Sundaram Midcap buys bank, IT; sells engineering

Sundaram BNP Paribas Select Midcap enhanced its exposure to banking, IT, media, oil & gas, utilities and metal sectors. However it pared exposure to engineering stocks.


In banking space it introduced Oriental Bank of Commerce and Bank of Maharashtra. It also bought 1 lakh shares of Centurion Bank of Punjab, Indian Bank and Power Finance Corporation. Andhra Bank and Bank Of Baroda were also in buying list. However, it sold Union Bank of India, Bank of India and India Infoline.


In IT pack it made fresh exposure to Sparsh BPO Services and also purchased Prithvi Information Solutions and 1.51 lakh shares of Polaris Software Lab, 1.05 lakh shares of Mphasis. In media sector it introduced Television Eighteen and Wire and Wireless.


In oil & gas pack it introduced Indian Oil Corporation and bought 2 lakh shares of HPCL. Buying was also seen in utility space as it bought Gujarat Industries Power, Torrent Power AEC and Tata Power Company.


In metal pack, the scheme introduced Kirloskar Ferrous Industries and Jindal Steel & Power. It bought Jindal Saw and 1.5 lakh shares of Welspun Gujarat Stahl Roh.


In cement sector, it bought Birla Corporation, Shree Cements, Jaiprakash Associates and Prism Cement. In enginnering pack, it exited Elgi Equipments, however it bought KEC Infrastructures.
Jaiprakash Associates, Mphasis and Polaris Software Lab were the top stocks held by the scheme in March. Cement (9.85%), Technology (9.75%) and Engineering (8.26%) were the top invested sectors in the scheme's portfolio. (Check out - Top stocks held by Sundaram BNP Paribas Select Midcap).


The equity exposure of the scheme has decreased from 73.34% to 70.88%. The total assets managed by the scheme over the month were Rs 2033.95 crore as on March 30, 2007.
Over the last one year, Sundaram BNP Paribas Select Midcap has yielded 11.5% returns as against 3.83% yielded by its benchmark BSE Midcap Index as on April 13, 2007.

ICICI Pru Dynamic Plan buys banks, metal, auto

ICICI Pru Dynamic Plan has enhanced its exposure to bank, metal, oil & gas and auto, however it sold IT and food & beverages. (View - What is ICICI Pru Dynamic Plan buying / selling?)
In the banking space, it bought 12.67 lakh shares of Federal Bank, 3.57 lakh shares of ICICI Bank, 3.17 lakh shares of SBI, 1.23 lakh shares of Punjab National Bank and nearly 1 lakh sthares of HDFC Bank, but it exited Canara Bank.

In the metals pack, it introduced SAIL and Tata Steel, however it exited National Aluminium Company.


In the oil & gas sector, it bought 1.71 lakh shares of ONGC and 1.60 lakh shares of Reliance Industries, but it exited IPCL.


Buying was also seen in auto space as the scheme made fresh investment in Tata Motors. It also bought 1.83 lakh shares of Maruti Udyog and 1.28 lakh shares of Mahindra and Mahindra. However, it exited Bajaj Auto.


In media pack it bought 7.42 lakh shares of Zee Entertainment Enterprises. In pharma pack it introduced Cadila Healthcare and bought Alembic, but it exited Cipla.


On the contrary, in IT pack the scheme exited Firstsource Solutions, sold 2.20 lakh shares of TCS and 1.5 lakh shares of Infosys Technologies. But it bought 1.96 lakh shares of Wipro. In food & beverages it exited Triveni Engineering and Nestle India.


In manufacturing the scheme sold 7.34 lakh shares of Amtek Auto, in tobacco it sold 2.80 lakh shares of ITC and in construction it exited Akruti Nirman.


Reliance Industries, TCS and Infosys Technologies were the top stocks held by the scheme in March. Technology (16.07%), Bank (13.95%) and Oil& Gas (9.75%) were the top invested sectors in the scheme's portfolio. (Check out - Top stocks held by ICICI Pru Dynamic Plan).
The equity exposure of the scheme has decreased from 84.46% to 79.48%. The total assets managed by the scheme over the month were Rs 1962.93 crore as on March 30, 2007.
Over the last one year, ICICI Pru Dynamic Plan has yielded 17.17% returns as against 21.2% yielded by its benchmark S&P CNX Nifty as on April 16, 2007.

AIG Global launches AIG India Equity Fund

AIG Global Investment Group (AIGGIG) has announced the launch of its maiden scheme " AIG India Equity Fund. The New Fund Offer priced at Rs.10 per unit (plus applicable entry load) will be open for purchase from May 3, 2007 to May 31, 2007. The fund will re-open for ongoing purchases / redemptions no later than June 29, 2007.

