Bond Mutual Funds best for Short term

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Bond Mutual Funds best for Short term

THE Reserve Bank of India (RBI) by keeping the repo rate unchanged and not reducing CRR is indicating its willingness to sacrifice some growth to fight inflationary pressure. The RBI governor has stated explicitly that reduction of repo rate at this point of time will led to higher inflation. This has clearly disappointed the markets that had factored in a repo rate cut of 25 basis points and a CRR cut of 50 basis points.

Due to adverse macro economic development in the domestic and global contexts, the demand for credit has come down. Core inflation is expected to moderate to 3 per cent to 4 per cent levels over the coming quarters, even though food inflation is expected to remain high due to structural factors. This will give RBI elbow room to cut policy rates by 50 basis points in the coming quarters.

For individual investors, on a risk-return paradigm, debt as an asset class could continue to give relatively high accrual income in this financial year.

Investors can choose the debt category to invest, based on the time horizon of their investment. Investors, who have one to three-months horizon, can look to invest in liquid-plus funds to get high accrual income. The yield curve is inverted due to tight liquidity prevailing in the markets.

Due to this reason, higher accruals are available in the short to medium end of the yield curve. Investors can capture higher accruals by investing in short-term bond funds that invest in the short to medium end of the yield curve.

There is also some scope for capital appreciation, if RBI cut rates or liquidity improves over the coming quarters and the yield curve corrects. Investors, who have an investment horizon of six months to one year, should enter short term bond funds.

Investors, who want to ride the interest rate cycle, can invest in income funds and gilt funds because interest rates are expected to come down over the next two years as lower GDP growth will translate into lower inflation numbers in the months ahead.

Investors should have an investment horizon of one to two years when they are investing in income and gilt funds. However, on a risk-return prespective, short-term bond funds seem to be the ideal choice for the prudent investors.

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Best Performing Mutual Funds

1. Largecap Funds        Invest Online
1. DSP BlackRock Top 100 Fund
2. ICICI Prudential Focused Blue Chip Fund
3. Birla Sun Life Front Line Equity Fund
2. Large and Midcap Funds     Invest Online

1. ICICI Prudential Dynamic Plan
2. HDFC Top 200 Fund
3. UTI Dividend Yield Fund
2. Mid and SmallCap Funds    Invest Online

1. Reliance Equity Opportunities Fund
2. DSP BlackRock Small & Midcap Fund
3. Sundaram Select Midcap
4. IDFC Premier Equity Fund
3. Small and MicroCap Funds             Invest Online

1. DSP BlackRock MicroCap Fund
4. Sector Funds              Invest Online

1. Reliance Banking Fund
2. Reliance Banking Fund
5. Gold Mutual Funds             Invest Online

1. Relaince Gold Savings Fund
2. ICICI Prudential Regular Gold Savings Fund
3. HDFC Gold Fund

 

ING Large Cap Equity Fund

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Large cap stocks are the leaders having higher market caps. They enjoy an edge over their mid-sized peers as they are well established, have stable revenues, usually well researched and are more predictable compared to highly volatile mid caps. The most noteworthy of them is their ability to provide stability to the investor's portfolio, during turbulent stock market conditions. Large cap funds are mandated to invest in large cap stocks and tend to outperform the funds in other category during uncertainty of the equity markets. Large cap funds are thus favoured during turbulent times of the equity markets as they are capable of providing stability to one's portfolio.

ING Large Cap Equity Fund (ILCEF) (erstwhile known as ING Nifty Plus Fund), is one such open-ended equity fund from the stable of ING Mutual Fund. It follows a blend style of investing. ILCEF predominantly invests in equity and equity related securities of large cap companies in India, along with money market instruments to manage its liquidity requirements. The fund was launched in February 2004 and has been in existence for a little over 7 ½ years now.

It is noteworthy that the fund has undergone changes in its fundamental attributes from March 25, 2011. Earlier the fund was classified as an open ended index linked equity Fund while now it is classified as an open ended equity fund.

Primary investment objective of the fund is "to seek to provide long-term capital appreciation from a portfolio that is invested predominantly in equity and equity-related securities constituted in the S&P CNX Nifty Index. There can be no assurance that the investment objective of the Scheme will be realized".

