Monthly Markets Update (India) - September 2011
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Monthly Markets Update (India) - September 2011

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Monthly review of key market segments within India including Equity (Domestic and International), Fixed Income, Currency, Economic Indicators, Mutual Funds & Recommended Portfolios (India).

Monthly review of key market segments within India including Equity (Domestic and International), Fixed Income, Currency, Economic Indicators, Mutual Funds & Recommended Portfolios (India).

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Monthly Markets Update (India) - September 2011 Monthly Markets Update (India) - September 2011 Document Transcript

  • September 2011Prepared by: iFAST Research Team
  • Monthly Markets Update - India September 2011 Key PointsThe month of August saw all the major global indices showing a downward trendThe major event during the month was the downgrading of US debt by S&PIndian markets were also severely impacted by the global eventsWe believe that Indian markets are presently undervalued and hence, advise investors to investat the current levelsWe expect RBI to increase policy rates in the 16 September meet, as inflation is still above 9%In the Mutual fund space, all the categories from the Equity and Hybrid segment deliverednegative month-on-month returns, while the debt segment gave positive returns during themonth
  • Monthly Markets Update - India September 2011 Equity Markets Update International Markets (As at August 2011 end) Earnings Earnings 2011 2011 2010 P/E P/E P/E Growth Growth MTD YTD Return (%) Yr 2011 Yr 2012 Yr 2013 2011 (%) 2012 (%)Asia ex Japan (MSCI Asia ex Japan) -10.16% -9.17% 17.00% 11.5 10.0 8.9 14.50% 15.30% Emerging Markets (MSCI EM) -9.19% -9.83% 16.40% 10.2 9.0 8.1 17.40% 13.70% Europe (Stoxx 600) -10.49% -14.29% 8.60% 9.9 8.8 8.1 7.60% 12.20% Japan (Nikkei 225) -8.93% -12.45% -3.00% 14.5 12.8 10.4 8.60% 13.80% USA (S&P 500) -5.68% -3.10% 12.80% 12.2 10.9 9.8 17.20% 12.30% Australia (S&P/ASX 200) -2.90% -10.31% -2.60% 11.7 10.6 9.8 7.90% 10.50% Brazil (IBOV) -3.96% -18.48% 1.00% 9.4 8.4 7.3 13.00% 11.70% China (HS Mainland 100) -9.32% -9.41% 2.20% 10.0 8.7 7.7 22.90% 15.10% Hong Kong (HSI) -8.49% -10.72% 5.30% 10.9 9.7 8.7 17.10% 12.80% India (SENSEX) -8.36% -18.21% 17.40% 14.0 12.0 10.9 13.10% 16.60% Indonesia (JCI) -7.00% 3.73% 46.10% 15.1 12.5 10.9 23.70% 20.40% Malaysia (KLCI) -6.56% -4.72% 19.30% 14.3 12.6 11.4 6.90% 14.20% Russia (RTSI$) -13.37% -3.84% 22.50% 5.4 5.1 5.0 50.90% 6.00% Singapore (STI) -9.53% -10.19% 10.10% 13.4 12.2 10.8 5.30% 9.40% South Korea (KOSPI) -11.86% -8.33% 21.90% 9.5 8.3 7.4 15.10% 14.80% Taiwan (Taiwan Weighted) -10.44% -13.10% 9.60% 14.0 11.5 10.3 -6.80% 21.40% Technology Heavy (NASDAQ 100) -5.15% 0.69% 19.20% 13.5 11.8 10.5 26.30% 14.00% Thailand (SET Index) -5.60% 3.61% 40.60% 12.1 10.6 9.6 25.40% 14.20%
  • Monthly Markets Update - India September 2011 Global Market Performance Group 7 Countries Global Indices- G7 (MTD Returns) 0.00% USA (S&P 500) Germany (DAX) France (CAC-40) UK (FTSE 100) Canada (S&P/TSX) Italy (FTSE MIB) Japan (Nikkei 225) -2.00% -4.00% -6.00% -8.00% -10.00% -12.00% -14.00% -16.00% -18.00% -20.00% -22.00%Events US Unemployment rate fell to 9.1% in Jul 11, down from 9.2% in Jun 11 US producer prices rose by 0.2% m-o-m in Jul 11, after a 0.4% m-o-m decline in Jun 11 2Q11 US GDP growth revised downwards to 1% q-o-q annualised (+1.3% previously), following 0.4% growth in 1Q 11 Germany Industrial production fell -1.1% m-o-m in Jun 11, after a downward-revised 0.9% rise in May 11 Germany GDP q-o-q grew 0.1% in Q2 2011, down significantly from a downward revised 1.3% growth in Q1 2011 Germany PMI manufacturing remained flat at 52 in Aug 11, literally unchanged from 52.1 in Jul 11 (lowest since Jul 2009) France Industrial production fell -1.6% m-o-m in Jun 11, after a downward-revised 1.9% growth in May 11 France PMI manufacturing fell to 49.3 in Aug 11, down from an upward-revised 50.5 in Jul 11 UK Core CPI rose 3.1% in Jul 11, up from 2.8% in Jun 11 UK ILO unemployment rate rose to 7.9% in Jun 11, up from 7.7% in May 11 UK PMI manufacturing fell to 49.1 in Jul 11, down from an upward-revised 51.4 in Jun 11 Bank of Japan (BOJ) held its target rate unchanged at a range between 0% to 0.1% in Aug 11 Industrial production dropped -1.7% y-o-y in Jun 11 following a decrease of -5.5% in May 11Market Outlook
  • Monthly Markets Update - India September 2011August saw US lawmakers finally agree to raise the US debt ceiling, bringing an end to political bickeringwhich has resulted in heightened uncertainty among consumers, investors and businesses alike. Despitethis positive development, credit ratings agency S&P downgraded the US sovereign credit rating onenotch to AA+ on 5 August 2011, much to the chagrin of various high-profile investors like Warren Buffett(who felt that the US should be a “quadruple-A”) and Bill Miller (who called the downgrade “precipitous,wrong, and dangerous”). As per our comments on the issue when S&P first lowered its outlook on theUS sovereign debt rating in April 2011, we view the downgrade as largely symbolic, and see nocorresponding increase in default risk or any significant economic repercussions for the economy. Giventhe weak growth seen in 1H 11 coupled with an anticipated slowdown in the Euro-zone, we nowforecast GDP growth to come in at just 1.6% for 2011.Manufacturing PMI indices across Europe continued to show growing weakness, with the core nationssuch as Germany, France and the UK showing manufacturing output is expected to contract followingseveral months of declining purchases. However, the same cannot be said for services