opening after the 29th April 2008 credit policy by RBI

Life Style Funds

an interesting theme got the fancy of MFs: Life Style changes of Indian Youth. What products the Indian Youth buy, make a portfolio of Shares of the companies that produce them!!

Kotak Lifestyle Fund (Feb 2006)
Birla GenNext Fund
UTI Lifestle Fund

Gold! ..... hold your breath....

Gold has a glittering past being an acceptable medium of exchange in trade from time immemorial. By early 19th Century, the Gold Specie standard became common among nations for trade settlement. Fine quality gold was the medium for settlement. Later from 1922-1936 we have the system of paper currency settlements that are backed by gold known as gold bullion standard(Brussels). Content of gold remained the same fine quality and quantity. It again went change when in 1946 Brettons Wood Conference when every member country wanted convertibilty of their currency into multiple currencies than gold. So the gold content in the currency got fixed and the without approval of IMF, no one member shall change the parity became the norm.

From the Gold Control Act 1962 that prohibited trade in gold in any form, Govt. of india launched the Gold Bond Scheme through Sate Bank of India for bringing into its reserves physical gold lying with individulas. The scheme was a damp squid and did n't succeed much as people feared harrassment by IT/bank officials. In 1990 Sovereign gold was pledged to come out of BOP crisis. In 1991, keeping pace with liberalization, gold import was allowed. India hold gold as part of its reserves too.

Over the years, gold remained everybody's attraction. As an investment, you have two distinctive products in this class.

1. Gold as ETFs

They are gold units traded on the exchange. One unit of ETF traded will have gold content equal to one-tenth of an ounze of gold(1oz=28.35gm). The monetary value of the ETF unit will depend upon the currency in which you are dealing. It is available on London Stock Exchange, australian Stock Exchange as Gold Bullion Securities and on New York Stock Exchange as Street Tracks Gold share(2004). In India, we have gold ETFs traded on NSE eg: Gold BeES from Benchmark (2007). The price is determined as the AM fixing Price by London Bullion Market Association and translated into Indian Rupees @ foreign exchange applicable as per FEDAI under the FEMA rules.

2. Physical Gold either as Coins/Bullion Bars

You can own gold coins/bars in India from banks/Jewllers/Commodity Exchnage s like NCDC/MCX through their brokers.

To understand Gold Funds, it is necessary to undestand what properties gold posses and how gold as an asset class perform. See the strength of relationship among dofferent asset classes from US economy and what returns Indian asset classes earned. Gold is inflation resistant as can be seen from the data from the US market and Indian market. This property makes it a defensive asset in one's portfolio.

From time immemorial, Gold has been a medium of exchange; After the Gold standards give way to SDRs of IMF, the world has changed quite a lot.

The Forces of Exchange rates, Interest Rates and Purchasing Power (manifested in inflation rates ) affect gold prices;

Commodity trading opportunities in Gold in India are available at NCDEX, MCX and NMCE through their approved brokers network. Geojit Financial Services Ltd, JRG Securities Ltd, RiddiSiddi Bullions Ltd are some of the brokers who deal in kilo gold, mini gold contracts. NCDEX has come up with even 8gm contract.

Banks have been permitted to import and sell gold coins/bullion bars

But after all how much gold should you hold in your portfolio?

The answer is 15% to 20% as

• European Central Bank (1999) based on internal studies DECIDED TO HOLD 15%.
• Germmill & Hillman created a model based on 20 years data suggests 20%

Individulas sholud do a comprehensive planning of their gold purchases as one will have personal effects and investment effects. The investment part is best in coins and bars than in jewellery.

Supply of gold is either from imports/Recycled/production from Kolar mines. One of the leading consumers of gold globally, India uses about 800-900 tonnes of gold. Gold buying inborn to Indians: Celeberations like Diwali (Oct 28, 2008 ), in North or Vishu (April 14) in South cannot go without gold. "Dhantheras"(November 07, 2007), "Akshay tridiya"(May 07, 2008) are considered auspicious to have gold for prosperity. Please note that the exact date may vary according to the year.

