Mutual Funds

Till now investors looking to buy directly had to go to a fund house website or independent websites.

The capital markets regulator, the Securities and Exchange 

Board of India (Sebi), has allowed investors to directly access the stock exchange infrastructure to transact in mutual funds bypassing fund distributors.

Till now investors looking to buy directly had to go to a fund house website or independent websites. With the stock exchange offering this facility it will further improve accessibility for investors.

In order to further increase the reach of the platform, it has been decided to allow investors to directly access infrastructure of the recognised stock exchanges to purchase and redeem mutual fund units directly from mutual fund/ asset management companies,” the regulator said in a release.

Recognised stock exchanges, clearing corporations and depositories may make the necessary amendment to their existing regulations, wherever required.

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This scheme will invest broadly in the three asset classes – equity, commodity derivatives, and debt. The fund house said that exchange-traded commodity derivatives (ETCDs) allow the investor to opt for other commodities like base metals, agricultural commodities, industrial chemicals, crude oil, etc.

Tata Mutual Fund launches the 'Tata Multi-Asset Opportunities Fund'. The fund will invest in exchange-traded commodity derivatives. The launch comes after SEBI's nod to mutual funds to expand into commodity derivatives. This is the first of its kind scheme in the mutual fund industry.

The fund will invest up to 25% of its assets under management in ETCDs where a single commodity exposure is 10% of the AUM. The fund will be managed by heads of the respective asset classes – Rahul Singh, Chief Investment Officer - Equities, Murthy Nagarajan, Head - Fixed Income, Aurobinda Prasad Gayan, Head- Commodities Strategy, and Sailesh Jain, Fund Manager at Tata Asset Management.

"The launch of the Tata Multi-Asset Opportunities fund introduces one more product to our strong and growing industry. It is a small step that will add up to Rs. 100 Trillion Opportunity, all of us are trying to tap into. We are sure that this product will generate interest from existing investors and distribution partners, as well as bring in newer investors. After our AI / ML-powered Quant Fund, this is second amongst the innovative products we had planned for this FY.

Rahul Singh, CIO-Equities, Tata Asset Management added, "Negative correlation between different assets ensures not all investments fail at the same time giving stability to the portfolio. Diversification and low correlation across equity, commodities, fixed income as well as returns in commodity arbitrage to reduce risk with less volatile returns and have the consistency of return. Since the asset allocation is generally static in this fund, investors do not miss out on sudden gains in an asset class. The fund will have adequate equity exposure with a provision of the cushion by equity arbitrage. Equity taxation will be ensured for better net returns to the investor.”

Aurobinda Prasad Gayan, Head-Commodities Strategy, Tata Asset Management said, "Commodities through arbitrage and selective directional strategies, have the potential to generate returns across market phases. The commodities arbitrage aims to give risk-adjusted rewards. Few participants, less supply of money and more demand for commodities lead to higher spreads in commodities. Commodity Futures contract prices take cues from spot prices.”

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UTI Mutual Fund and Nippon India MF Monday decided to create a segregated portfolio, following in the footsteps of Franklin Templeton Mutual Fund, which had already segregated the investments last month.

Mutual funds invested in the debt of Vodafone Idea, the telco that must pay the government Rs 53,000 crore in dues, has begun segregating those investments into a separate portfolio after the company’s creditworthiness was downgraded in light of the stressed finances.

UTI Mutual Fund and Nippon India MF Monday decided to create a segregated portfolio, following in the footsteps of Franklin Templeton Mutual Fund, which had already segregated the investments last month.

Net debt at Vodafone Idea, at the end of the December quarter, is about Rs 1.03 lakh crore, a level analysts believe is unsustainable for a company that is losing subscribers and can’t generate enough funds internally if it were to pay the demanded dues to the state.

Earlier Monday, CARE Ratings downgraded Vodafone Idea to BB-, a rating indicating below investment grade paper. UTI MF said that as of February 14, UTI Credit Risk Fund, UTI Bond Fund, UTI Regular Savings Fund, UTI Dynamic Bond Fund, and UTI Medium Term Fund have exposures to the debt securities of Vodafone Idea, the market value of the investment is Rs 186 crore.

Three schemes of Nippon India Mutual Fund — Nippon India Strategic Debt Fund, Nippon India Credit Risk Fund, and Nippon India Hybrid Bond Fund — have exposure in the debt securities of Vodafone Idea. The face value of these investments is Rs 227 crore.

In a note to investors, Nippon India Mutual Fund said: “In light of no further relief and the Supreme Court’s re-iteration of the requirement to make the payment, the company’s operations are likely to become unviable, unless there is significant equity infusion. The promoters of VIL have hinted that they will be unable to continue the operations of the company on a going concern basis unless there is meaningful relief on the AGR dues.”