which have seen abroad-based rise in the continent.Euro zone inflation for July maintained June’s pace of 2.5% on a year-on-year basis. Excluding volatilecomponents, core-inflation fell to a rate of 1.20% as compared to 1.60% year-on-year in June, within thetarget range of the ECB. Following their interest rate hike on 7 July 2011, we believe that the ECB couldpossibly be regretting its action as the rate hike now seems premature and worryingly reminiscent of2008, when following a rate hike; the ECB was forced to retreat as the global financial system fell apart.Japan’s ruling Democratic Party has chosen the present finance minister Yoshihiko Noda as its newleader and the country’s sixth prime minister within five years. Noda has been widely regarded as afiscal hawk as he has consistently called for a painful fiscal consolidation in order to rein in the country’sballooning fiscal deficit. During the campaign, he had argued again that a tax rise is necessary if fiscalresources still run short. Noda’s succession as prime minister could accelerate the consumption tax hikewhich is negative to the economy.The Japanese government could also accelerate its fiscal consolidation plan after Moody’s lowered itscredit rating to Aa3. The credit rating agency said large budget deficits as well as the highest debt-to-GDP ratio in major countries are the crucial reasons that drive the downgrade. Besides, frequentchanges in administrations impeded the government to enact a long-term economic and fiscal policy.Political deadlock is the major concern that could hinder the country’s long-term economicdevelopment. In spite of the downgrade, the Japanese bond market is largely unaffected.
  • Monthly Markets Update - India September 2011 Asia Pacific (Ex Japan) Global Indices- Asia Pacific (Ex Japan) (MTD Returns) 0.00% South Korea Hong Kong (HSI) (S&P/ASX 200) Thailand (SET Singapore (STI) Malaysia (KLCI) Indonesia (JCI) Taiwan (Taiwan -2.00% (KOSPI) Weighted) Australia Index) -4.00% -6.00% -8.00% -10.00% -12.00% -14.00%Events Singapore’s Industrial production for Jul 11 increased 0.3% m-o-m, after an upward-revised 1.9% gain in Jun 11 Malaysia’s BNM may hold the Overnight Policy Rate at 3.0% for the rest of 2011 to accommodate economic growth Malaysia’s GDP growth for 2Q 2011 y-o-y moderated to 4.0% from an upward revised 4.9% in 1Q 2011 Indonesia’s GDP second quarter y-o-y growth recorded 6.49%, marginally higher than first quarter, 6.47% Indonesia’s Foreign reserves rose to $122.7 billion USD in July Thailand’s 2Q 2011 GDP growth slowed to 2.6% y-o-y, down from an upward revised 3.2% growth in 1Q 2011 The Bank of Korea (BOK) held its benchmark 7-day repo rate unchanged at 3.25% in Aug 11 The Korean Consumer Price Index (CPI) grew at 4.7% y-o-y in Jul 11 compared to a 4.4% increase in Jun 11 Taiwan’s 2Q11 GDP grew 5.02% y-o-y, compared to 6.16% y-o-y growth 1Q11 Hong Kong’s 2Q11 GDP grew 5.1% y-o-y, compared to revised 7.5% y-o-y growth in 1Q11 Australia’s benchmark rate (RBA Cash Rate Target) stood at 4.75% Australia’s Trade balance fell to AUD 2052 mil surplus in Jun 11 from revised upward AUD 2699 mil in May 11Market Outlook
  • Monthly Markets Update - India September 2011Malaysia’s GDP growth for 2Q 2011 year-on-year moderated to 4.0% from an upward revised 4.9% in 1Q2011, mainly due to the slowdown in investment and government spending. The sustained growth indomestic consumption and the stronger growth in exports have mitigated the weaker growth ininvestment and government spending. Going forward, exports growth and government spending mayfall as the global economic growth is expected to slow down and the government would like to reduceits expenditure in order to lower the budget deficit.Indonesia’s GDP second quarter year-on-year growth recorded 6.49%, marginally higher than firstquarter, 6.47%. Industry breakdown showed that the transport industry grew the fastest by 10.7%followed by the hotel and restaurant industry and the construction industry which posted 9.6% and7.4% respectively on year-on-year basis. Similarly, household spending expanded steadily, advancing4.6% in the second quarter as compared to 4.5% in first quarter. GDP growth is expected to be sustainedin a strong pattern underpinned by the robust domestic consumption and rising investment. The risk ofheightened external uncertainties and slowdown in developed markets will feed into the real economygoing forward.Thailand recorded a 2.6% year-on-year GDP growth in 2Q which is slower than the revised upward 3.2%growth in the previous quarter and also missed the consensus forecast of 3.6% growth. This is mainlydue to the slower growth in exports resulted from the Japan natural disasters in March and theslowdown in Europe and US economy. The economic growth in the Europe and US are expected tofurther slowdown in the coming months which may further pressure Thailand’s economic growth. Let’slook at some leading indicators for better judgment.2Q11 Taiwan’s GDP grew 5.02% year-on-year. Although it grew faster than market forecasts, theeconomy grew at the slowest pace since 2009. A slower growth is mainly due to the disruptive effects ofJapan’s earthquake. Exports only expanded 14.6% year-on-year in the 2Q11 as compared to a 19.5%year-on-year growth in the 1Q11. The Taiwanese government also cut its forecast for 2011 GDP growthto 4.81% from 5.01%.Hong Kong’s GDP grew by 5.1% year-on-year in the second quarter of 2011. However, in terms ofquarterly growth, Hong Kong reported a 0.5% contraction in the second quarter as compared to the firstquarter 2011. Slower growth in exports is the key reason of the economic contraction as exports postedan 11.1% quarter-on-quarter (0.3% year-on-year increase) drop in the 2Q11.