According to Hindu mythology, Lord Krishna gifted Draupati "Akshaya patra" , the vessel of unlimited bounty which would give her anything that she ask for when Pandavas were away in the forest. And when you buy gold on the Akshayatrithiya day, prosperity come home .The day is dedicated to Goddess Lakshmi in a very special way.

Badrinath temple opens after 6 months closure on this day. Brindavan does not have Krishna adorned on this day like Lord Narasimha at Simhachalan in Andhra Pradesh. But in Uddupi, Lord Krishna is adored in sandalwood on that day. There is no lack of festivals in this land of diversity, one can find reasons for celeberation all the time.

Poet Dharumi wanted to win the bag of 1000 gold mohras from the King performing Thirivilayadaal... GOLD is in the culture as traits in your genes.

A land of varied cultures, it has festivals all months in the calendar year in one or other part. There are about 450,000 goldsmiths engaged in this segment that is largely unorganised. There are over 15000 players in the gold processing industry of which 80% constitute about $4.15million. Corporatisation is on with branded players entering the field including the over-the-counter coin selling banks.

The essential part of girl's wardrobe(men also). Cultural practices , Religious Practice of permission to women only to wear gold and silk(in certain sects like muslim) is also another reason for craze for gold.Ornaments are part of any community and when it is in gold, one is elite class. Valentines Day is becoming another day for gold purchases.

Corporates uses old Coins as gifts for sales promotion, reward for loyalty( ONGC, Power Grid Corpn, NTPC) issue of commemorative gold coins(LIC golden jubilee year, ), etc..Imagine 85000 employees per PSU undertaking rewarded with 8gm coin;May be an opportunity in 100 years or 75 years or 50 years...

From simple medallions in Sports/Education gold has moved to varied purposes.

A cash benefit given to the employee is valued 100% and taxed;but a gift in kind is taxed at50% purchase value makes it attractive for both employer and employee.

In 1982, the annual Indian gold consumption stood at 65 tonnes has crossed 500 tonnes per year by 2007. 80% of consumption is for jewellery fabrication (more than 22 carat purity level), 15% investment purposes and hardly 5% for industrial uses.

The fashil jewellery of 1 gm market is expanding at rocket speed.

1.http://finance.indiamart.com/markets/commodity/gold.html

2. http://goldnews.bullionvault.com/node/1558/print

3. http://www.finfacts.com/Private/curency/goldmarketprice.htm

4.http://www.research.gold.org/investment/

Technology Sector Funds

An early arrival on the tech boom of Indian Capital Markets by the turn of the Century.

DSP ML Technology.Com Fund
Birla New Millenium
ICICI Pru Tech Fund
SBI Magnum IT Fund
Franklin Infotech Fund
Kotak Tech Fund
UTI Software Fund

Auto Sector Funds

This is a type of Sector funds that is facing extinction now.
JM Auto Sector Fund
UTI Auto Sector Fund are the only two in this class; But UTI took the mantle of transportation & Logistics recently widening the scope from narrow Auto segment.

Petro thro Power to Energy Funds

This class of Funds emerged initially as Petro funds, then took the mantle of Power and then migrated to Energy label.

Reliance Diversified Power Sector Fund
J M Basic Industries Fund
UTI Energy Fund
Sundram Energy Opportunities Fund

FMCG Funds

Not a big class by itself; But to understand how the Indian MFs are creating product differentiation in whatever form they can.
ICICI Pru FMCG Fund
Franklin FMCG Fund
SBI Magnum FMCG Fund


More funds did n't venture into this space, mostly due to non-sustainability of the heme.

The Price for being No:1

A Case Study in Banking that help students to understand banking in its Indian LPG scenario. Written in the background of Federal Bank Ltd, Alwaye, Ernakulam, India that boasts from a horading in Vyttilla Junction in Ernakulam District, facing the NH 47: "Many a good things in Banking begin at federal bank", when it faced covert takeover attempts from ICICI Bank Ltd ,Mumbai

You can read the abstract at http://www.asiacase.com/case/southAsia/icfai-MVMonica.html