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Impact 
 (Source: ACE MF, PersonalFN Research)
The Foreign Institutional Investors (FIIs) seem to be wary of the scam stories unfolding in India and the political uncertainty building there from.
In the month of November 2010 their (FII) participation towards India mellowed and in December 2010 they took money off the table by selling Indian equities to the tune of  1,324 crore. And this was the first time after the year 2006 where the FIIs have ended the last month of the calendar year on a negative note.
Interestingly this year despite the QEII announcement (in November 2010) the foreign money hasn't flushed into the Indian equity markets, which has made Indian equity markets appear nervous and directionless.
Interestingly, the data released by the central bank displays that cash and currency with the public grew to almost 1,00,000 crore this year (between April 1 and December 3) as against about 65,000 crore in the year ago period, thus indicating that expectation of high inflation is compelling people to stay with cash.
We think that the year-end sell-off by FIIs is quite common, as in the developed nations the calendar year also constitutes to be the financial year, which tempts them to sell some of their stake in the emerging nations while they close their books of accounts in their home country. But this year interestingly, in our opinion there also seems to be a change in asset allocation from equity to commodities, post the QEII announcement and this is witnessed by surging prices of crude oil and gold.
We believe that in the year 2011, India will experience muted FII flow as there would be a change in focus from emerging nations to developed nations, as off-late the economic data in the U.S. has been encouraging. However, from a long-term perspective India will continue to be a favourite investment destination for foreigners (FIIs) as our country, has seen immense resilience during the time of economic turmoil due to robust regulations, prudent Government interventions and our upbeat economic growth. We think the year 2011 will provide good "value buying opportunities", which one should avail of, to create a prudent portfolio. In mutual fund investing too, it's advisable that one adopts the SIP (Systematic Investment Plan) mode (rather than the lump sum mode) as it will enable you to manage the turbulence of the equity markets well, as well as enjoy the power of compounding, which in turn would lead to long-term wealth creation.
We wish you all a Very Joyful and a Prosperous New Year 2011.
HAPPY INVESTING!!
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Impact
A lucrative job offer coming your way; you would definitely cling on to it. And if you are thinking of withdrawing each time you switch your job, then soon that could be the thing of the past as the Employees Provident Fund Organisation (EPFO) has urged the Government to bar workers from pulling out their PF balances on changing jobs.
"Every six months to a year you change your job and withdraw your PF. That makes us more like a bank," said Central PF Commissioner Samirendra Chatterjee. He also further added saying, "The PF account should serve its purpose of social security - having a 15,000 balance at retirement is ridiculous. It's in the larger interest of workers to bar withdrawals."
An internal study of this year's PF settlements at the PF office in Karnal, Haryana revealed that 89% of the cases settled at the office were those of workers withdrawing PF balance after resigning from a job, whereas just 0.8% workers opted to transfer their PF account to their new job.
In our opinion the PF money should be treated like a retirement fund and instead of withdrawing the PF balance (on account of change in job), one should transfer it to the new PF account, with a new employer. This practice not only helps in earning interest on the entire PF balance without any interruption but also helps in building a substantial retirement corpus. |
Impact
In their bid to beat competition from large mutual fund houses and carve out a niche for themselves, smaller mutual fund houses are focusing on a select group of products. This trend is also an outcome of increasing regulatory control over mutual funds. Mutual fund houses are now looking at differentiating their products and simplifying things for investors.
At present, a few mutual fund houses like Benchmark, Motilal Oswal, DSP BlackRock, JP Morgan and Quantum are carving out a niche position by differentiating their products. Benchmark has established itself in the ETF (exchange traded fund) category and Motilal Oswal is trying likewise.
JP Morgan and DSP Blackrock are bringing their international products to domestic investors. Quantum Mutual Fund follows a unique no-commission model, where the investors directly interact with the mutual fund house.
We believe that the trend in product differentiation will intensify further in the mutual fund industry as there are more than 3,000 schemes floating in the market, and investors require simpler and transparent products for investing. In order to survive competition from large mutual fund houses it is important for the smaller fund houses to innovate and carve out their territory in the industry.
| | | Weekly Facts |
| Close | Change | %Change | | BSE Sensex* | 20,509.09 | 435.4 | 2.17% | | Re/US$ | 44.97 | 0.1 | 0.27% | | Gold /10g | 20,660.00 | 270.0 | 1.32% | | Crude ($/barrel) | 93.60 | 0.1 | 0.14% | | FD Rates (1-Yr) | 6.50% - 7.25% | Weekly change as on December 30, 2010
*BSE Sensex as on December 31,2010 |
In this issue
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In an interview with DNA Money, Mr. Sujoy Das, Head of Fixed Income at Religare Mutual Fund shared his views on debt funds; Fixed Maturity Plans (FMPs), 10-year benchmark gilt and monetary policy review to be held on January 25, 2011.
Mr. Das believes that 2010 was mixed year for debt funds, with shorter duration funds outperforming the longer ones. According to him the long term interest rates were largely affected by the RBI's stance around inflation and rising inflationary conditions; and the yields of the short term interest rates moved higher due to a protracted period of liquidity deficit.
As far as FMPs are concerned, according to him they (FMPs) will offer opportunities to risk-averse investors and advised that the investors with various degrees of risk should allocate certain exposure to interest rate products with various levels of duration.
Mr. Das feels that the outlook for gilts over 2011 is positive. He says, "The risk-return trade-off is tilted in favour of gilts over the year. Over the next couple of quarters we expect the 10 year gilt to trade at finer levels and move closer to the long-term average of 7.50%. The inflation trajectory over the first six months will play a very important role in determining market sentiment. The risks to inflation upside due to base effect and food inflation could rise in the second half."
Mr. Sujoy Das expects the RBI to hike rates in monetary policy review scheduled on January 25, 2011 and thereafter take a long pause. He believes that the RBI will step in only if the inflation trajectory shifts higher in the second half of the year 2011. |
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Fund Of Funds : A mutual fund that invests in other mutual funds
(Source: Investopedia) |
QUOTE OF THE WEEK
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- Sidney Madwed |
This Week's Poll !!!
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Will the Indian equity markets surge in 2011 too?
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