The telecom industry was plunged into a crisis on Friday after the Supreme Court came down heavily on the telcos for not adhering to its January 23 deadline of paying their outstanding AGR dues and on the telecom department for issuing an order that no coercive action be taken against telcos for missing the earlier deadline.

On January 24, a day after the initial deadline expired, Crisil downgraded the non-convertible debentures of Vodafone Idea to BB, due to which both UTI and Nippon India Mutual Fund had marked down the security and valued it at Rs 35, in line with valuations provided by agencies.

After the segregation, existing investors in the relevant schemes will be allotted an equal number of units in the segregated portfolio as those held in the main portfolio. No subscription or redemption will be allowed in the segregated portfolio of the captioned schemes.

In case investors in any of these schemes choose to redeem their units, they will get redemption proceeds based on the net asset value of the main portfolio and will continue to hold units of the segregated portfolio.

The units of the segregated portfolio will be listed on the stock exchange.

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Total flows in equity mutual funds stood at Rs 11,837 crore for the quarter ended December as against Rs 23,874 crore in the September quarter.

Investors poured nearly Rs 12,000 crore into equity-oriented mutual funds in the three months ended December 2019, a sharp slump of 50 percent from the preceding quarter, on worries over stock valuations as well as stuttering economic growth.

Notably, all categories of equity funds, including large-cap, mid-cap, small-cap and dividend yield funds, saw a drop inflows compared to the preceding quarter

According to a Morningstar report, total flows in equity mutual funds stood at Rs 11,837 crore for the quarter ended December as against Rs 23,874 crore in the September quarter.

During April-June quarter, inflows in such schemes stood at Rs 17,500 crore.

The asset base of equity funds, on the other hand, rose by 6% to Rs 7.7 lakh crore for the quarter ended December.

"Although the flows were positive, the sharp fall in equity flows could be attributed to concerns around over-valuations of some of the underlying stocks held by funds, polarised performances of some of the heavy-weighted stocks in the indexes, which camouflages the performance of the other under-performing stocks, and concerns regarding the steady fall in the GDP growth of the country that have been witnessed in the past few months," the report noted.

Over 30 per cent of the net equity flows have been directed toward the large-cap category, as this segment has been the most resilient over the past year and delivered good returns.

However, inflows in large-cap funds plunged by 42 per cent to Rs 3,500 crore for the period under review, from Rs 6,000 crore seen in July-September.

Until this quarter, large-cap equities had continued to see steady rise inflows as investors continued to align their investments to these funds relative to mid-cap and small-cap counterparts, which saw significant corrections in some of the underlying stocks.

Mid-cap funds saw infusion to the tune of Rs 2,688 crore in the period under review, from Rs 3,738 crore in the preceding three months, translating into a decline of 28 per cent.

The flows in the small-cap category halved to Rs 1,360 crore, from Rs 3,038 crore in the September quarter.

Overall, mutual fund flows have been growing consecutively for the past four quarters. Such funds witnessed a net infusion of Rs 1,28,463 crore in the third quarter of the ongoing financial year 2019-20, compared to Rs 46,578 crore in the preceding three months.

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We are keeping a close watch on HDFC Mid-Cap Opportunities Fund. As per our methodology, the scheme has been in the last quartile for over six months now. We will continue to watch the performance of the scheme and update you on its performance.

Here is an update on our mid-cap mutual fund recommendation list for 2020. And there are no changes to the list this month. In short, if you have invested in these mid-cap schemes, you may continue with your investments in them and make fresh allocations to them.

However, we are keeping a close watch on HDFC Mid-Cap Opportunities Fund. As per our methodology, the scheme has been in the last quartile for over six months now. We will continue to watch the performance of the scheme and update you on its performance.

Currently, the mid-cap mutual fund category is offering 17.58% returns in the last one year. The category has given 7.64% returns in three years and 8.46% returns in five years.

If you are new to these recommendations, here are a few things you should understand before considering to invest in mid-cap mutual funds to meet your long-term financial goals. Mid-cap mutual funds invest mostly in mid-cap stocks or stocks of mid-sized companies. These companies could become a successful large company. If that happens, you will make money.

However, many mid-sized companies never fulfill their promise. In fact, many of them get into trouble because of dubious management practices and lack of vision. This is the risk you are taking while investing in mid-cap stocks. When the company hits a rough patch, the stock tanks and it may take a very long time to bounce back or it may never regain its glory. When a company faces these phases, its stocks may tank heavily.

This is the reason why mid-cap stocks are considered extremely risky and volatile. That is the reason why these schemes are recommended only to an investor with a very large appetite and ability to cope with volatility. Advisors also say investors should invest in mid-cap schemes only if they have a very long horizon.

If you are a new mutual fund investor, you should avoid investing in mid-cap schemes. Start with relatively safer large-cap mutual funds, gain some experience before venturing into the mid-cap space. Do it only if you have the necessary risk appetite. Otherwise, sacrifice those extra returns and be happy with moderate returns from relatively less risky equity schemes like large-cap mutual funds and multi-cap mutual funds.

