rediffGURU Dev Ashish answers your personal finance and mutual fund queries.
The RBI's financial stability report has on Wednesday highlighted the disconnect between the real economy and equity market yet again. The central bank observed that Indian equities were trading at rich valuations, with several metrics such as price to earnings multiples, price to book ratio, market cap to GDP and the cyclically adjusted P/E ratio, or Shiller P/E, at above historical averages. For instance, as on December 13, the one-year forward P/E ratio for India was 35.1 per cent, above its 10-year average, and one of the highest in the world.
Foreign portfolio investors' (FPIs') shareholding in NSE-listed companies fell 51 basis points sequentially to 17.68 per cent in the quarter ended March 31, 2024, according to data compiled by PRIME Database. This is the lowest FPI shareholding since December 2012. From the recent peak of 21.21 per cent at the end of December 2020, FPI shareholding is down 353 basis points.
Many retail investors, who are experiencing their first bear market, are shocked at the erosion in the value of their mutual fund (MF) portfolios. The pain is especially acute for those who had taken excessive exposure to sector/thematic and small-cap funds. Even international diversification has failed to stanch the bleed in this downturn.
Monday's steep fall turned Sensex's yearly returns to - 2.57%, but only two large-cap funds did worse.
'When you have surplus cash flow and markets correct sharply, what options do you have other than buying good stocks?'
Assuming that the value of LIC's holding has risen in line with the markets, its portfolio size today could be around $86 billion, higher than the previous record of $84 billion in March 2018.
The value of the foreign portfolio investors' (FPI) holdings in the domestic equities reached $667 billion in three months ended September 2021, a surge of 13 per cent from the preceding quarter, according to a Morningstar report. This was largely on the back of strong performance by the Indian equity markets along with net inflows from FPIs at the later part of the quarter. "At the end of the quarter ended September 2021, the value of FPI investments in Indian equities shot up sharply to $667 billion, which was considerably higher than the $592 billion recorded in the previous quarter, a spike of around 13 per cent," the report noted.
In May, MFs were the net sellers in several PSUs, as they deployed Rs 47,600 crore in equities during the month.
One-sponsor-one-fund rule may set off merger as Amundi seen sponsoring two funds following buyout.
...instead invest in diversified equity funds
Riding the wave of the equity market, the mutual fund (MF) industry experienced double-digit growth in Samvat 2079, concluding the Hindu calendar year close to the Rs 50 trillion assets under management milestone. After a subdued 6 per cent growth in Samvat 2078, the industry's assets surged over 18 per cent last year to Rs 46.7 trillion. Industry players anticipate that Samvat 2080 will also be a fruitful year for the asset management industry, given the strong inflows from retail investors, particularly through the systematic investment plan route.
The BSE SmallCap index gained 106 per cent in the one year ended May 12, 2021.
'It could tempt investors to pick stocks that are not fundamentally sound.'
Omkeshwar Singh, Head, Rank MF, a mutual fund investment platform, answers your queries.
Rediff.com spoke to registered investment advisors to figure out how best the extra Rs 17,500 saved ever year can be invested to create a decent corpus in the years ahead. This is what they said.
Regarding the applicability of stamp duty on redemption of mutual fund (MF) units, Sebi said, "Redemption is not liable to duty as it is neither a transfer nor an issue nor a sale." However, switching in mutual fund would attract stamp duty. "The issue of fresh units in the switched scheme would attract stamp duty even though there is no physical consideration paid or transfer of ownership," Sebi said.
Investors can sell a part of the stocks, mutual funds, exchange-traded funds, and other securities held in their portfolios at a loss and use this loss to offset tax on the capital gains made on the sale of other securities.
'The market should maintain optimism on the back of range-bound oil prices, a robust fiscal balance sheet, a better-than-expected monsoon, and moderating inflation.'
Investing in ETFs is similar to buying and selling shares on exchanges through your trading account, points out Ashwani Bhatia, MD and CEO, SBI Mutual Fund.
While debt funds have emerged as the flavour of the season, not all investors understand debt funds. So the best they can do is put trust in the fund manager and the fund house.