The fund is mandated to invest predominantly in stocks forming the S&P CNX Nifty and a small portion of the net assets may be invested in the stocks falling outside the index. The fund abides itself to invest minimum 70% of the corpus in equities including the maximum exposure of 20% to stocks falling outside S&P CNX Nifty. Fund may also invest in cash and money market instruments to manage liquidity with maximum exposure of 30% of its corpus.

 

Equity Portfolio

Holdings	June 2011	July 2011	Aug 2011	Sept 2011	Oct 2011
ITC Ltd.	6.5	7.3	8.7	8.9	9.1
Reliance Industries Ltd.	6.6	6.7	6.9	7.0	7.2
ICICI Bank Ltd.	8.3	9.5	6.9	5.6	6.7
Infosys Ltd.	7.7	8.0	6.4	7.1	6.2
HDFC Bank Ltd.	4.7	5.0	6.3	6.5	5.5
Tata Consultancy Services Ltd.	3.7	3.9	3.9	4.0	4.1
Tata Motors Ltd.	2.1	2.2	2.1	2.2	3.8
HDFC Ltd.	5.2	4.0	5.3	4.2	3.3
Bharti Airtel Ltd.	1.9	2.3	3.4	3.3	3.2
Larsen & Toubro Ltd.	4.6	4.8	4.9	4.3	2.7

 

The table above reveals that ILCEF' portfolio holds some of the most liquid large caps. Its latest portfolio (as on October 2011) comprises of 36 stocks, of which mere 6% are the 'B' group stocks while the rest (94%) are the group ones. The investment mandate of the fund attempts to minimise the risk arising from the poor stock selection and invests predominantly in widely researched index stocks along with derivatives in order to hedge the portfolio, thereby enhancing investors' interest.

The top-10 stocks account for 51.77% of its total holding, whereas the top-5 sectors account for 48.26% of the portfolio. The fund manager refrains from churning the portfolio quite often as revealed by the portfolio turnover ratio of 0.81 times.

 

How ILCEF has fared vis-à-vis its peers?

Scheme Name	6-Mth (%)	1-Yr (%)	3-Yr (%)	5-Yr (%)	Std. Dev. (%)	Sharpe Ratio
Principal Large Cap(G)	-11.5	-19.8	28.4	8.1	7.66	0.24
Franklin India Bluechip(G)	-6.1	-11.2	27.2	9.4	6.73	0.25
Birla SL Frontline Equity(G)	-8.9	-17.1	25.6	9.8	7.47	0.22
ICICI Pru Top 100(G)	-7.8	-13.8	21.9	6.1	6.47	0.21
ING Large Cap Equity(G)	-8.4	-16.8	20.5	4.7	7.36	0.17
Reliance Vision-Ret(G)	-16.0	-25.4	18.9	5.0	7.48	0.18
S&P CNX Nifty	-9.3	-17.6	20.8	5.1	7.76	0.17

The table above reveals that ILCEF's performance has not been very luring so far. Even though over a 3-Yr and 5-Yr time frame, the fund has clocked a return of 20.5% CAGR and 4.7% CAGR respectively, the fund has underperformed its benchmark – S&P CNX Nifty Index and most of its peers under both these time frames.

On the volatility front ILCEF has certainly exposed its investors to low risk (as revealed by the Standard Deviation of 7.36%), but the risk-adjusted returns (as revealed by the Sharpe Ratio of 0.17) clocked too have been middling and nothing to vie for when compared to its peers.

 

Fund Manager Profile

Name of the Fund Manager	Mr. Ramanathan K.
Total Work Experience	Over 12 years
Managing the fund since	May-11
Qualifications	CFA,PGPM, B.E(Mech)

ILCEF's performance has not been very luring so far. Even though over a 3-Yr and 5-Yr time frame, the fund has clocked a return of 20.5% CAGR and 4.7% CAGR respectively, the fund has underperformed its benchmark – S&P CNX Nifty Index and most of its peers under both these time frames. Despite having a flexibility of investing up to 20% of its assets in non-index stocks fund has failed to outperform the S&P CNX Nifty. Moreover, it has not generated any risk adjusted returns in excess of those generated by S&P CNX Nifty. It defeats the principle of active fund management. The high expense ratio of 2.50% has also eaten into the returns generated by the fund.

Merely investing in a large cap fund neither assures you success in mutual investing nor it exposes you to lesser risk. But selection made after doing in-depth analysis certainly enhance your chances of generating competitive returns at lower risk.