Finally, if you have a very high-risk appetite and can invest for a long-term horizon of seven to 10 years, you can invest in mid-cap mutual fund schemes. We have handpicked five mid-cap equity mutual fund schemes that you may consider to invest to achieve your long-term financial goals.

Best mid-cap mutual fund schemes to invest in 2020

L&T Midcap Fund

HDFC Mid-Cap Opportunities Fund

DSP Midcap Fund

Invesco India Midcap fund

Axis Midcap Fund

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According to the fund house, the fund is designed with the objective of providing access to emerging technologies that are in the early stages of adoption based in the US.

Edelweiss Asset Management Limited, a group company of Edelweiss, announced the launch of a New Fund Offer of the Edelweiss US Technology Equity Fund of Fund (FOF). The NFO will open on February 14, and close for subscription on February 28. It will re-open for continuous sale and repurchase on or before March 16.

According to the fund house, the fund is designed with the objective of providing access to emerging technologies that are in the early stages of adoption based in the US. This is the first time that Indian investors will be able to take exposure to these emerging technologies across different sectors, through the underlying fund, stated the press release.

The underlying fund, JP Morgan US Technology Fund, is an actively-managed fund with 20 plus years of track record. It invests in technologies that are in the early stages of adoption and are growing at a fast pace compared to technologies that have matured and are in their growth cycle. The underlying fund has a multi-cap strategy and hence, can outperform the popular large-cap based indices in the long run.

In this theme, there are companies that serve various consumers, using technology and catering to varied needs. A few of the top holdings of the underlying fund include Netflix, Synopsys, Microsoft, Tesla, Advanced Micro Devices, Analog Devices, ServiceNow, PayPal Holdings and Alphabet (Google's Parent company).

Radhika Gupta, CEO, Edelweiss Asset Management Limited said, "Technology is a very broad theme and operates in multiple sectors. Most of these companies draw their revenues from across the world, hence have limited country-specific risks. This fund enables investors to be a part of some megatrends in technology and get access to expert research of the JPMorgan Investment Team."

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Investment trading in securities market is always subjected to market risks, past performance is not a guarantee of future performance. CapitalStars Investment Adviser: SEBI Registration Number: INA000001647

For more details call on 9977499927 or visit our website www.capitalstars.com

Gold exchange-traded funds witnessed a net inflow of Rs 200 crore in January, making it the highest infusion in seven years, as geopolitical tensions in different parts of the globe and slowdown in the global economy led investors to opt for the safe-haven.

This also marks the third consecutive monthly inflow in gold exchange-traded funds (ETFs).

According to latest data available with Association of Mutual Funds in India (Amfi), a net sum of Rs 202 crore was pumped in gold-linked ETFs in January as compared to Rs 27 crore in the preceding month.

Prior to that, the safe-haven asset saw an infusion of Rs 7.68 crore in November. However, it had seen a pull-out Rs 31.45 crore in October. Such funds saw an infusion of Rs 44 crore in September and Rs 145 crore in August.

The latest monthly inflow was the highest one since December 2012, when gold ETFs saw a net infusion of Rs 474 crore.

"Gold ETFs witnessed a strong net inflow in the month of January. This was significantly higher than Rs 27 crore, which the segment received in the month of December. Geopolitical tensions in different parts of the globe and slowdown in the global economy led investors to opt for safe-haven like gold over the last one year," said Himanshu Srivastava, Senior Research Analyst - Manager Research, Morningstar Investment Adviser India.

"The appeal of yellow metal enhanced recently on the back of rising concerns over the severity of the coronavirus outbreak. As the investors weigh the fallout of the epidemic, they have increased their allocation to gold for its safe-haven appeal," he added.

The inflows meant asset under management (AUM) of gold funds surged 7.6 per cent to Rs 6,207 crore at the end of January from Rs 5,768 crore at the end of December.

Gold-backed ETFs are passive investment instruments that are based on price movements and investments in physical gold.

Overall, mutual fund houses witnessed an inflow of Rs 1.2 lakh crore last month as compared to an outflow of Rs 61,810 crore in December 2019. This inflow led to AUM of the 44-player industry rising to Rs 27.85 lakh crore by January-end from Rs 26.54 lakh crore at the end of December.

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Capitalstars is a SEBI registered investment advisor. Schedule a call with Capitalstars investment consultant or drop a mail at backoffice@capiltalstars.in and we will get in touch with you. You may also call us on 9977499927

Investment trading in securities market is always subjected to market risks, past performance is not a guarantee of future performance. CapitalStars Investment Adviser: SEBI Registration Number: INA000001647

For more details call on 9977499927 or visit our website www.capitalstars.com