  • Monthly Markets Update - India September 2011 BRIC (Ex India) Countries Global Indices- BRIC (Ex-India)- (MTD Returns) 0.00% Brazil (IBOV) China (HS Mainland 100) Russia (RTSI$) -4.00% -8.00% -12.00% -16.00%Events Brazil’s IPCA Inflation rose to 6.9% y-o-y in Jul 11, up from 6.7% in Jun 11 Brazil’s CNI Capacity Utilisation fell to 82.3% in Jun 11, down from an upward-revised 82.5% reading in May 11 China’s Industrial production grew y-o-y by 14.0% in Jul 11 as compared with 15.1% increase y- o-y in Jun 11 China’s Exports increased 20.4% y-o-y in Jul 11 as compared with a 17.0% increase y-o-y in Jun 11 China’s Imports increased 22.9% y-o-y in Jul 11 as compared with a 28.0% increase y-o-y in Jun 11 Russia’s Industrial production expanded 5.2% y-o-y in Jul 11, after a 5.7% y-o-y increase in Jun 11 Russia’s 2Q 11 GDP grew by 3.4% y-o-y, down from 1Q 11 GDP growth of 4.1% Russia’s PMI Manufacturing dropped from 50.6 in Jun 11 to 49.8 in Jul 11Market OutlookBrazil’s economic activity decelerated amidst a challenging external environment. Capacity utilisationfell to 82.30% in June, down from an upward-revised 82.5% in May, falling short of consensus estimatesof an 82.20% rate. The PMI manufacturing index declined further to 47.8 in July 2011 (a reading below50 indicates a contraction in manufacturing activity), significantly lower than its average reading of 53.6for Q1 2011 as manufacturers remained downbeat amidst a slowdown in developed market growth. Theeconomic activity index posted its first negative reading for the year with a loss of -0.26% in July aftergrowing by a downward-revised 0.05% on a month-on-month basis in June. The economic data is as our
  • Monthly Markets Update - India September 2011house view expected with the economy slowing due to the various measures mentioned in prior monthsand the rate hikes implemented. Looking forward, we expect further cooling of the economy as globalgrowth slows.Initially, the market expected to see the Chinese headline inflation peaking in June at 6.4% year-on-year.However, July’s CPI surprised the market by accelerating to 6.5% year-on-year. Food costs jumped14.8%, compared to 14.4% in June. Similar to the last inflation cycle, the rising food prices wereprimarily driven by higher pork prices which surged 33.6% in July compared to a year earlier. Non-foodprice inflation continues to rise gradually at 2.9% year-on-year compared to 3.0% in June. While inflationfailed to see a peak in June, the consensus still believes that inflation is ready to peak. Therefore, we donot expect a sharp deceleration ahead as China is likely to experience inflation brought by pricepressures from the non-cyclical service sector.Russia reported 2Q 11 GDP growth of 3.4% on a year-on-year basis. The figure showed a decline ineconomic activity from 1Q 2011 and missed consensus estimates of 4.0% growth. With decliningmanufacturing PMI over the course of 2Q, the results do not come as much of a surprise as industrialproduction grew by 4.8% year-on-year, down from 5.9% from Q1 2011. Further drags on GDP growthwere provided by weakened domestic consumption as a result of high inflation which eroded purchasingpower.
  • Monthly Markets Update - India September 2011 INDIAEquity Market Outlook
  • Monthly Markets Update - India September 2011 India-Equity India Indices (MTD Returns) Sectoral Indices (MTD 0.00% Returns) BSE MID CAP Nifty Index BSE SMALL CAP BSE Sensex -2.00% 0.00% BSE-HC BSE IT BSE CD BSE FMCG BSE CG BSE METAL BSE Oil & Gas BSE Realty BSE Bankex BSE Power BSE AUTO -4.00% -2.00% -4.00% -6.00% -6.00% -8.00% -8.00%-10.00% -10.00%-12.00% -12.00%-14.00% -14.00%-16.00% -16.00% Events India’s Manufacturing Purchasing Managers’ Index is at 53.6 in July as compared to 55.3 in June. Production at factories, utilities and mines increased to 8.8% in June as against 5.6% in May. WPI Inflation for the month of July stands at 9.22% as against 9.44% in June 2011. The YoY 1Q FY2011-12 GDP is at 7.7% as compared to GDP growth of 1Q FY 2010-11 at 8.8% a year ago. Market Outlook The negative performance witnessed in the last month has continued even in August. BSE SENSEX and S&P CNX NIFTY have both lost 8.36% and 8.77% respectively. All the sectoral indices of BSE have witnessed negative performance. The BSE Realty Index, fell the most at 14.78% while the BSE FMCG index fell the least at -3.51%. The concerns in US and Europe are the primary reasons for which the Indian equity market has shown a negative performance. With the inflation still continuing to be above 9%, we expect that the RBI will go for a rate hike in September. Currently, the estimated P/E for SENSEX as on 30 August 2011 stands at 14.37X for fiscal 2011 (Ending March 2012) and 12.30X for fiscal 2012 (Ending March 2013).Estimated earnings growth for the market is at 9.36% and 16.77% for these two financial years. Looking at the valuations, we feel that the Indian equity market is undervalued and investors can consider investing into the market at the current levels. However, the investors are advised that there can be some downward correction due to unfolding of the global events. However, for long term
  • Monthly Markets Update - India September 2011investors, the market is currently undervalued and investors can consider doing SIP to even out thevolatility as seen in the equity market.
