CAPITAL LETTER

Volume 2 April 7, 2010 Issue 4 Greetings from FundsIndia! Budget behind us, Taxes ahead... My name is Srikanth; I’m a director at FundsIndia. Thanks for taking the time out to read this April 2010 our monthly news letter. The financial year of 2009-10 is behind us. Hope you all had a good year. The equity markets in India sure had a blockbuster year after a period of scary uncertainty. The one-year return of diversified equity mutual funds in India tell a tale of impressive re- turns signaling a teasing return to the heady days of a couple of years back. At FundsIndia, we are happy that our investors are getting to make a nice profit on their mutual fund and equity investments. However, we are watching the markets with caution to see if there is a froth building up in valuations. Although it should not matter to long-term investors, there are people who are looking at one, two year timeframes and they could get hurt if they invest when equity market valuations are high. We are still hearing tales from people who were turned off from the market after January 2008. If and when the market hits the 21,000 mark again, there will probably be a stampede of redemptions from people trying to get their money back. That is the reason we recommend that people average their entry into the market via systematic investment plans or value-cost averaging investment plan at FundsIndia. We have innovated most in this space in our platform offering a variety of ways to do periodic investments—re gular SIP, portfolio SIP, Alert SIP, and VIP. Soon, we will also be introducing SIPs in ETFs allowing investors to get into passive instruments in a systematic way as well. Apart from this, investors should look forward to more interesting ideas on our equity platform in the near future as well! Happy Investing!

Top MF schemes in FundsIndia (for March 2010) Equity schemes Debt Schemes

HDFC Top 200 HDFC High Interest

HDFC Prudence Templeton India ST Income

Reliance Infrastructure-Ret(G) Rla SL Asset Alloc-Cons

Reliance Regular Savings—Equity Reliance STF

Canara Robeco Equity Tax Saver HDFC Multiple Yield

Transfering funds to your brokerage account made easy! FundsIndia recently enabled an easy, seamless way to transfer money to your trading account with us. You can now just login to your account, and chose to transfer money from your bank. You will be taken directly to your bank’s payment gateway (if it is one of the 13 banks we support) to complete the transaction. If done in business hours, the money will be made available for trading within half an hour!

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

Featured Fund and Spotlight Scheme

Sundaram BNP Paribas Mutual Funds

Sundaram BNP Paribas Mutual funds, a joint venture between the famed Sundaram house in Southern India, and the BNP Paribas of France, has built a stellar reputation as an asset management company in India over the past 15 years.

The fund has launched several innovative managed funds in the country including the first mid-cap fund, the first CAPEX fund, and the first fund to focus on small-cap opportunities (profiled below).

Today the company has 15 equity funds, an a full bouquet of debt funds, and five balanced funds on offer.

Popular schemes Launched By Sundaram BNPP MF

1. Sundaram BNPP S.M.I.L.E fund – An open ended equity scheme (small-mid-cap) 2. Sundaram BNPP Capex Opportunities – An open ended equity-diversified fund 3. Sundaram BNPP Select Midcap regular – A open-ended equity diversified fund (mid cap)

About Sundaram BNPP S.M.I.L.E Fund A Top ranked small-mid cap fund

Investment Objective: The scheme aims to achieve capital appreciation by investing atleast 65 per cent of its as- sets in diversified stocks that are generally termed as 'small and mid caps'. Small and midcaps are defined as any eq- uity stock whose market capitalization is equal to or lower than the market capitalization of the largest market capi- talization stock in CNX Midcap 200 index. .

FundsIndia Commentary: Sundaram BNP Paribas S.M.I.L.E. Reg nexus with gains is exemplary

“With this offering you can be sure of ample diversification amongst sectors as well as stocks. Over the past one year, the number of stocks has averaged at 50, which is a considerable change from its earlier days when it touched 96. While around 40 per cent of its investment universe comprises of stocks that have been held in the portfolio for less than six months, there are a number of stocks which have been held for considerable lengths of time. It’s worth not- ing that in most stocks it offloads positions completely before buying them afresh “

(sourced from the research desk of valueresearchonline.com) Investment Options: Growth, Dividend Payout & Dividend Re-investment Minimum Investment: Rs. 5000/- and Rs. 500/- thereafter Load Structure: Entry Load – Not Applicable Exit Load – If the units are redeemed / switched-out within 1 yr from the date of allotment - 1.0% If the units are redeemed / switched-out after 1 yr from the date of allotment - NIL Date of Inception: Jan, 2005 Fund Manager : Mr. S. Krishna Kumar

All Sundaram BNPP mutual fund schemes are available for investment at www.FundsIndia.com

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

Impactful small changes in April

Dhirendra Kumar

The beginning of the new financial year has seen a number of small changes that, even though seem disparate, sort of hang together in terms marking a turning point for the ordinary Indian. Or at least, as four separate turning points. Some, or perhaps all of these may not seem like such a big deal to you but I believe that each of these things will make a difference.

