Thursday, September 29, 2011

Diversify your portfolio by investing in DSP BlackRock's World Agriculture Fund

DSP BlackRock Investment Managers announces the launch of DSP BlackRock World Agriculture Fund. The Scheme is a fund of funds Scheme investing predominantly into the BlackRock Global Funds – World Agriculture Fund, which invests in equity securities of agricultural companies globally. These are companies that form a part of the upstream and midstream portion of the value chain in the agriculture sector and operate across various geographies around the world. The New Fund Offer (NFO) will commence on September 30, 2011 and close on October 14, 2011.

Agriculture is a sector represented globally, which has sound fundamentals over the long term, given the rising imbalance between food demand and supply. We believe that agriculture is an investment opportunity with the potential for growth over a long term investment horizon. DSP BlackRock Investment Managers already has a suite of products in the international fund of funds category such as the DSP BlackRock World Gold Fund, DSP BlackRock World Mining Fund and the DSP BlackRock World Energy Fund. We feel that the DSP BlackRock World Agriculture Fund is another such diversification opportunity for Indian investors looking to access leading global and emerging agricultural companies.

A brief note on the product is mentioned below for your reference:

Why invest in DSP BlackRock World Agriculture Fund?

DSP BlackRock World Agriculture Fund provides Indian investors with a unique investment opportunity to benefit from the potential growth prospects in the agriculture sector by investing into agricultural companies globally through international funds. The unique features of this Scheme are:

¬ Low correlation of the agriculture sector of 0.6 with Indian equities (Data considered: Monthly returns of DAX Global Agribusiness Index v/s BSE100 Index from Oct 31, 2001 till Aug 31, 2011)
¬ Provides access to leading global and emerging agricultural companies through international funds.
¬ The scheme provides investors the opportunity for global diversification combined with access to the fundamentals of the agriculture sector and the growth potential of equities.
¬ The team at BlackRock, responsible for BlackRock Global Funds – World Agriculture Fund belongs to one of the stronger Natural Resources Teams in the industry, managing around US$ 47.2 billion in assets as on Mar 31, 2011.
¬ BlackRock Global Funds – World Agriculture Fund leverages on the fund managers’ investment experience in the agricultural space and the commodities sector.

Key drivers in the Agriculture sector
The agricultural cycle is often characterized by rising commodity prices driven by imbalance between food supply and demand.

The main drivers of demand in the agriculture sector are: a rise in global population which is driving food demand upwards; the rising affluence of urban population leading to an improvement in diet which increases the demand for proteins and the growth of the biofuel sector. The main drivers of supply in the agriculture sector are: The decline in the availability of arable land and a slowdown in the crop yield growth and hence a gradual decline in inventory, which results in a market that is more prone to supply shocks from adverse climatic conditions or government intervention in the global grains trade

This imbalance between demand and supply will likely cause a rise in commodity prices, which in turn will drive the increase in global farm incomes and provide farmers with the incentive to improve productivity. Companies providing goods and services to farmers would benefit from the likely investment cycle in the global farming sector. Rising grain prices lead to sound farm economics and a strong economic case for farmers to improve productivity on a global scale.

Areas into which this scheme invests
DSP BlackRock World Agriculture Fund will invest into the BlackRock Global Funds – World Agriculture Fund and other similar overseas mutual fund schemes, and will provide investors with access to the fundamentals of the agriculture sector. BlackRock Global Funds – World Agriculture Fund invests mostly in the equity securities of companies which belong to the following investment themes: Agricultural Science Companies, Fertilizers, Agricultural Equipment, Agribusiness, Food Processors, Land & Farming, Forestry etc.

To know more about the fund... click the following link BlackRock World Agriculture Fund - Single Pager.pdf

To invest in this fund online... click the following link

Wednesday, August 24, 2011

Transaction Fee while buying mutual fund units

The regulator has clarified that upfront commission to distributors shall continue to be paid by the investor directly to the distributor by a separate cheque

Mumbai: SEBI has allowed mutual funds to charge a transaction fee of Rs 100 on investments of Rs 10,000 and above for existing investors through a circular issued today. For roping in new investors, advisors will be entitled to Rs 150 on a subscription of Rs 10,000 and above.

AMCs will be required to deduct any charges from the subscription amount and pay the transaction charge to distributors later. There will be no charges in direct investments.

The statement of account given to investors will reflect gross investment, transaction fees deduction and the net investment. Distributors can continue to get an upfront fee through a second cheque directly from their investors.
Distributors will not be allowed to levy any transaction charges other than purchases/ subscriptions relating to new inflows. These transactional charge details will have to be printed in bold letters in application forms.

“Distributors will be able to choose to opt out of charging the transaction charge. However, the ‘opt-out’ shall be at distributor level and not investor level i.e. a distributor shall not charge one investor and choose not to charge another investor,” states the circular.