AIG India Equity Fund is an open-ended diversified equity fund with no biases. The fund has the flexibility to invest across companies without having any bias towards a particular sector, investing style or market capitalization range. The fund will be managed by Mr. Tushar Pradhan, Chief Investment Officer - Equities.

AIGGIG believes that no single sector, market capitalization orientation or style has outperformed consistently over the long term. The key to consistent long term performance is to have the flexibility to pick stocks without having any restraints on style, sector, theme or market capitalization.

Speaking on the occasion Sunil Mehta, Country Head and Chief Executive, India, American International Group, Inc. said, "Our vision is to create a world class asset manager in India that combines AIG Global Investment Group’s global expertise with our local experience gained over the years and the track record of our experienced and professional management team. The launch of this fund further reaffirms AIG’s commitment and participation in the fast growing Indian economy.”

Ravi Mehrotra, Managing Director and Head of Asia Asset Management Companies for AIGGIG said "AIG India Equity Fund is the first amongst a range of investment solutions that we plan to offer. Our corporate philosophy is to align with the interests of our investors by taking a meaningful stake in the asset class. We, thereby, share common goals, parallel motivations and comparable attitudes towards portfolio and risk management. Given the pedigree of AIG Global Investment Group, the investing philosophy and the depth of experience, we are confident that our funds will form an integral part of any investor’s product portfolio."

The Indian Equity fund management team of AIG Global Investment Group is linked to the global fund management team through an intranet-based knowledge system called EPIC (Equity Platform for Investment Communication). EPIC serves as the backbone for equity research, stock categorization, stock ranking, idea-generation and communication. This system allows Equity teams around the globe to function as a cohesive unit and “speak the same language”.

India underweight in benchmark indices: JP Morgan

JP Morgan AMC is bullish on India. Harshad Patwardhan, Investment Manager-Equities of JP Morgan AMC says the domestic fund will not be a mirror image of their offshore fund.
According to him, India's interest rates are close to peaking out. He expresses concern that India is grossly underweight in benchmark indices. Proportion of India is just 6% in benchmark indices.

Q: How is the Indian market positioned right now, as you are entering the market?

A: We remain very bullish on the Indian market; we are already one of the largest investors into the Indian market.
We have close to USD 6 billion of India dedicated money invested into the Indian market through our FII vehicles. We have also been in India for a long time; our oldest funds have been around for 3-14 years.
Yes, this is our new fund as far as the domestic business is concern.
But we have been in India for a long time managing large pools of money. We remain confident on the prospects of the Indian market, in the medium to long term.

Q: What have the JP Morgan global funds been doing in the last 3-6 months while most funds have a fairly cautious approach in India because of the interest rates situation, earnings slowdown etc?

A: During the last calendar year, which is the reported performance, we underperformed benchmark only by 1%, but we were ahead of most of our competitors.
Our philosophy has been always to look at the long term.
In fact, that is one of the differentiating factors that we have vis-à-vis many other competitors.
We tend to look at long term and short term volatility, which will always be there in the Indian market;we have seen it over the last 10-15 years.
So we tend to use it more as an opportunity rather than get victimized by it.

Q: What will you do? Will you manage the portfolio actively here or will it reflect or mirror the 5 funds that you manage offshore?

A: One of the key features of our investment process is the team approach, what we call - ‘two geographies one team’.
We have a team based out of Hong Kong of 3 fund managers looking at the offshore funds; we have team here in India of 4 investment professionals.
So we look at, discuss, debate on the ideas collectively; it’s a fairly collaborative research approach. So to that extent, some of the thinking that we have in the offshore funds is likely to get reflected for the domestic fund.
But there are various things which are different.
For example, the money that we have in offshore funds is about USD 6 billion; the domestic funds to start with, will be at least be smaller than that.
Also we will not face here, some of the constraints faced by my offshore team. So it will not be a mirror image; but to an extent it will reflect similar investment philosophy and process.

Q: What is your take on the whole interest rates and inflation situation out here and how would you approach it as you start putting the money to work?

A: As far as inflation is concern already the headline inflation has started coming down and we believe it will come down further. On interest rates our view is that it is closer to peak now. So essentially this whole fixation about headline inflation number, once it starts trending down then that should be a time which should be positive for the equity. I would say that we are launching a fund at an appropriate time.

