ICICI RIGHT FUND - RIGHT OR WRONG??

FOR PASSIVE TAX SAVING INVESTORS

ICICI Prudential Right Fund is a 10 year Close Ended ELSS (Tax Saving ) Fund.
The Fund closed for subscription on 09 September.
I sent the following advise on the Fund to my clients.

Read on...........

ICICI Prudential Mutual Fund has lauched a New Fund ICICI Prudential Right Fund. The Fund is a 10 year Close ended ELSS that seeks to generate Long Term Capital Appreciaton.

The Minimum Subscription is Rs.500 and in multiples of Rs.500 thereof.
The scheme will charge an entry Load of 2.25%.
Prashant Kothari will be the fund manager of the scheme. Mr.Prashanth Kothari has over 5 years of experience as Equity analyst and Fund Manager. He is presently managing ICICI Equity & Derivative Fund, ICICI FMCG Fund, ICICI Focussed Equity Fund

ANALYSIS AND RECOMMENDATION :
What is this RIGHT Fund?. RIGHT is an acronym for 'Rewards of Investing and Generation of Healthy Tax Savings'.
The Fund seeks to invest a major part of its portfolio in Large Caps and is thus is 'Safer' compared to other ELSS funds. This is especially more pronounced when you consider that almost all Tax Saving Funds invest in 'Growth' Stocks which are mostly Mid-caps and thus volatile.

PROS :
1. With its Large Cap Focus, the Fund will have reduced volatilty.
2. Most Tax Funds have consistently delivered Better returns than both Nifty and Sensex.
3. The Fund aims to invest 85% in Top 100 Companies by Market Cap which should protect the Fund during Bear Markets.
4. Minimum Investment is only Rs.500.

CONS :
1. Since the Fund aims to invest mostly in Large Caps, the fund may fail to deliver superior returns during market rallies.
2. The Fund has an entry load of 2.25%.
3. Being a Close-ended Fund, you cannot take the 'SIP' route to investing in this fund.

If you are investing purely for Tax Saving purpose, then you need not look at this Fund. However, if you are looking both for Tax Saving as well as Long Term investment, then this Fund should be in your portfolio.

Best of luck,

Srikanth Shankar Matrubai

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HELP ME ACCUMULATE LONG TERM GAINS

Want to accumulate Long Term Gains???... Then read on..

Niranjan Kumar Boora wrote :

Hi,
I am considering to accumulate long term gains, I have started SIP in mutual funds. My question is did I selected the proper portfolio.
I happened to read your blog today.

I started investing in mutual fund through SIP route Rs2000pm for 1 year starting Nov 2008 in the following funds.

Can you please analyze my portfolio.

1. HSBC Equity Fund - Growth (You suggested to few people to buy Fidelity Equity, what to do?)
2. IDFC Premier Equity Fund - Growth
3. DWS Tax Saving Fund - Growth

Apart from these, I have investments in the following funds (planning to switch from these to some HSBC Equity or some other fund you suggest, should I do?)


4. Sundaram CAPEX Fund - Growth (20K)
5. SBI Multicap Fund - Growth (10K)
6 UTI Mahila Unit Scheme - Growth (20K)
7. SBI Infrastructure Fund (20K)

Thanks,
Niranjan


SRIKANTH SHANKAR MATRUBAI advised :
Dear Niranjan,
Your existing SIP are going into very Good Funds and I do not see the need for change in funds. Yes, I have been recommending Fidelity Equity, but HSBC Equity too has been performing well and should continue to do so. So, in conclusion, your existing sips need not be tinkered with.
However, your lumpsum investments do need a overhaul.
Sundaram CAPEX Fund - Growth (20K) - Switch to the more promising and better performing Sundaram Select Focus Fund

SBI Multicap Fund - Growth (10K) - Better redeem and invest in a Good Large Cap Fund like the HDFC Top 200 Fund

UTI Mahila Unit Scheme - Growth (20K) - continue

SBI Infrastructure Fund (20K) - Switch to SBI Bluechip fund.

If possible reduce the existing sip from 2000 to 1000 in each of the existing sips or increase the sip investments by another 3000 and invest in the following funds to give your fund a Balanced Look.
DSPBR Top 100 Fund
Fidelity Equity Fund
HDFC Prudence Fund

Regards,
Srikanth Shankar Matrubai

http://goodfundsadvisor.blogspot.com


Mr.Niranajan wrote back :
Thank you sir..
I will do what you have suggested for a balanced portfolio. I really thank you for taking time to analyze my portfolio and suggesting the changes.

Thanks
Niranjan


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L&T FINANCE NCD - INVEST

SAFE, SECURE AND LIQUID TOO

L&T Finance is offering its First Ever NCD.

Srikanth Shankar Matrubai

L&T Finance is a 100% subsidiary of L&T. The Company has a good Track record. The Company's Capital Adequacy is very good at 16%.
The NCD is secured and the Company is also setting up a Debenture Redemption Reserve by setting aside 50% of the Capital raised in the NCD.