  • Monthly Markets Update - India September 2011 INDIADebt Market Outlook
  • Monthly Markets Update - India September 2011 India-Debt 10 Year G-sec Curve 8.5 8.45 8.4 8.35 8.3 8.25 8.2 8.15 8.1 8.05 2-Aug-11 4-Aug-11 6-Aug-11 8-Aug-11 10-Aug-11 12-Aug-11 14-Aug-11 16-Aug-11 18-Aug-11 20-Aug-11 22-Aug-11 24-Aug-11 26-Aug-11 28-Aug-11 30-Aug-11 29-Jul-11 31-Jul-11 YieldsThe 10 year benchmark yields were on a downward trend until 10 August 2011; however, post 10August 2011 the yields have risen a bit. Overall, the 10 year yields have fallen by 14 basis points in thismonth. This is unlike the past few months, where in the 10 year benchmark yields have gone up on amonth on month basis. The drop in yields has led the Gilt category funds to deliver good returns inAugust.However, the liquidity condition in the system has improved but still continues to be in the deficit mode.With the inflation still above 9% in July, we expect the RBI to go for a rate hike in September policymeet.In this scenario, we advise: Investors with a time horizon anywhere from 3 months to 24 months can lock-in their FMPs (available with varying maturities) at the prevailing high rates. Investors with idle cash in the savings account should look at Ultra-Short Term Funds. Recommended Funds in this category include DWS Cash Opportunities fund and Birla Sunlife Ultra short term Fund .The suggested investment horizon for such instruments is about 3 months.
  • Monthly Markets Update - India September 2011 Mutual Funds
  • Monthly Markets Update - India September 2011 Fund Category Returns Fund Category Returns (as of August 2011) 1 Month 1 Year Equity: Large Cap -7.88% -7.70% Equity: Multi Cap -7.94% -9.47% Equity: Mid Cap -7.66% -9.12% Equity: ELSS -7.48% -8.33% Equity: Index -8.45% -6.74% Equity: Global -5.57% 4.66% Hybrid: Balanced -5.64% -4.11% Hybrid: MIP -0.66% 3.98% Debt: Income 0.87% 6.55% Debt: Gilt Short Term 0.79% 5.87% Debt: Gilt Long Term 1.17% 5.63% Debt: Floating Rate 0.78% 7.82% Debt: Ultra Short Term 0.74% 7.43% Debt: Short Term 0.83% 7.52% Liquid 0.71% 7.49% Source: ACE MF, iFAST Compilations (Excludes Institutional Plans)All the categories from Equity and Hybrid segment have delivered negative month-on-monthreturns; Debt segment on the other hand has given positive returns this month. Index fundscategory has delivered highest negative returns across the three segments i.e. equity, debt andhybrid for second consecutive month.All three actively managed large cap, multi cap and mid cap categories have delivered negativemonth-on-month returns. When compared to the performance of broader indices like Sensexand Nifty, these actively managed categories gave slightly better negative returns with both thebroader indices delivering negative returns close to 8.36% and 8.77%, respectively.In the Hybrid segment, performance of both the categories i.e. Monthly Income Plans andBalanced funds was weighted down by negative performance of the equity part in the portfolio.Global funds category has delivered negative returns for fourth consecutive month. However,on a 1 year basis it is the only category in the equity segment which has delivered positivereturns.Among the Debt segment performance of all the categories is seen in the positive territory fromquite some time. This is the fourth consecutive month where all the debt categories have
  • Monthly Markets Update - India September 2011delivered positive month-on-month returns. Gilt Long term category has been the starperformer delivering highest positive returns of around 1.17% in the month of August.
  • Monthly Markets Update - India September 2011 Top and Bottom Performing Equity Funds in August Top Performing Equity funds on our Platform in August 2011 Sector 1 Month 1 Year BNP Paribas Equity Fund Large Cap -5.15% 0.00% DSP BlackRock Top 100 Equity Fund Large Cap -5.80% -3.86% CNX Nifty Index (Benchmark) -8.77% -7.43% AIG India Equity Fund Multi-Cap -3.42% 0.46% UTI Opportunities Fund Multi-Cap -5.26% 0.34% CNX 500 Index (Benchmark) -8.72% -11.00% IDFC Premier Equity Fund Plan A Midcap & Small Cap -3.09% -2.86% Magnum Global Fund Midcap & Small Cap -5.06% -1.69% CNX Midcap Index (Benchmark) -9.01% -15.96% BNP Paribas Tax Advantage Plan (ELSS) ELSS -4.76% -2.62% Edelweiss ELSS Fund ELSS -5.02% -6.73% CNX 500 Index (Benchmark) -8.72% -11.00% DSP BlackRock World Gold Fund Overseas 8.35% 18.01% AIG World Gold Fund Overseas 6.87% 18.50% MSCI World Index (in INR) (Benchmark) -4.49% 8.38% Source: ACF MF, iFAST CompilationsLarge Cap FundsAll the large cap funds have delivered negative returns on month-on-month basis. BNP Paribas EquityFund was the top performer in the category which delivered least negative returns close to 5.15%. Thisfund continues to be among the top two funds for second consecutive month.Multi Cap FundsBoth the funds in this category i.e. AIG India Equity Fund and UTI Opportunities Fund have deliverednegative month-on-month returns close to 3.42% and 5.26% respectively; they were the top twoperformers in the previous month as well. UTI Opportunities Fund is our recommended fund in the multicap category.Mid Cap FundsIn the Mid cap space, both the top two performing funds despite delivering negative returns haveperformed better than their benchmark CNX Midcap Index. IDFC Premier Equity Fund Plan A and
  • Monthly Markets Update - India September 2011Magnum Global Fund have given negative returns of around 3.09% and 5.06% whereas the benchmarkCNX Midcap Index has given negative returns close to 9.01%.ELSS FundsIn the ELSS funds category, BNP Paribas Tax Advantage Plan (ELSS) and Edelweiss ELSS Fund are the toptwo performing funds delivering negative returns close to 4.76% and 5.02% respectively.Global FundsBoth the global funds i.e. DSP Black Rock World Gold Fund AIG World Gold Fund have delivered positivemonth-on-month returns close to 8.35% and 6.87% respectively. With most global equity marketswitnessing a downfall this month, gold played its part of the safe haven asset. Out of 25 global funds onour platform, only the top 3 funds i.e. DSP Black Rock World Gold Fund, AIG World Gold Fund and BirlaSunLife Commodity Equities Fund -Global Precious Metals Plan have delivered positive returns close to8.35%, 6.87% and 5.36% respectively.
