Exciting New Improvements

Volume 4, Issue 11

06—Nov—2012

The monthly newsletter from FundsIndia

Exciting new improvements

Inside this issue: Srikanth Meenakshi Greetings from FundsIndia! Exciting new im- 1 We are making some interesting improvements in the FundsIndia service as well as the provements - platform. We have rolled out some of these already, and more are on the works. Sri ka nt h I am sure you have started receiving our weekly mutual fund recommendation email that Me ena ks hi we started about a month back. Please note that all these recommendations are perma- nently archived in our blog as well. You can go to our home page at any time, click on the ‘Blog’ link and find all our recommendations and read about them. The month ahead 2 - Equity recom- Later this month, we will roll out a completely revamped set of pre-packaged portfolios on our platform as well. mendations - There will be many more portfolios than today, and will suit a wider range of needs of our investors. Along with B.Krishna Kumar this, we will also be unveiling of our list of FundsIndia’s Featured Funds list – a considered list of funds that has been put together after extensive research and analysis. Templeton India 4 We have also rolled out a new referral system. Apart from increased incentives, the new system has a very inter- Equity Income: esting feature that I would like to tell you about. If you go to the ‘Referral’ page after logging into your FundsIn- I n ves t —Vid y a dia account, you can create a personal referral link for yourself. You can even place your own message (about, Bal a say, why you like FundsIndia and why you would like to recommend the service). You can then publish this link anywhere you want – twitter, facebook, blog, forum etc. Whenever someone clicks on the link, they will come to a Financial Plan- page that will show your personal message and help them will registering their account. Any account opened 5 using your referral link will mean referral points for you! I encourage you to please check this out and use it for ning Education referring your friends and colleagues. Consistent Per- 6 This new referral system will come in especially useful in the upcoming tax-saving season. We have a new tax f ormers saving pre-packaged portfolio for this season, and you can help your friends save taxes as well by referring FundsIndia to them! Festival Without 8 Let me also take this opportunity to wish you and your family a very Happy Diwali! G ol d —Dh iren dra K um ar

Change in cut-off time

For all liquid fund transactions (for any amount) as well as non-liquid fund transactions of greater than Rs. 2 lakhs (in a single scheme on a single day), the cut-off time for same-day NAV will be 1 PM (as opposed to 2 PM previously). This change is due to recent SEBI regulations and is effective immediately.

Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing. Volume 4, Issue 11 Page 2

The month ahead - Equity recommendations B.Krishna Kumar

After a sharp rally in September, the month of October turned out to be a drab. The index was confined to a 100-point trading range and is looking for some direction from global and local events. On the economic front, the headline inflation remains stubborn and refuses to budge.

The Reserve Bank of India disappointed the market after it decided to keep policy rates on hold at the recently held meeting. It is positive to note that after a brief fall, the Nifty recovered ground and had gotten back to the broad trading range of 5,630-5,730.

While we maintain the bullish view for the stock market, a look at the behavior of the India Rupee in relation to the US Dollar raises a flag. The Rupee has been depreciating in the recent weeks and has breached key support levels as well. Unless there is quick reversal there would be a strong case for the Rupee to seek further lows versus the Dollar.

A move below Rs.53.40 would indicate that the US Dollar is losing ground and this would have a positive rub-off on the equity market sentiment as well. Else, expect the Dollar to appreciate to Rs.56.50-56.70.

A look at the 10-year bond yield chart indicates that the much anticipated interest rate cut is not round the corner. Or, at least, the bond market does not seem to be pricing this in, as yet.

From a technical perspective, we maintain our target of 6,000 for the Nifty. The journey towards this target is underway and any sem- blance of positive news flow would help the Nifty get past this psychological barrier of 6,000.

The bullish sequence of higher highs and higher lows is pretty much intact and the index has to fall below 5,570 to question the possibility of an immediate rally to 6,000.

Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing. Volume 4, Issue 11 Page 3

Continued from page 2 . . .

A breakout past 6,000 would impart momentum to the uptrend and the index could then rally to the next resistance at 6,300. We suggest investors to use any price weakness to buy into fundamentally sound stocks from the banking, cement, realty, FMCG and infrastructure sectors.

This month, we cover the outlook for a couple of stocks from the pharmaceutical sector. The stocks from the Pharma sector have been top performers in 2012. A look at the technical indicators suggests that a few stocks still have room to the upside. Lupin and Cipla are the names that we have in mind from this sector.