Net NPA is only 2.04% as on 31/3/09 and that too due to Economic downturn and prudent Accounting norms.

L&T Finance has NEVER been downgraded!!.

COMMENTS AND RECOMMENDATION :
The better return is the biggest attraction. Banks like the SBI is offering around 8% return on a 5 year FD and here L&T Finance is offering 9.5% with a better liquidity.
Good Rating from both CARE and ICRA. CARE has given a AA+ and ICRA has rated the issue LAA+ indicating LOW RISK.

Definitely better than any Fixed Deposit because of its better liquidity and Tax Benefits.

There is even a chance of Capital Gain because of its listing in Stock Markets and the greater interest in Retail Bond Market growing everyday. Any major fall in yields of Debt instruments would present L&T NCD investor with an opportunity to Cash out by selling in the Stock Markets.
The Company has also indicated that it may consider Buyback of the NCD and also consider giving loans to the holders of the NCD, in future.
INVEST preferably in the 10 year option and lock in the higher interest rates offered.



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SHINSEI INDUSTRY LEADERS FUND - INVEST

Focusses on Quality Stocks


Srikanth Shankar Matrubai

One can consider investing in Shinsei Industry Leaders Fund.





Shinsei Mutual Fund promoted by Shinsei Bank, Japan and Rakesh Jhunjhunwala have come out with their First Equity NFO with the name of Shinsei Industry Leaders Fund.

WHERE WILL THE FUND INVEST ?
The Fund aims to invest in "Leaders" who not only have Largest Market Share but also includes companies who have Highest Growth in sales and Highest Profitabliity. While AMFi has classifed companies into 43 sectors, the Fund aims to identify about 3-5 companies in each sector and further filter them and ultimately aim to have a portfolio of 25-35 stocks.
The Fund aims to have 60-70% in large cap and about 30-40% in Mid cap.


FUND MANAGER :
David Pezarkar is the Fund Manager of this Scheme. He had earlier managed SBI Magnum Tax Gain 93 and had also worked with UTI Mutual Fund, Way2Wealth Brokers, and Bajaj Allianz Life Insurance as a Equity Head.

COMMENTS AND RECOMMENDATIONS :

Though a New Fund from a New AMC, the persons behind the AMC like Mr.Rakesh Jhunjhunwala and Shinsei Bank do inspire confidence. Also, note that the Fund's investment philosophy is a no-brainer and should form a part of all Risk Averse Investors.
Investors can hope to get a Portfolio comprising of Leading Companies giving Good Market Relative Returns. The portfolio of the scheme has the potential to offer steady relative returns to investors across various market conditions because of its focus on Quality Stocks.
Industry Leaders does not necessarily mean Large Cap Companies.
The Backtesting of the Model that Shinsei proposes to use has shown that the Fund has given an Alpha Return of 10% above its Benchmark of BSE-100 with a Sharpe Ratio of the Fund is 2.06%
the Fund will NOT invest in Small Caps and Micro Caps


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KOTAK SELECT FOCUS FUND - NEITHER HERE NOR THERE

Srikanth Shankar Matrubai

Kotak Mutual Fund recently came out with a New Fund Offer named Kotak Select Focus Fund.





Kotak Select Focus Fund intends to focus on Select Sectors with untapped Current and Future Growth potential. Fund Manager Mr.Krishna Sanghvi says that this Fund provides adequate diversification compared to a Single Sector Fund while at the same time providing benefit adequate concentration in the portfolio on certain sectors expected to show strong performance.
The Fund will aim to invest in Six Sectors at a time.

COMMENTS AND RECOMMENDATION :
The Fund is positioned between a Sector Fund and a Diversified Equity Fund and thus fails to either enthuse Aggressive Investor or the Risk Averse Investor. Also, with a target of having about 60 stocks in the Portfolio, the Fund fails to classify as a Sectoral Fund, which its name suggests.
The Fund seems to be more of an extension of Kotak Opportunities Fund with a Sectorial bias.
Having Three Fund Manager could also result in too many cooks spoiling the broth.
The Difference between Sundaram Select Focus Fund and the Kotak Select Focus Fund is that Sundaram focus on Specific Stocks and Kotak tends to be more focussed on Top Down Approach i.e, Sector Focussed. So, even if a Stock looks attractive, the Fund will shy away and NOT invest in the Stock if the Sector outlook does not look rosy.
A separate Fund Manager for Debt portion too makes the Fund unsuitable for a Risk-Ready investor looking for a 'Alpha' to his returns.
Kotak AMC has a good track record in almost all its Funds but still the Fund confuses investors with its 'neither here nor there' approach. The ball is in your court.
The Fund is obviously not for the First Time Investor. I suggest AVOID.