  • Monthly Markets Update - India September 2011 Bottom Performing Equity funds on our Platform in August 2011 Sector 1 Month 1 Year Reliance Equity Fund Large Cap -9.85% -19.81% Sundaram India Leadership Fund Large Cap -9.94% -7.66% CNX Nifty Index (Benchmark) -8.77% -7.43% Reliance Regular Savings Fund -Equity Option Multi-Cap -10.46% -13.76% Birla Sun Life India Opportunities Fund Multi-Cap -11.32% -14.59% CNX 500 Index (Benchmark) -8.72% -11.00% Reliance Growth Fund Midcap & Small Cap -10.17% -15.32% HSBC Midcap Equity Fund Midcap & Small Cap -14.28% -28.98% CNX Midcap Index (Benchmark) -9.01% -15.96% JM Tax Gain Fund ELSS -9.38% -21.10% Reliance Tax Saver (ELSS) ELSS -9.59% -9.99% CNX 500 Index (Benchmark) -8.72% -11.00% Mirae Asset China Advantage Fund Overseas -10.99% -1.27% HSBC Emerging Markets Fund Overseas -15.03% -5.26% MSCI World Index (in INR) (Benchmark) -4.49% 8.38% Source: ACF MF, iFAST CompilationsLarge Cap FundsIn the large cap space, Reliance Equity Fund and Sundaram India Leadership Fund were the bottom twoperformers delivering negative returns close to 9.85% and 9.94% respectively. The fundsunderperformed their benchmark CNX Nifty Index which delivered slightly lower negative returns ofaround 8.77%.Multi Cap FundsIn the multi cap funds segment, both the bottom performing funds Reliance Regular Savings-Equity Fundand Birla Sun Life India Opportunities Fund have underperformed its category average as well as thebenchmark i.e. CNX 500 Index. Both the funds have given negative returns of 10.46% and 11.32%respectively.
  • Monthly Markets Update - India September 2011Mid Cap FundsIn the mid cap space, both the bottom performing funds Reliance Growth Fund and HSBC Midcap EquityFund have delivered negative return of around 10.17% and 14.28% respectively. Both the funds haveunderperformed their benchmark CNX Midcap Index which delivered negative returns close to 9.01%.ELSS FundsWith respect to ELSS funds - JM Tax Gain Fund and Reliance Tax Saver (ELSS) were the bottomperformers for August. While the former appeared to be among the bottom performers in the previousmonth as well, Reliance Tax Saver (ELSS) was among the top two performing ELSS funds in the previousmonth.Global FundsBoth the global funds Mirae Asset China Advantage Fund and HSBC Emerging Markets Fund deliverednegative returns close to 10.99% and 15.03% respectively. Both the funds have underperformed thebenchmark MSCI World which delivered a negative return close to 4.49% in August.
  • Monthly Markets Update - India September 2011 Top and Bottom Performing Debt / Hybrid Funds in August Top Performing Debt funds / Hybrid on our Platform in August 2011 Sector 1 Month 1 Year Canara Robeco Balance Balanced -3.91% -1.30% Birla Sunlife Freedom Fund Balanced -4.31% -5.14% Crisil Balanced Fund Index -5.48% -2.61% Birla Sunlife MIP II-Savings 5 Plan MIP 0.52% 6.84% HDFC Multiple Yield Fund Plan 2005 MIP 0.28% 7.61% Crisil MIP Blended Index -0.67% 3.98% Religare Active Income Fund Plan A Income 1.53% 8.84% Reliance Income Fund Income 1.34% 6.25% Crisil Composite Bond Fund Index 0.79% 5.86% DWS Gilt Fund Gilt - Long Term 1.78% 5.25% DSP BlackRock Government Securities Fund Gilt - Long Term 1.77% 3.90% I-BEX (I-Sec Sovereign Bond Index) 1.47% 6.94% Religare Short Term Plan-Plan A Short Term 1.41% 6.99% Principal Income Fund Short Term 0.96% 6.75% Crisil Short-Term Bond Fund Index 0.81% 6.75% Source: ACF MF, iFAST CompilationsBalanced Funds Both the top performing funds Canara Robeco Balance and Birla Sunlife Freedom Fund despitedelivering negative returns of 3.91% and 4.31% outperformed their benchmark Crisil Balanced FundIndex, which delivered a negative return of 5.48% on a month-on-month basis.Monthly Income PlansThe best performing funds in this category - Birla Sun Life MIP II-Savings 5 Plan and HDFC Multiple YieldFund Plan 2005 have delivered positive returns close to 0.52% and 0.28% respectively. Out of 39 fundson our platform, only top 5 funds have delivered positive returns on month-on-month basis.Income FundsAll the funds in this category have delivered positive month-on-month returns. Religare Active IncomeFund Plan A is the top performer among the income funds delivering positive returns close to 1.53%.
  • Monthly Markets Update - India September 2011The fund also outperformed the benchmark Crisil Composite Bond Fund Index which delivered close to0.79% in this month.Gilt- Long term FundsGilt- Long Term Funds as a category outperformed all other categories in the debt segment. All the 26Gilt- Long Term Funds on our platform delivered positive returns on month-on-month basis. DWS GiltFund was the top performer in the month of August delivering a return of 1.78%.Short Term FundsIn this segment, Religare Short Term Plan-Plan A and Principal Income Fund were the top performingfunds during the month delivering returns close to 1.41% and 0.96% respectively . Both the funds havemanaged to give better returns than their benchmark Crisil Short-Term Bond Fund Index whichdelivered 0.81% returns.