Most large fund houses, such as HDFC MF, ICICI Prudential AMC, Reliance MF, Reliance MF, Birla SunLife MF and SBI MF, have the backing of large banks or financial institutions, giving them reach and understanding, they say.
The value of the foreign portfolio investors (FPI) holdings in the domestic equities reached $592 billion in three months ended June 2021, a surge of 7 per cent from the preceding quarter, according to a Morningstar report. This was largely on the back of robust net inflows from FPIs, coupled with the strong performance of the Indian equity markets. "As of the quarter ended June 2021, the value of FPI investments in Indian equities stood at $592 billion, which was considerably higher than the $552 billion recorded in the previous quarter, a spike of around 7 per cent," the report noted. As of June 2020, the value of FPI investments in Indian equities had been $344 billion.
'If you align your ambition with India's rise, the peak of your careers will unfold alongside the peak of India's power.'
'...which is possible through flexicap and multicap funds.' 'The latter has a better balance between large, mid and smallcap stocks.'
At a time when banks are finding it challenging to mobilise resources, State Bank of India (SBI)-the country's largest lender-has devised a three-pronged strategy to boost deposit accretion. First is an aspirational product that promises to make depositors lakhpatis by helping them grow their deposits to Rs 1 lakh through recurring deposit (RD) schemes.
While the Sensex fell by as much as 19 per cent from the recent peak, a host of fund houses were fully invested. A majority of the fund houses were sitting on cash amounting to 1 to 4 per cent of their portfolios against an average of 5 to 7 per cent, data from Value Research, a fund tracking company suggested.
Omkeshwar Singh, head, Rank MF, a mutual fund investment platform, answers your queries.
Gold exchange-traded funds (ETFs) have further lost favour among Indian investors.
After a sharp rally in the equities market this year, investors could be better off rotating some funds towards the debt market. Experts believe several tailwinds could spur bond market returns over the next 12-18 months. These include India's robust macroeconomics, declining inflation, and the imminent passive flows of close to Rs 2.5 trillion on account of domestic sovereign bonds getting included in the JP Morgan global indices.
'It is the best avenue for investors who would like to take long-term exposure to gold.'
Omkeshwar Singh, head, Rank MF, a mutual fund investment platform, answers your queries.
'A key reason for the strong interest in IPOs has been an increased focus on profitability and reasonable pricing of deals.'
Compared to equity funds, debt funds are lower risk profile and are usually suitable for investors for very short term.
After eight months of consecutive outflows, equity mutual funds witnessed a net inflow of Rs 9,115 crore in March amid correction in the stock market. Barring multi-cap and value fund categories, all the equity schemes saw inflow last month, data from the Association of Mutual Funds in India (Amfi) showed on Thursday. However, investors pulled out Rs 52,528 crore from debt mutual funds last month, after investing Rs 1,735 crore in February, owing to advance tax payments and other year ending commitments. Overall, the mutual fund industry witnessed a net outflow of Rs 29,745 crore across all segments during the period under review, compared with a net inflow of Rs 4,090 crore in February.
The three year lock-in period enables ELSS fund managers to invest in high conviction stocks for a long period of time because of relatively less redemption pressure, says Dwaipayan Bose
In order to boost its deposit base, State Bank of India (SBI) is focusing on various segments, including JanDhan account holders, trusts, societies, and the segment below the affluent class but above the normal account holders. According to Ashwini Tewari , managing director, SBI, the bank is focusing on three broad segments. One is wealth banking, where the bank is focusing on individuals who perhaps do not qualify for private banking but are above regular accounts and require individual attention.
When the NAV falls, you are going to get more units of the fund. That means when the market turns around, you will get much more returns
Shares of Avenue Supermarts (DMart) have rallied 15 per cent in the past month, even as the benchmark National Stock Exchange Nifty has remained flat. The stock has garnered favourable commentary from both fundamental and technical analysts after three years of poor performance. "DMart has reached its first 52-week high since October 2021, taking off from solid base formations.