A look at the daily chart of Lupin featured below indicates that the stock has been in a downward correction in the past few weeks. This correction seems complete and the next leg of the rally seems underway.

Investors may buy the stock with a stop-loss at Rs.545 for an initial target of Rs.650. A move past Rs.650 would lend momentum to the uptrend and the stock could then target the major resistance at Rs.680.

Cipla is the other stock we recommend from the Pharma sector. The stock has been in a consolidation in the recent weeks. The better- than-expected earnings for the September quarter has acted as a catalyst and the stock now seems set to rally to Rs.440.

A look at the daily chart featured above indicates that Cipla has taken support and bounced off crucial levels. This is a sign of strength and investors may use weakness to build an exposure in Cipla. A breakout past Rs.440 could propel Cipla to the major resistance at Rs.470.

Mr. B.Krishnakumar is the Head of Equity Research at FundsIndia. With extensive experience in tracking the stock market (over 15 years) he has worked with companies such as ’The Hindu , Business Line’ and ’Dow Jones Newswires. He will be contributing to our monthly newsletter with his stock market outlook which shall hold good for a month. Mr.B.Krishnakumar can be reached at [email protected]

Mr.B.Krishna Kumar also hosts a weekly webinar that discusses the market outlook for the following week. You can register for the webinar by clicking here:

https://www4.gotomeeting.com/register/927617871

Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing. Volume 4, Issue 11 Page 4

Templeton India Equity Income: Invest

Vidya Bala—Head - Mutual Fund Research at FundsIndia

Emerging markets, including India, do not offer too many ‘value’ or less expensive stocks, given their growth focus. If you wish to hold a portfolio of value stocks, mostly in India and in pockets of other growth economies, then Templeton India Equity Income is a good bet.

With about 30-35 per cent exposure to international stocks, this fund delivered 11.5 per cent annually in the last three years, comfortably beating its benchmark BSE 200’s return of 5.1 per cent. The fund also finds a place in the top quartile of three and five-year performance chart of diversified equity funds. This performance is notable, as most funds with international exposure have struggled to beat domestic diversified funds over the long term.

Suitability

The fund is suitable for investors who want to take limited exposure to international markets without losing capital gains tax benefits. Templeton India Equity Income will hold only upto a third of its assets in international stocks. Hence, with at least 65 per cent holding in Indian equities, it will qualify for capital gains tax benefits available to equity funds.

As the fund holds a number of dividend yield stocks as part of its value approach, it also regularly distributes dividends. Since, its inception the fund has, without fail, paid out dividends once or twice a year. You can capitalise on this by either opting for dividend payout (if you need some income) or go for dividend reinvestment.

It is noteworthy that funds with international exposure are impacted by currency movements. For instance, the rupee’s depreciation against the dollar, last year, improved gains made by international funds. While Templeton India Equity Income’s exposure to international stocks is limited, still an element of volatility from currency does exist. Hence, you will do well to sweep profits occasionally through the dividend payout/reinvestment options.

For the same reason, let this fund not be your core holding. Use it as a diversifier and limit exposure to the fund.

Performance

While Templeton India Equity Income is not strictly comparable with domestic equity funds, we compared it with local dividend yield funds to see how it fared. Over a three- period, the fund lagged Birla Sun Life Dividend Yield Plus by less than a percentage point and marginally outperformed UTI Dividend Yield. The fund’s return since inception in 2006, at about 13 per cent, is next only to UTI Dividend Yield. It has either kept pace with, or outperformed other dividend yield funds since its inception.

At 16 per cent, the fund’s one-year return has beat top peers by 10 percentage points, given the sound rally in other foreign markets.

Portfolio

Templeton India Equity Income boasts of an offbeat portfolio with stocks from semiconductor industries to transportation – sectors that do not find much place in the Indian listed universe. Semiconductor stocks such as United Microelectronics Corporation (Taiwan) as well as shipping plays such as Cosco Pacific are part of the fund’s portfolio. True to its value style, the fund has typical high dividend yield sectors such as finance, oil and chemicals. Even in the dividend yielding FMCG space, it holds less expensive stocks from countries like Taiwan and Chile.