  • Monthly Markets Update - India September 2011 Bottom Performing Debt / Hybrid funds on our Platform in August 2011 Sector 1 Month 1 Year Reliance Regular Savings Fund-Balanced Option Balanced -7.79% -9.68% Magnum Balanced Fund Balanced -7.81% -10.33% Crisil Balanced Fund Index -5.48% -2.61% UTI MIS Advantage Plan MIP -1.59% 4.05% ICICI Prudential MIP 25 MIP -1.70% 4.22% Crisil MIP Blended Index -0.67% 3.98% Sundaram Bond Saver Income 0.27% 4.83% Birla SunLife Medium Term Plan Income 0.08% 7.76% Crisil Composite Bond Fund Index 0.79% 5.86% Religare Gilt-Long Duration Plan Gilt - Long Term 0.47% 4.16% JM G-Sec Fund Gilt - Long Term 0.42% 3.76% I-BEX (I-Sec Sovereign Bond Index) 1.47% 6.94% Mirae Asset Short Term Bond Fund Short Term 0.60% 5.39% Goldman Sachs Short Term Fund Short Term 0.57% 5.86% Crisil Short-Term Bond Fund Index 0.81% 6.75% Source: ACF MF, iFAST CompilationsBalanced FundsReliance Regular Savings Fund-Balanced Option and Magnum Balanced Fund are the bottom performingbalanced funds for August delivering negative returns close to 7.79% and 7.81% respectively. Both thefunds have underperformed the Crisil Balanced Fund Index which delivered negative return of 5.48%.Monthly Income PlansIn the MIP category, UTI MIS Advantage Plan and ICICI Prudential MIP 25 are the bottom performers onmonth-on-month basis delivering negative returns close to 1.59% and 1.70% respectively. Both thefunds have underperformed their category average as well as the benchmark i.e. Crisil MIP BlendedIndex which delivered a negative return of 0.66% and 0.67% respectively.Income FundsIn the income funds segment, both the bottom performing funds i.e. Sundaram Bond Saver and BirlaSun Life Medium Term Plan have delivered returns close to 0.27% and 0.08% respectively. Theyunderperformed the benchmark i.e. Crisil Composite Bond Fund Index. which delivered a return ofaround 0.79% on a month-on-month basis.
  • Monthly Markets Update - India September 2011Gilt- Long term FundsBoth the bottom performing Gilt long term funds Religare Gilt-Long Duration Plan and JM G-Sec Fundunderperformed their benchmark which is I-BEX (I-Sec Sovereign Bond Index) on a month-on-monthbasis. JM G-sec Fund continues to be the bottom performer for second consecutive month.Short Term FundsIn this category, both Mirae Asset Short Term Bond Fund & *Goldman Sachs Short Term Fund continueto be the bottom two performers for the second consecutive month as well. They delivered returnsaround 0.60% and 0.57% respectively this month.*Goldman Sachs Asset Management (India) Private Limited (GS AMC) has taken over the rights tomanage the Schemes from BAMC (Benchmark Asset Management Company )and has become theinvestment manager of the Schemes with effect from 22 August 2011.
  • Monthly Markets Update - India September 2011Recommended Portfolios Update
  • Monthly Markets Update - India September 2011 Recommended Portfolios Update 1. Conservative Portfolio: Portfolio Objective:The portfolio aims to achieve long term capital appreciation by investing 90% into bond funds and 10%into equity funds. The target allocation may change depending on our views on financial markets.Currently, we hold a neutral position in equities and we target to have an exposure of 90% to bondfunds and 10% to equity funds. Portfolio Absolute Return since inception:Total Investment: INR 1,00,000 (Inception Date: 26 Feb 2010) 11.81%Portfolio Value: INR 1,11,807 August 2011 Portfolio Return: -0.09% Portfolio Commentary:The Conservative portfolio gave a negative return of 0.09% in August. After delivering positive returnsfor five consecutive months the portfolio fell into negative territory this month.In the Debt segment, the short term funds have attributed close to 45% of the debt portfolio returns,while the floating rate funds accounted for over 32% of the debt portfolio returns. Reliance Short TermFund with 16.95% returns followed by Canara Robeco Floating Rate Fund with 16.52% returnsaccounted for most of the debt portfolio returns.In the domestic equity funds, both HDFC Top 200 Fund and UTI Dividend Yield Fund gave negativereturns. However, HDFC Top 200 Fund accounted for 62% of the negative equity portfolio returnsfollowed by UTI Dividend Yield Fund. 2. Moderately Conservative Portfolio: Portfolio Objective:The portfolio aims to achieve long term capital appreciation by investing 70% into bond funds and 30%into equity funds. The target allocation may change depending upon our views on financial markets.Currently, we hold a neutral position in equities and we target to have an exposure of 70% to bondfunds and 30% to equity funds. Portfolio Absolute Return since inception:Total Investment: INR 1,00,000 (Inception Date: 26 Feb 2010) 10.72%Portfolio Value: August 2011 Portfolio Returns: INR 1,10,720 -1.96%
  • Monthly Markets Update - India September 2011 Portfolio Commentary:The Moderately Conservative portfolio gave a negative return of 1.96% in August. The portfolio returnswere negative on account of negative performance of the equity funds despite the positive performanceof debt funds.In the Debt category, the short term funds attributed close to 43% of the debt portfolio returns, whilethe floating rate funds accounted for close to 28% of the debt portfolio returns. Reliance Short TermFund with 22% returns followed by Birla Sunlife Dynamic Bond Fund with 16% returns accounted formost of the debt portfolio returns .In the domestic equity funds, all the three funds have given negative returns. However, the two largecap funds i.e. HDFC Top 200 Fund and ICICI Prudential Focused Blue Chip Equity Fund togetheraccounted for 75% of the negative equity portfolio returns. 3. Balanced Portfolio: Portfolio Objective:The portfolio aims to achieve long term capital appreciation by investing 50% into bond funds and 50%into equity funds. The target allocation may change depending upon our views on financial markets.Currently, we hold a neutral position in equities and we target to have an exposure of 50% to bondfunds and 50% to equity funds. Portfolio Absolute Return since inception:Total Investment: INR 1,00,000 (Inception Date: 26 Feb 2010) 10.63%Portfolio Value: August 2011 Portfolio Returns: INR 1,10,627 -3.66% Portfolio Commentary:The Balanced portfolio gave a negative return of 3.66% in August. The portfolio gave positive returns fortwo consecutive months before appearing in the negative territory in the month of August.Among the Debt funds, the short term funds have attributed close to 50% of the debt portfolio returns,while the floating rate funds was the next best category accounting for close to 29% of the debtportfolio returns. Reliance Short Term Fund with 30% returns followed by Birla Sunlife Floating RateFund- Long term Plan with 19% returns accounted for most of the debt portfolio returns.