Q: How do you look at India relative to some of the other global markets since you have that emerging market perspective? We are still about 10% below our highs, most other Asian markets have cruised to well above their previous highs, do you see this kind of divergence continuing?

A: One of the key advantages that we have at JP Morgan Asset Management is the team approach for the India team.
What we tend to do is extend this team approach beyond.
We have lot of investment professionals who are looking at China, Korea, Taiwan and various other markets based out of Hong Kong. So we tend to get a lot of perspective on other markets as well.
In addition to that, we also have a team out of our London office that manages global emerging markets money; they have prospects to offer in Latin America and Eastern Europe.
Considering all that, we continue to be very positive on the Indian market. If you look at emerging market as a whole, the proportion for India is only 6% in some of the benchmark indices.
We believe that’s grossly underrepresented. The kind of corporates that we have in India vis-à-vis some of the other emerging markets, we have absolutely no doubt in our mind that the potential for Indian market is very positive indeed

ICICI Pru launches Micro Systematic Investment Plan

Aimed at providing access to formal finance to over 600 million rural poor, ICICI Prudential on Wednesday launched Micro Systematic Investment Plan (MSIP).

"The scheme will provide an opportunity for the rural poor to invest periodically in small amounts, as low as Rs 50 and its multiples," ICICI Prudential Managing Director Pankaj Razdan told reporters here.

He said the MSIP would help the rural poor to build a corpus of savings over the long-term through a disciplined and systematic approach.

Having no lock-in period, investors are entitled to withdraw the invested amount anytime, subject to applicable exit loads.

Razdan said that the ICICI Prudential has over 200 tie-ups with micro finance institutions (MFIs) and NGOs across the country, which would act as aggregators and subsequently deposit the consolidated amount to the fund house.

"However, we will try to incorporate as many MFIs and NGOs as possible," ICICI bank's Deputy Managing Director Nachiket Mor said. ICICI Bank has 3.2 million customers in rural areas.

ICICI Prudential is one of the largest players in the domestic mutual fund industry. As on March 31, 2007, ICICI Prudential has Rs 37,906 crore worth of assets under management.

Fidelity International Opportunities Fund – Should you buy?

Fidelity Fund Management has launched Fidelity International Opportunities Fund (FIOF), an open-ended equity scheme that aims to generate long-term capital appreciation from a diversified portfolio of predominantly equity and equity-related securities including equity derivatives in the Indian and international markets. The scheme intends to invest up to 30% of the portfolio in foreign stocks in the Asian region (except Japan).


Investment expert Sandeep Shanbhag says, "Accessing foreign markets, especially through a mutual fund of high pedigree like Fidelity is great diversification for Indian investors hitherto being fed a diet rich only in Indian stocks."


On the flipside, advisor Hemant Rustagi feels, "Since the fund would largely be focusing on Asian markets, it would not truly provide diversification that one could achieve through an international fund."


However, Ashu Suyash, Managing Director and Country Head, Fidelity Fund Management clarifies, "The fund manager is expected to have a focus on the Asia-Pacific region but the fund is not limited to investing in Asia-Pacific equities only. The fund manager has the flexibility to invest in other markets depending on the opportunities available." "However, as the Fund Manager of Fidelity International Opportunities Fund, Rajesh Singh, has said, Asia is going through a growth phase and offers a wide set of opportunities for stock picking in markets, some developed (like Hong Kong, Singapore and Australia) and others emerging (Korea, Malaysia, etc.). So the focus currently will be on investing in Asia-Pacific equities", she added.

Tax Restrictions:

• (a) "The Income Tax Act bestows tax benefits only to a fund that invests at least 65% in domestic Indian equity. Till that changes, FIOF and similar schemes will have to limit their exposure to foreign equity to 35%", says Sandeep Shanbhag. Ashu Suyash adds, 'The structure of the product is constructed to make the most of current regulations pertaining to overseas investing. Plus, with 65% in Indian equities, investors will enjoy the prevailing tax benefit of long-term capital gains applicable to all Indian equity funds. However, if these tax laws were to be amended in future, the fund's offer document has enabling provisions to make changes in the investment pattern."

• (b) "The other aspect that needs a little clarity is taxation of foreign investments for the scheme. It is the Indian Income Tax Act that exempts the income of a mutual fund from domestic taxation. However, FIOF's investments in markets abroad will be subject to tax incidence as per the rules of the foreign markets and this will somewhat eat into the returns of the scheme", says Shanbhag. However, he adds, 'On balance, the multi-country portfolio diversification that FIOF offers far outweighs the additional taxation, if any."