SEBI has put the onus on checking any malpractices by distributors in implementing this rule. It has asked fund houses to put in place systems to check if distributors are splitting applications in multiple funds to earn higher transaction fees. AMCs and AMFI have been authorized to take strict action against such practices.

The regulator has asked fund houses to de-duplicate folios within a period of six months.

Wednesday, August 10, 2011


This is in continuation of my previous post wherein I said, I was looking for articles / views of experts subsequent to the recent US downgrade activity carried out by S&P. I came across a wonderful insight by none other than Prashant Jain, CIO of HDFC Asset Management Company, who delivers consistently. A must read for all the pessimists & the optimists too !

Monday, August 8, 2011

US downgrade

It is always tempting to come up with one's views when this kind of catastrophe happens. But time and again I have personally observed that there are articles written by Experts that give more depth & knowledge than one's own views. I decided to check some of the expert opinions and in the process came up with this one as the first interesting note rather than an article. Read on

Mark Mobius in considered as one of the best fund managers who follows value investing. His focus is on emerging markets and he is associated with Franklin Templeton Asset Management Company.

Sunday, May 15, 2011

Market View by Prashant Jain, HDFC AMC

Pls find the market oulook by Mr. Prashant Jain, CIO HDFC MF.
Has the bull market started - for us to worry about its end?
Prashant Jain, CIO, HDFC AMC

Prashant Jain is known to be a voice of calm reason - a trait that is even more appreciated in stormy weather like what the stock market is witnessing right now. In a conversation with Wealth Forum, Prashant shared his simple and clear insights on the key aspects that markets are worried about : inflation, interest rates and oil. As regards the fear that markets are entering a bear phase, he poses a pointed question : has the bull market started - for us to worry about its end? Here are the excerpts of that chat ……

Inflation and stock markets

From an equity market perspective, we must appreciate that in an economy like India, inflation is more often than not a pass through. Good companies have pricing power - they should be able to pass through the impact of inflation by means of marginally higher prices. So, the direct impact of inflation on earnings is expected to be rather muted.

What would be a concern is if we see demand destruction as a result of consumers' inability to absorb this inflation. We are not seeing significant evidence of demand destruction as of now. We must look at this fear of demand destruction in context. First, the proportion of middle class household income that is spent on food has come down substantially in the last decade as incomes have risen quite rapidly. Food inflation - which has been the biggest concern - does impact the poor very severely. But, the consuming class - the middle class - has been able to absorb this impact to a large extent, thanks to rising income levels.

Then, if you look at the discretionary spends of the middle class, the story on inflation is entirely different. Consumer electronics prices today are lower in absolute terms than where they were 5 years ago, same is the case with cable TV costs, with airfares, with hotel room tariffs. Consumers have not really felt any inflationary impact on all of these items, which are increasingly becoming a big portion of their spending patterns.

Yes, power and fuel prices have gone through the roof and consumers' pockets are getting pinched by this. Is that enough to destroy demand? Will petrol and electricity bills bite so much that people start cutting down on entertainment, travel and other discretionary spends? Again, the proportion of household income spent on power and fuel has gone down over the last decade to levels where the middle class is perhaps able to absorb price hikes. But obviously, this cannot go on - if oil prices continue to rise, we will see some impact on overall consumption.

What RBI is trying to do is to postpone consumption by pushing up financing costs. If demand for consumer durables, automobiles, homes etc gets postponed and thus inflation can be cooled down, it is for the good of the economy. That consumption is most likely going to get postponed - not destroyed.

High interest rates and stock markets

High interest rates will have a negative impact on earnings. Growth can also slow down as investments get curtailed or postponed. It's possible that GDP growth rate can be knocked down by 1% - if we were projecting an 8% GDP growth, perhaps it is sensible to look at 7% now.

The Indian economy has lived through many periods of high interest rates, without it doing too much damage to the economy. Yes, some impact will be felt - but I don't think the underlying bull case for Indian equities is to be questioned by higher interest rates.

Sectoral impact of high interest rates

Auto and banking stocks have come under pressure as a result of the recent interest rate movements. Regarding automobile companies, I suppose some of these concerns are warranted, at least in the cars segment. Footfalls in car showrooms have decreased. 7 out of 10 cars in India are sold on the back of car loans. As car loans become expensive, some consumers have sought to postpone their purchases - which can impact near term earnings of these companies.

As regards banks, I am not so sure that a high interest rate environment is so bad for banks. Well managed banks have close to 40% of their deposit base in the form of low interest bearing savings and current accounts. A stable base of low cost deposits should help manage a rising interest rate environment. Banks who depend on wholesale deposits are the ones who may be impacted adversely.

Banks have corrected to fairly attractive levels. Some of the large well run PSU banks are available at close to 1 time book value on a FY 13 valuation basis. That's not really expensive.