  • Monthly Markets Update - India September 2011In the domestic equity funds, all the equity funds in the portfolio have given negative returns. Out ofthree large cap funds, two of them i.e. HDFC Top 200 Fund and ICICI Prudential Focused Blue Chip EquityFund have lost the maximum of all the equity funds in the portfolio. Both the funds together accountedfor 58% of the negative equity portfolio returns. UTI Dividend Yield Fund has lost the least of all theequity funds in the portfolio. 4. Moderately Aggressive Portfolio: Portfolio Objective:The portfolio aims to achieve long term capital appreciation by investing 30% into bond funds and 70%into equity funds. The target allocation may change depending upon our views on financial markets.Currently, we hold a neutral position in equities and we target to have an exposure of 30% to bondfunds and 70% to equity funds. Portfolio Absolute Return since inception:Total Investment: INR 1,00,000 (Inception Date: 26 Feb 2010) 10.74%Portfolio Value: August 2011 Portfolio Returns: INR 1,10,737 -5.95% Portfolio Commentary:The Moderately Aggressive portfolio gave a negative return of 5.95% in August. The returns werenegative on account of negative performance of the equity funds in the portfolio.In the Debt funds category, Birla Sunlife Floating Rate Fund- Long term Plan with 29% returns and ICICIPrudential Gilt Fund- Investment Plan with 23% returns accounted for most of the debt portfolioreturns.In the domestic equity funds, the mid cap category accounted for 30% of the negative equity portfolioreturns followed by sector funds which accounted for close to 28% of the negative equity portfolioreturns. Reliance Banking Fund alone accounted for 22% of the negative equity portfolio returns. TheUTI Opportunities Fund has lost the least of all the negative performing funds in the portfolio accountingfor only 4% of the negative equity portfolio returns. 5. Aggressive Portfolio: Portfolio Objective:The portfolio aims to achieve long term capital appreciation by investing 10% into bond funds and 90%into equity funds. The target allocation may change depending upon our views on financial markets.
  • Monthly Markets Update - India September 2011Currently, we hold a neutral position in equities we target to have an exposure of 10% to bond fundsand 90% to equity funds. Portfolio Absolute Return since inception:Total Investment: INR 1,00,000 (Inception Date: 26 Feb 2010) 12.40%Portfolio Value: August 2011 Portfolio Returns: -7.63% INR 1,12,398 Portfolio Commentary:The Aggressive portfolio gave a negative return of 7.63% in August. The negative portfolio returns isowing to higher weightage to equity part in the portfolio which has delivered negative returns.In the debt category, both the funds delivered positive month-on-month returns. ICICI Prudential GiltFund- Investment Plan alone accounted for 58% of the debt portfolio returns.In the domestic equity funds, the sector funds category i.e. Reliance Banking Fund, ICICI PrudentialInfrastructure Fund and Reliance Pharma Fund followed by the midcap oriented funds i.e. HDFC MidcapOpportunities Fund and DSP Blackrock Small and Midcap Fund have accounted for 34% and 33%respectively of the negative equity portfolio returns. 6. Moderately Aggressive (Global) Portfolio: Portfolio Objective:The portfolio aims to achieve long term capital appreciation by investing 30% into bond funds, 46% indomestic equity funds and 25% in global equity funds. The target allocation may change dependingupon our views on financial markets. Currently, we hold a neutral position in equities and we target tohave an exposure of 30% to bond funds, 46% to domestic equity funds and 25% to global equity funds. Portfolio Absolute Return since inception:Total Investment: INR 1,00,000 (Inception Date: 26 Feb 2010) 10.85%Portfolio Value: August 2011 Portfolio Returns: -5.53% INR 1,10,847 Portfolio Commentary:The Moderately Aggressive (Global) portfolio gave a negative return of 5.53% in August. The returnswere negative on account of negative performance of the domestic and global equity funds in theportfolio.
  • Monthly Markets Update - India September 2011In the Debt funds category, Birla Sunlife Floating Rate Fund- Long term Plan with 30% returns and ICICIPrudential Gilt Fund- Investment Plan with 22% returns accounted for most of the debt portfolioreturns.In the domestic equity funds, the midcap oriented funds i.e. HDFC Midcap Opportunities Fund and DSPBlackrock Small and Midcap Fund have accounted for 30% of the negative equity portfolio returns.In the global equity funds, both the global funds i.e. Mirae Asset China Advantage Fund and PrincipalGlobal Opportunities Fund have given negative returns. However Mirae Asset China Advantage Fundalone accounted for 66% of the negative global equity portfolio returns. 7. Aggressive (Global) Portfolio: Portfolio Objective:The portfolio aims to achieve long term capital appreciation by investing 10% into bond funds, 59% intodomestic equity funds and 31% into global equity funds. The target allocation may change dependingupon our views on financial markets. Currently, we hold a neutral position in equities and we target tohave an exposure of 10% to bond funds, 60% to domestic equity funds and 30% to global equity funds. Portfolio Absolute Return since inception:Total Investment: INR 1,00,000 (Inception Date: 26 Feb 2010) 11.07%Portfolio Value: August 2011 Portfolio Returns: -7.22% INR 1,11,070 Portfolio Commentary:The Aggressive (Global) portfolio gave a negative return of 7.22% in August. The returns were negativeon account of negative performance of the domestic and global equity funds in the portfolio.In the debt category, both the funds delivered positive month-on-month returns. ICICI Prudential GiltFund- Investment Plan alone accounted for 56% of the debt portfolio returns.In the domestic equity funds, the sector funds category i.e. Reliance Banking Fund, ICICI PrudentialInfrastructure Fund and Reliance Pharma Fund followed by the midcap oriented funds i.e. HDFC MidcapOpportunities Fund and DSP Blackrock Small and Midcap Fund have accounted for 31% and 29%respectively of the negative equity portfolio returns. .In the global equity funds, both the global funds i.e. Mirae Asset China Advantage Fund and PrincipalGlobal Opportunities Fund have given negative returns. However, Mirae Asset China Advantage Fundalone accounted for 57% of the negative global equity portfolio returns.