As a value fund, Templeton India Equity Income would have to scout outside India for value. India has on most occasions traded at a premium to many Asian, emerging nations. At one- year forward price earnings ratio of 14.9 times, India is a premium to Chinese/Korean markets (10-11 times)

The fund is managed by renowned fund manager Dr. J Mark Mobius and assisted by Chetan Sehgal and Vikas Chiranewal

Vidya Bala can be reached at [email protected]

Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing. Volume 4, Issue 11 Page 5

Financial Planning Education Series

S.Shridharan —Head - Financial Planning FundsIndia’s Financial Planning Desk would like to introduce you to a series of articles on the need and methods involved in Financial Planning. This will be a six part series and will cover the following topics.

Series 1 : The need and importance of financial planning. Where do you stand today in terms of your finances. What is your liabilities, your income to loan etc.,

Series 2 : The importance of budgeting. This includes your income, liabilities and savings. The four steps involved in the financial planning.

Series 3 : Inflation, time value for money and the advantage of disciplined investments. The importance of asset allocation.

Series 4 : Insurance Planning. Understanding insurance, the types of insurance. Understanding what is Human Life Value(HLV)

Series 5 : Children Future Planning. Quantifying the goals, find the futuristic value and planning theinvestments based on individ- ual’s risk appetite, time horizon.

Series 6 : Retirement Planning. The importance of retirement planning, the advantage of early investments towards retirement corpus accumulation.

To start with, let’s just cover the question ‘What is Financial Planning?’

Financial planning is the process which will help you in creating a roadmap for reaching your goals. This will help you in identifying, quantifying the current financial needs and how can one achieve these goals in a disciplined approach.

Financial Planning involves planning for your life goals such as your own child’s education, your child’s marriage, retirement, pur- chase of an asset such as a house or a car and any other goals you may want to achieve.

When doing financial planning, with the help of your planner, we will determine and quantify your goals, and then evaluate your cash flows to see how to allocate funds towards your goals in a manner that your financial objectives are accomplished.

Once a plan is being created by taking all your personal financial goals into account, then we would suggest you to start your investments towards reaching those goals. The recommendations are provided to fit into the financial plan.

“Life is full of uncertainties. Future investment earnings and interest and inflation rates are not known to anybody. However, I can guarantee you one thing... those who put an investment program in place will have a lot more money when they come to retire than those who never get around to it.”

—Noel Whittaker

Mr.S.Sridharan is the Head of Financial Planning with FundsIndia. You can reach Mr.Sridharan at [email protected]

Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing. Volume 4, Issue 11 Page 6

Consistent Performers FundsIndia Research

In this page, we feature mutual fund schemes in popular categories that have stood the test of time and delivered performance consistently. These schemes have consistently featured in the top quartile of their category in terms of performance over multiple time periods in the past. For equity funds and income funds, we have chosen three, five and seven year time periods for such ranking. For short term and ultra-short term funds, we have chosen shorter time frames. Please note that in some cases, we have pruned the list for length - we have removed institutional schemes and those that have very high initial investment amounts (in the debt side) from this list. This list will be updated every month, although we do not anticipate significant changes on a month-on-month basis. Rankings data for this report has been sourced from Value Research Online. MIP Funds Average 6-M Re- 6-M 1-Y Re- 3-Y Re- Ranking Fund Name turn (%) Rank turn (%) 1-Y Rank turn (%) 3-Y Rank (%) Rating SBI Magnum Children's Benefit Plan 6.05 4/59 12.89 1/58 9.73 3/47 4.96 4 Star Tata MIP Plus 5.68 9/59 11.53 8/58 7.86 12/47 18.19 3 Star Debt Short Term Funds Average 3-M Re- 3-M 6-M Re- 6-M 1-Y Re- Ranking Fund Name turn (%) Rank turn (%) Rank turn (%) 1-Y Rank (%) Rating UTI Short-term Income Regular 2.79 6/43 5.43 5/43 10.72 2/40 10.19 1 Star DWS Short Maturity Premium Plus 2.71 10/43 5.4 8/43 10.44 6/40 18.95 3 Star Debt Ultra Short Term Funds Average 3-M Re- 3-M 6-M Re- 6-M 1-Y Re- Ranking Fund Name turn (%) Rank turn (%) Rank turn (%) 1-Y Rank (%) Rating Birla Sun Life Short Term Opportuni- ties 2.62 3/172 6.3 2/170 11.08 3/167 1.57 2 Star Peerless Short Term 2.59 5/172 5.29 7/170 10.71 6/167 3.54 5 Star Sundaram SD Short-term 2.52 8/172 5.34 4/170 10.5 10/167 4.33 2 Star HDFC Floating Rate Income LT 2.44 14/172 5.32 6/170 10.91 4/167 4.69 1 Star Taurus Short Term Income 2.48 11/172 5.14 10/170 10.5 9/167 5.89 5 Star Religare Short-term Plan A 2.48 10/172 5.02 20/170 11.5 1/167 6.06 1 Star Tata Fixed Income Portfolio Scheme C2 Reg 2.41 18/172 5.1 13/170 10.32 21/167 10.23 2 Star Sundaram Flexible Fund Short Term Reg 2.39 21/172 5.34 5/170 10.14 37/167 12.44 1 Star Templeton India Low Duration 2.41 19/172 5.01 23/170 10.32 22/167 12.58 5 Star JM Short-term 2.35 33/172 5.01 24/170 10.41 13/167 13.7 4 Star JM Money Manager Super 2.36 29/172 5 25/170 10.34 17/167 13.92 5 Star HDFC Short Term Opportunities 2.52 7/172 4.94 39/170 10.13 41/167 17.19 3 Star Tata Fixed Income Portfolio Scheme B2 Plan A 2.36 30/172 4.97 33/170 10.17 31/167 18.47 3 Star JM Money Manager Reg 2.33 40/172 4.9 43/170 10.34 18/167 19.78 5 Star Tata Fixed Income Portfolio Scheme B2 Reg 2.36 32/172 4.97 35/170 10.17 33/167 19.65 3 Star

Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing. Volume 4, Issue 11 Page 7

Continued from page 4. . .

Debt Income Funds Average 3-M Re- 3-M 6-M Re- 6-M 1-Y Re- Ranking Fund Name turn (%) Rank turn (%) Rank turn (%) 1-Y Rank (%) Rating ICICI Prudential Income Opportunities 3.87 2/97 7.34 2/96 12.45 9/88 4.79 2 Star Templeton India Income Builder 3.09 7/97 5.95 10/96 12.71 6/88 8.15 4 Star SBI Magnum Income 2.78 18/97 6.55 4/96 13.01 4/88 9.09 3 Star UTI Dynamic Bond 3.33 3/97 5.66 20/96 11.99 16/88 14.04 3 Star Reliance Dynamic Bond 2.76 21/97 5.67 19/96 13.82 3/88 14.95 2 Star IDFC SSI Inv Plan C 2.8 16/97 5.69 18/96 12.11 11/88 15.91 Unrated ICICI Prudential Income 3.04 8/97 5.76 15/96 11.5 22/88 16.29 1 Star IDFC SSI Inv Plan F 2.77 19/97 5.64 21/96 11.99 15/88 19.5 3 Star IDFC SSI Inv Plan B 2.74 23/97 5.58 24/96 11.88 17/88 22.68 2 Star Large Cap Funds

3-Y Re- 5-Y Re- Average Fund Name turn (%) 3-Y Rank turn (%) 5-Y Rank 7-Y Return (%) 7-Y Rank Ranking(%) Rating Franklin India Bluechip 9.64 4/69 3.71 1/50 16.47 3/38 5.23 4 Star ICICI Prudential Top 100 9.01 6/69 1.87 6/50 14.85 6/38 12.16 4 Star HDFC Index Sensex Plus 8.47 13/69 2.31 4/50 15.74 4/38 12.46 4 Star SBI Magnum Equity 8.67 12/69 1.23 12/50 16.48 2/38 15.55 4 Star Large & Mid Cap Funds

3-Y Re- 5-Y Re- Average Fund Name turn (%) 3-Y Rank turn (%) 5-Y Rank 7-Y Return (%) 7-Y Rank Ranking(%) Rating ICICI Prudential Dynamic 10.47 8/67 5.35 8/52 18.03 1/35 10.06 4 Star UTI Dividend Yield 10.35 9/67 6.54 2/52 16.91 8/35 13.38 4 Star Mid & Small Cap Funds