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Download Mutual Fund Application Forms from all AMCs

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Best Performing Mutual Funds

1. Largecap Funds:
1. DSP BlackRock Top 100 Fund
2. ICICI Prudential Focused Blue Chip Fund
3. Birla Sun Life Front Line Equity Fund
2. Large and Midcap Funds
1. ICICI Prudential Dynamic Plan
2. HDFC Top 200 Fund
3. UTI Dividend Yield Fund
3. Mid and SmallCap Funds
1. Reliance Equity Opportunities Fund
2. DSP BlackRock Small & Midcap Fund
3. Sundaram Select Midcap
4. IDFC Premier Equity Fund
4. Small and MicroCap Funds
1. DSP BlackRock MicroCap Fund
5. Sector Funds
1. Reliance Banking Fund
2. Reliance Banking Fund
6. Gold Mutual Funds
1. Relaince Gold Savings Fund
2. ICICI Prudential Regular Gold Savings Fund
3. HDFC Gold Fund

 

Filing Tax Returns – What Tax Payers need to know

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THERE are certain requirements in the field of taxation that needs to be completed by the taxpayers. In recent times a lot of the additional requirements have arisen with respect to the online route used for filing tax returns as well as the manner in which the tax to be paid.

This is something that needs attention because of the fact that this can lead to a situation where you might not be ready to tackle the situation. Here are a couple of these requirements that will require a specific kind of action.

Payment of advance tax: There is a need to pay advance tax to the tax department when the advance tax payable in the year crosses the Rs 10,000 mark. This puts many people in a situation where they need to pay the advance tax and there are two ways in which this can actually be paid. The first is where the tax is paid in the bank by the use of a cheque while the second route involves payment of the tax online through an internet banking account. One of the requirements is that when there is a taxpayer who needs to get his accounts audited then the tax payment would have to be done online. This will require that they have the necessary system in place because if they do not have a net banking account then they would need to get this quickly.

Filing of returns: When it comes to the question of filing the income tax returns then there are two things that need to be followed.

The first relates to a situation where the individual is one who has to get his or her accounts audited.

When this is the case then the position is such that the individual will have to file their tax returns online.

Here the tax returns need not be filed with the income tax officer in the physical form but they should be filed online.

Since there is such a requirement this will need to be followed and this should not be a difficult thing because the chartered accountant who is doing the necessary process would complete the requirement and then complete the details. This will also mean that there is not much to worry about for the individual and this eases out the entire situation for them.

One of the advantages that arise when the returns are being filed online is that there does not have to be a lot of paperwork that is attached with the entire process. All the details about the tax deducted and other things have to be filled in the return itself and then this has to be filed. Under the old situation the details had to be accompanied by a copy of the documents and this often made the entire situation difficult. There was no common way in which this was accepted as some of the offices did not accept the documents while in other cases these were still called for and hence there was not uniformity in the entire situation.

There is another condition that has been introduced in this year's budget which is that if the income of the individual is more than Rs 10 lakh then the income tax return has to be filed online. This means that a lot more people would need to be ready to tackle the online situation.

This is the reason why the benefits of the online process should be utilised. 

--------------------------------------------

Invest Mutual Funds Online

Transact Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Fund Application Forms

Best Performing Mutual Funds

1. Largecap Funds        Invest Online
1. DSP BlackRock Top 100 Fund
2. ICICI Prudential Focused Blue Chip Fund
3. Birla Sun Life Front Line Equity Fund
2. Large and Midcap Funds     Invest Online

1. ICICI Prudential Dynamic Plan
2. HDFC Top 200 Fund
3. UTI Dividend Yield Fund
2. Mid and SmallCap Funds    Invest Online

1. Reliance Equity Opportunities Fund
2. DSP BlackRock Small & Midcap Fund
3. Sundaram Select Midcap
4. IDFC Premier Equity Fund
3. Small and MicroCap Funds             Invest Online

1. DSP BlackRock MicroCap Fund
4. Sector Funds              Invest Online

1. Reliance Banking Fund
2. Reliance Banking Fund
5. Gold Mutual Funds             Invest Online

1. Relaince Gold Savings Fund
2. ICICI Prudential Regular Gold Savings Fund
3. HDFC Gold Fund