  • Monthly Markets Update - India September 2011 Fund Focus
  • Monthly Markets Update - India September 2011 Fund Focus: ICICI Prudential Infrastructure FundInfrastructure is a key sector for any economy. Infrastructure is a broad sector consisting mainly oftransportation (land, air and water), telecommunication, energy (Oil and Gas and Power) and financesub sectors. Good public infrastructure not only directly contributes to robust economic growth but alsoindirectly enables other sectors contribute more towards economic growth; therefore, good publicInfrastructure sector is an enabler for economic growth.Lack of public infrastructure is one of the key reasons hampering the economic growth of India.However, the government has woken up from its lethargic attitude towards public infrastructure. Thefocus on infrastructure spending is seen in the budget speech of 2011-12. However, certain bottlenecksremain and the government is working to resolve them from the policy perspective.Infrastructure as an investmentIndia is expected to invest $1 trillion in public infrastructure development in its 12th five year planbetween 2012 and 2017. The economic survey for 2011-12 states that atleast 50% of this $1 trillion isexpected to be made from the private sector. Since, most of the infrastructure projects are mostlymonopolistic in nature (ports, roads, etc) investors can expect good returns from Infrastructureinvestments.Government has enabled higher inflows directly into the infrastructure space on the debt side in orderto meet the huge investments demands in the sector. The government has raised the limit for FIIparticipation into infrastructure debt space from $5 billion to $25 billion in the budget for 2011-12.This sector holds potential to generate long term returns for the patient investor as infrastructureprojects has long gestation periods. Our recommended fund in infrastructure space is ICICI PrudentialInfrastructure fund.Investment strategy of ICICI Prudential Infrastructure fundThe ICICI Prudential Infrastructure fund invests across market cap, but has a high concentration towardslarge caps. Between February 2008 and July 2011, the fund on an average had over 68% exposure of theportfolio to large cap stocks. Exposure to mid cap stocks was on an average close to 8.3%, whileexposure to the small cap stocks was limited to around 4.7% between February 2008 and July 2011 .Cash holding on an average was close to 8.4% between February 2008 and July 2011. The fund does takeexposure to derivatives. However, much of the exposure is in futures while the use of options issporadic. The exposure to futures was on an average of 5.7% between February 2008 and July 2011.Banking, Refineries, Power generation/distribution, telecom and Oil exploration sectors are the top fivesectors to which the fund has exposure to. Between February 2008 and June 2007, Banking has anaverage exposure of 12.7% of the portfolio, followed by Refinery at 10%, which is further followed bypower sector having 9.7%, telecom 8.1% while Oil exploration sector having 6.4% exposure.
  • Monthly Markets Update - India September 2011PerformanceInfrastructure sector’s performance as a whole has been continuously lagging since the greater part of2010 till today. This can be seen in chart 1. CNX Infrastructure is the benchmark for this fund. If you hadinvested INR 10,000 into this fund on 30 April 2008, this INR 10,000 would have been worth INR 8870 asat 30 August 2011.This laggard performance is actually an investment opportunity in disguise for the long term investor.The prospects of this sector are bright as huge investments are made into the infrastructure space byboth private investors and government.Chart 1: Performance of ICICI Prudential Infrastructure fund, other top performing infrastructurefunds and CNX Nifty. Performance of ICICI Prudential Infrastructure Fund 130 120 110 100 90 80 70 60 50 40 30 30-Jun-08 31-Oct-08 30-Jun-09 30-Jun-10 30-Jun-11 31-Oct-09 31-Oct-10 30-Apr-10 30-Apr-08 31-Aug-08 30-Apr-09 31-Aug-09 31-Aug-10 30-Apr-11 28-Feb-09 28-Feb-10 28-Feb-11 31-Dec-08 31-Dec-09 31-Dec-10 AIG Infra & Eco Reform DSPBR India T.I.G.E.R ICICI Pru Infrastructure CNX Infrastructure
  • Monthly Markets Update - India September 2011Table 1: Performance of funds in percentage Scheme Name 6 Months 1 Year 3 Years 5 Years AIG Infrastructure & Economic Reform Fund 6.46 -5.59 9.52 DSP Black Rock India T.I.G.E.R Fund -5.05 -19.17 3.47 8.71 ICICI Prudential Infrastructure Fund -6.88 -13.58 1.39 11.70 CNX Infrastructure -1.08 -18.07 -8.40 2.75 Source: iFAST Compilations, performance above 1 year is in CAGR terms and performance below 1 year is in absolute terms. Performance as on 30 August 2011Our take on the FundThe growth in the infrastructure sector is a must for our economy to continue to grow at high currentgrowth rate. With the 12th plan expecting about US$ 1 trillion being invested into the infrastructurespace and atleast 50% of this US$ 1 trillion being invested by the private investors, there are goodopportunities for patient investors in this sector.ICICI Prudential Infrastructure fund is the best performing infrastructure fund despite the lack lusterperformance of this sector in the past year. However, investors can use the laggard performance toenter into this fund. Moreover, we recommend the investors to hold their investments into this fund foratleast five years to realise the growth benefits of the sector.