3-Y Re- 5-Y Re- Average Fund Name turn (%) 3-Y Rank turn (%) 5-Y Rank 7-Y Return (%) 7-Y Rank Ranking(%) Rating Reliance Equity Opportu- nities 18.84 3/50 8.14 7/42 19.83 2/26 10.12 4 Star IDFC Premier Equity 15.91 9/50 10.19 4/42 22.41 1/26 10.46 5 Star ICICI Prudential Discovery 14.04 13/50 11.34 2/42 16.86 4/26 15.38 5 Star Hybrid: Equity-oriented Funds

3-Y Re- 5-Y Re- Average Fund Name turn (%) 3-Y Rank turn (%) 5-Y Rank 7-Y Return (%) 7-Y Rank Ranking(%) Rating HDFC Balanced 14.15 2/27 10.24 1/26 15.13 5/25 10.42 5 Star HDFC Prudence 12.13 6/27 8.29 4/26 16.9 1/25 13.87 5 Star

Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing. Volume 4, Issue 11 Page 8

Festival Without Gold

By Dhirendra Kumar | Sep 28, 2012

‘Sona hee hai, koi fizool kharchee thodey naa hai’, says the doting husband in the TV advertisement for Tan- ishq gold jewellery, while Diwali crackers can be heard in the background. ‘It’s just gold, not a waste of money’.

It’s the season for buying gold. Unfortunately. I’ll hasten to add that there’s nothing unfortunate about the season. I expect it to be as auspicious and happy as any festival season in the past. However, it’s the gold-buying aspect of the Diwali season that could become a problem. Gold and Diwali are intricately related and even in economically marginal times such as these, the idea of buying gold is an easy sell. After all, you may have resolved not to waste money this Diwali, but as the man says in the ad, buying gold is not a waste of money. Implying that it’s actually an investment. When you combine it with the enormous social and cul- tural affinity that we Indians have built up for gold over centuries past, it’s an irresistible combination.

And that’s the problem. In the last ten years, gold has doubtlessly been a great investment. In domestic Indian prices, if you had bought some gold each Diwali over the last ten years, then these are the gains you would have seen by the next Diwali: 9.3 %, 11.7 %, 8.0 %, 26.6 %, 11.5 %, 32.7 %, 23.5 %, 22.8 %, 36.7 %, 16.5 %. Compounded, the total gains are 670 %.

It’s a matchless record among all kinds of investments. In particular, the record from 2009 to 2011 has given gold buying the kind of cachet that it hasn’t had for a generation in India. Sure, the stock markets gained more from 2002 to 2008, but the kind of crash they had after that disproves the point. Moreover, outside a select set, there are very few people who think that they can reliably extract the maximum possible gains from stocks. Gains from gold, on the other hand, seem there for the taking. As the cliché goes, it’s just money lying on the table, waiting to be picked up. Anyone could have made these kinds of returns, and many did.

But that was the past. The question that savers need to ask themselves is, “How likely is it that this run of unprecedented returns in gold will continue”? Or, let me put it this way, “How likely is it that 10 grams of gold will cost Rs 2 lakh in 2022”? My answer to that question always has been, ‘Not very’.

As has been pointed out often, gold is an unproductive asset. Unlike stocks or bonds, it’s a type of asset whose value depends on nothing but a shared belief that that value will rise and keep rising. However this apparently irrational gold boom has gone on long enough for it to shake the faith of a lot of people in the basic uselessnesss of gold. There’s an old saying in investment, which is often said in irony, ‘this time its different’.

However, one of the things that really is different this time is the deep commitment shown by the big central banks of the world to not let asset prices fall. Here’s what Ben Bernanke said a month ago: “if people feel that their financial situation is better because their 401k (investments) looks better or for whatever reason… they are more willing to go out and spend, and that’s going to provide de- mand that firms need in order to be willing to hire and to invest.”

That’s what it has come down to. Instead of the financial markets being a reflection of the real economy, this approach hopes to rig the financial markets so that, hopefully, their rise might somehow become a self-justifying phenomenon. In other words, all rationality might have exited from the price of gold, and indeed other assets.

I would normally have said that regardless of how gold tugs at your heartstrings around Diwali, you should take a hard look at the logic of gold. Unfortunately, no one knows any more what that logic is.

Syndicated from Value Research Online—Article can be viewed online here—http://www.valueresearchonline.com/story/h2_storyview.asp? str=21054

Wealth India Financial Services Pvt. Ltd., H.M Center, Second Floor, 29, Nungambakkam High Road, Phone: 044-4344 3100 Nungambakkam, E-mail: [email protected] Chennai - 600 034.

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