Oil and stock markets

This is the one factor that we ought to be worried about. Last year, a robust export growth helped camouflage the impact of rising oil prices on our current account balances. If oil prices continue to rise to say $ 140, it will have a material impact on our fiscal deficit, on inflation, on aggregate consumption and therefore on growth.

If on the other hand, oil prices cool off to under $90, that will be a big positive for India and therefore for our markets.

Outlook for markets

I don't see why people should become bearish on the Indian market from a long term perspective. Let's remember that this market is where it was three years ago. And in these three years, earnings have grown and therefore valuations have become reasonable. So, when people talk about the bull market ending, my only question is: has the bull market started yet? We are only where we were three years ago! One can describe this as a flat market - not a bull market.

Markets are fairly valued - while we can't see huge room for near term appreciation, we don't see a case for a drastic fall as well. The structural case for Indian equities continues to be strong - it will play out over the next several years. One should expect markets to deliver returns in line with earnings growth, over time. But, for that, one needs patience and conviction to stay invested through volatile conditions.

DISCLAIMER: The views expressed by Mr. Prashant Jain, Executive /Director & CIO of HDFC Asset Management Company Limited, constitute the author's views as of this date. It should not be construed as investment advice to any party. The statements contained herein may include statements of future expectations and other forward-looking statements that are based on the author's views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. The recipient(s) before acting on any information herein should make his/their own investigation and seek appropriate professional advice and shall be fully responsible for the decisions taken. Mutual fund investments are subject to market risks, read the Offer Document carefully before investing.

Wednesday, May 11, 2011

Savings & Investments

How Much Should I Save Versus How Much Should I Invest?

Saving always comes first. Think of it as the foundation upon which your financial house is built. The reason is simple - unless you inherit a large amount of money, it is your savings that will provide you with the capital to feed your investments or it is savings that will provide you with an emergency kitty.

•As a general rule, your savings should be sufficient to cover all of your personal expenses, including your mortgage, loan payments, insurance premia, utility bills, food, and clothing expenses for at least six months. How do you straightaway jump to this quantum of money ? May be, you can start with 3 months, then increase this gradually to 6 months of your expenses. Even you can work around on this. Keep six months of your take home income saved. That way, if you lose your job, you’ll be able to have sufficient time to adjust your life without the extreme pressure that comes from living salary credit to salary credit.

•Any specific purpose in your life that will require a large amount of cash in two years or less should be savings-driven, not investment-driven. The stock market in the short-run can be extremely volatile, losing more than 50% of its value in a single year. Purchasing a home is a great example. Only after that these things are in place, and you have health insurance, should you begin investing. The only possible exception is putting money into NPS plan at work if your company recommends you to contribute. That’s because not only will you get a substantial tax break for putting money into your retirement account, but the matching funds basically represent free cash that is being handed to you on a silver tray.

Tuesday, March 8, 2011

Fixed Maturity Plans - An overview

What are fixed maturity plans?

Fixed maturity plans are investment schemes floated by mutual funds and are close-ended with a maturity period ranging from three months to five years. These plans are predominantly debt-oriented, while some of them may have a small equity component.

The objective of such a scheme is to generate steady returns over a fixed-maturity period and immunising the investor against market fluctuations.

How do FMPs work?

FMPs are typically passively managed fixed-income schemes with the fund manager locking into investments with maturities corresponding with the maturity of the plan. The objective is to lock into a certain rate of return on the assets at inception, thereby protecting the schemes against market fluctuations. Unless specified in the objective of a
FMP, investments are in risk- free or highly-rated assets for principal protection. FMPs with equity component will be more dynamically managed as fund managers cannot invest in equities for locking in to inception returns.

Factors influencing decision to invest in a FMP

The following are the key factors … …

1. Cash flow forecasting: FMPs are suitable for investors who require locking in funds for a particular period of time. E.g. If an individual has a certain cash outflow in three years time, investing in a debt FMP with three year maturity can be considered as the investor is only concerned with receiving the principal plus return on the investment at the end of three years.

2. Immunisation of investments: FMPs are a good investment vehicle for investors who are targeting a return on their investments over a fixed period of time and are indifferent to market volatility within that period.

3. Interest rates currently prevailing in the market: The investor should look at interest rates on government bonds, corporate bonds, commercial papers, certificate of deposits, securitised assets, bank deposits, company deposits and other short to medium term fixed income products before taking an investment decision in a FMP. This exercise will give an idea to the investor on the return one can expect on FMPs.

The investor can then use this knowledge to lock into returns through FMPs or directly through other fixed income products.

4. View on the equity market: FMPs are generally meant for investors who are indifferent to market fluctuations in the short term. However it pays to form a view on the markets for investing in FMPs with equity components as equities markets carry a higher risk in the short term than in the long term.

Risks in FMPs

The close ended nature of FMPs do not really protect them against risks including market, credit and liquidity risks.

The risks in FMPs are Market risk, Interest rate risk and Credit risk.

courtesy - DNA