Limit of $150 mn for Global Equity Investment:

"SEBI regulations mandate that a mutual fund can invest only up to a maximum of $150 million in global equities. Though there have been some changes ushered in by the credit policy announced on the 24th of April, these are just announcements yet and the laws are yet to be passed. $150 million roughly works out to around Rs 650 crore which in turn could be around 30% of the funds intended to be mobilized in the NFO", says Shanbhag.
However, he adds, "That being said, as time passes, regulations will only be relaxed and it is hoped that the scheme will adapt to the relaxed regulations."

Performance of Fidelity’s existing schemes:

Fidelity's maiden equity offering in India - Fidelity Equity Fund launched in April 2005 and the more recently launched Fidelity Special Situations Fund (launched in April 2006) and Fidelity Tax Advantage Fund (launched in January 2006) have a four star rating .

Shanbhag says, "The experience and capacity of Fidelity as a fund house is evidenced from its performance even in the Indian market to which it is a late entrant. The flagship Fidelity Equity Fund has been amongst the top performers consistently and the Special Situations Fund is also shaping up well."

Conclusion:

All things considered, experts believe that investors who already have a portfolio of funds investing in Indian markets can achieve further diversification by investing in international markets through this fund. And for first timers too, FIOF will be a good NFO to subscribe to. The NFO closes on April 30, 2007.

Fidelity Equity Fund declares 25% dividend

Fidelity Mutual Fund has announced a dividend of 25% (i.e. Rs 2.5 per unit on Face Value of Rs 10) in its open-ended equity fund, the Fidelity Equity Fund. The objective of the Scheme is to generate long-term capital growth from a diversifed portfolio of predominantly equity and equity-related securities.(Check out - Recent MF Dividends )

The record date for the dividend is April 30, 2007, 2006. All investors registered in the Dividend Plan of the scheme as on April 30, 2007 will receive this dividend. Please note that dividend as decided shall be paid, subject to availability of distributable surplus. Pursuant to payment of dividend, the NAV of the schemes would fall to the extent of payout and statutory levy (if applicable).

The last dividend declared by the scheme was 20% in March 2006. Over the last one year, Fidelity Equity Fund has yielded 22.7% as compared to 15.9% given by its benchmark BSE 200 as on April 24, 2007.

Bullish on telecom: DBS Chola

Q: How would this month shape up for the market?

A: This month began on a very lackluster note; I don’t think it came with a lot of open interest positions built up. Looking at the derivative, I feel that although we need to consider a wider range considering the volatility in the market, support should be somewhere at 3,850 looking at the put-call position and probably it may attempt to once again move towards its earlier peak of 4,200.

Q: What is the call on both - tech and autos - sectors post the earnings season?

A: Going forward, taking a view on technology with the concerns on rupee appreciation would be a contra call. Next quarter too if we see Ebitda margins sustainable for these companies then I would have to retract my view of a contra theme for the IT sector. I believe we need to closely watch auto numbers that come month on month to look at topline growth. Auto as a sector has not done too well in the last 12 months and have already been underperformers. Any bit of positive news would drive prices up, added to that you have Maruti disinvestment coming up in the sector, and you could also see some other big outsourcing story etc coming up in the auto ancillary space. It’s a sector we have to at least have a neutral view as far as our fund house is concern. But on IT, I would rather have a contra view at the current moment.

Q: Do you think quality midcaps have more headroom to run and would you say there is a very good chance that the markets can test their old highs of 14,700 any time soon?

A: Midcaps are very scrip driven; it’s very news driven, very specific about results pertaining to each company that comes out. One has to be very careful, we cannot broadly comment that midcaps as a general theme would run away. I would rather say that it would be more news as well as results driven in the sector.

Q: As a fund manager at levels of about 13,900 would you sit on higher cash or have you been buying?

A: In open-ended schemes the fund managers should not keep any cash. If at all its needed it would be in single digits to tide over liquidity. I believe that at all points of time there are opportunities that exist and one needs to buy into those stocks, which look undervalued. My asset call between cash and equity would be to remain invested fully.

Q: How do you play the telecom sector, very good results coming from that space but would you say most of it is already in the price only?


A: Today’s results of Reliance Communications reiterated the fact that it is a growth sector which one needs to continue looking at. The kind of EBITDA margins these companies are showing today makes me believe that there is lot of steam left in the sector, and I would say that one needs to be overweight going forward as well. I don’t think the price levels today are not sustainable going forward because I see the topline growing at a robust 30% and bottomline too are in that range of 25-30% for most telecom companies. If you give them PE of between 20-25 times with FY08 earnings consensus then I think they still look a lot to go up from here.