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CANROBECCO FORCE FUND

FOR HIGH RISK APPETITE INVESTORS

Srikanth Shankar Matrubai





Canara Robecco has joined the NFO Bandwagon with its Canara Robecco FORCE Fund. FORCE is the acronym for Financial Opportunities, Retail and Entertainment. The new fund offer (NFOs) open for subscription from July 20 to August 18, 2009.

The Fund will primarily invest in Stocks of the above sectors. The Fund will be managed by Anand Shah who was earlier with Kotak and ICICI. Mr.Anand Shah presently manages CanRobecco Emerging Equities, CanRobecco Balance, CanRobecco Infra and CanRobecco MultiCap Fund.

COMMENTS AND RECOMMENDATION:
Canara Robecco has had an excellent past year. And the Economic Times rated many funds right in the top Platinum slot. This should give comfort to first time investors in this AMC.

The Force Fund aims to exploit the India Growth Story by focussing on the Sectors most likely to benefit from Rising Consumer Spending.

Because of its Sector Concentration, the Fund is expected to be volatile and should be considered for investment only by Aggressive Investors who have a good risk appetite. However, the Fund does have a wider choice in terms of Stock Universe compared to other Finance Funds and should do well over a longer time frame, especially above 5 years or more.

Invest if you are willing to stay invested for more than 5 years.

Best of luck,

Srikanth Shankar Matrubai


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SHRIRAM NCD - GRAB THE OFFER

Better than Bank FDs

SHRIRAM NCD OFFERS UPTO 11.5%

Srikanth Shankar Matrubai




Shriram Transport Finance Company Limited after its attractive Fixed Deposit Offering, came out with a Issue of Secured Non-convertible Debentures (NCDs).
Investors can definitely take up the offer as they not only offer Returns higher than Bank FDs but their money is also secured by the Assets of the Compnay.
The company :
Shriram Transport Finance which is among the leading asset financing (commercial vehicle financing) NBFCs in India. The Compnay has a 25% market share in pre-owned truck finance market and has a 7% market share in New Truck Market.
The offer :
The Company is offering 5 investment options.
Investment 3 and 4 come with Put and Call Options at the end of 4 years. The issue offers Coupon rates ranging between 10.75% to 11.5%.
NCD options
Option I: It pays interest every six months and has an effective yield of 11.30 per cent. Redemption is staggered in the ratio of 40 per cent, 40 per cent and 20 per cent at the end of 36, 48 and 60 months respectively.

Option II: It pays interest annually. The principal is redeemed as under option I. Senior citizens are offered an extra return of 0.25 percentage points under both these options. The effective yield on this option comes to 11.25 per cent.

Option III: It offers an interest rate of 11.03 per cent compounded quarterly, with the effective yield coming to 11.50 per cent. It is a cumulative option and hence offers the highest yield. This option comes with a put and call option at the end of 48 months.

Option IV: This option pays interest annually. The yield comes to 11 per cent. Put and call option are available at the end of 48 months.

Option V: This option has been designed for those who want to invest for only three years. The interest rate has been capped at 10.75 per cent and there is no Put and Call option. The maturity amount is paid at the end of 36 months.


Depending on the option you choose, you will get interest semi-annualy, annually or on a cumulative basis.
The minimum application amount is Rs.10000 and in the multiples of Rs.1000.

HOW SAFE IS YOUR MONEY???
The NCD has been rated CARE AA+ by CARE and AA (Ind) by Fitch, which indicates that the company is stable and capable of timely servicing of debt. Further, the NCD is secured by the company’s assets. Consequently, the claims of NCD holders will be superior to the claims of unsecured creditors (like company FD holders, which are unsecured deposits). Bank FDs are insured up to a maximum of Rs 1 lakh.


WHY INVEST :
1)No TDS is payable on Interest Income.
2)Ample liquidity due to listing of NCD on the NSE.
3) Interest recd will treated as “other income”and so will get added to your total income and taxed at the marginal tax rate.
4) If you sell at the stock exchange after 12 months, your gains will be treated as long-term capital gain and will be taxed at 10 per cent without indexation. If you sell in less than 12 months, your gains will be treated as short-term capital gains and taxed at the marginal income tax rate.
5)For low risk taking investors this issue offers a unique opportunity. The current rate on bank deposits is for a tenure of 48-60 months is between 7.5%-8.0%. This issue can earn an investor a spread of 275-350 basis points at a negligible incremental risk.
6) Shriram's Interest Coverage Ratio of 1.49 indicates its ability to service the interest on debt and is better than other Finance Companies like Gruh finance and HDFC.

SHOULD YOU INVEST??

YES!!! OF COURSE!!!
Even for a risk-averse saver bitten by ever falling Bank FD rates, NCDs are great alternative. After all, a three-year fixed deposit will earn you 6-6.5% interest, but a three-year NCD will fetch between 10.5-10.75%.

Not only will you be locking your returns at a higher rate than a Bank FD but also liquidity is easy due to its trading in the Stock Markets!!! If you want to get out, you can get out any time.


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