Firstly, from April 1 onwards, the government will begin making a starting contribution to small depositors' accounts in the New Pension System. Despite having the potential to revolut ionise old-age security for a huge number of Indians, the NPS has proven to be difficult to promote. In the absence of commission-earning agents, there's no one to sell the NPS. How- ever, as the FM said in the budget, for the next three years, the government will contribute Rs 1,000 per year to the NPS account of those who deposit less than Rs 12,000 per year and start their account in 2010-11. This scheme could well be the promotional impetus that the NPS needs to do generate awareness among a larger audience.

Second, savings bank accounts will now pay interest daily. By itself, the difference in compound- ing is not much-for a constant amount in a savings account. Even for Rs 1 lakh, daily compound- ing will fetch an extra Rs 5 or so over a year. However, the real difference will be made by the fact that every day's balance will play its part in earning interest. Up till now, banks would pay inter- est only on the minimum balance between the 10th of a month and its end, which was a rule de- signed to generate income for banks without having to pay customers for use of their money. The earlier rule was so blatantly anti-customer that it's a scandal that it has taken so long for the RBI to amend it.

Third, very small businesses will now have a much easier time with their tax and accounting be- cause of the new presumptive taxation rules. Businesses with annual revenue of less than Rs 60 lakh can now just pay tax assuming an income of 8 per cent of turnover, without even having to maintain books of accounts. While business analysts would hardly stop to bother about micro- enterprises of this size, I believe that this scheme is a serious boost to entrepreneurship. The grind of books and audits is a major drag on starting entrepreneurs. Under this scheme, they may not even need an accountant.

Four, there's the right to education. Oh, I know that has nothing to do with business or savings or investments, but eventually, it should affect everything. At least I hope so..

— Syndicated from Value Research Online —

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

How to select a good mutual fund—Part 2 of 3 P.V. Subhramanyam

(Continuing from the previous issue on the criteria to use for selecting mutual funds…)

5. Have a demonic watch on the asset management charges. As a fund starts to do well, it should attract a lot of investors, and as its assets increase it should keep dropping its asset management charges. Look at well managed funds with charges below 1.9% p.a. – there are many.

6. Look at the portfolio turnover ratio – the greater the ratio, the more is your total cost. One cost which is not visible to the investor is the brokerage that the fund scheme pays. This is a function of the turnover of the portfolio. So a fund with a lower turnover would be incurring lesser costs.

7. The asset management company’s team is important too! Look for experienced teams where the managers have gone through a few business cycles. Managers who have not seen a down market can be very myopic, and those managers who have been through a prolonged slow down very pessimistic. You need a nice blend in the team.

8. True to label : When you buy a large cap fund, you are buying a large cap fund, simple. If a fund says it is a large cap fund it should not be buying mid cap, small cap etc. just because large caps are currently out of favor. It is your choice to be in a large cap fund and your fund manager should respect it.

9. Philosophy matching : Some fund houses are cooler and calmer compared to the others. See which philosophy suits you. For example Templeton says Franklin India blue chip is a ‘growth’ oriented, large cap fund, whereas Templeton India Growth fund is a ‘value’ oriented fund – see what suits you. HDFC mutual fund on the other hand does not classify itself into ‘growth’ or ‘value’ labels.

10. Fund management is by a team or a star fund manager : Fund management is a part science and part art. The fund manager will surely leave a stamp, however, some fund houses have been able to create teams and systems to handle the departure of fund managers – this gives you greater peace of mind. A star fund manager could leave or even worse just drop dead – and you keep wondering ‘now what’! Internationally and in the Indian context well performing funds (over say 10 years) have seen very stable management teams and CIOs. (to be continued…) (Reprinted with permission from www.subramoney.com)

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