Investors can buy the units of HDFC Prudence, a balanced equity-oriented fund, considering its long-term track record in delivering returns and ability to contain downside as a result of hedge offered by its debt exposure. The fund?s balanced structure may, however, limit it from benefiting as much as top diversified equity funds during market rallies. It may, therefore, be suitable for investors with a low-risk appetite.

Over a five-year period, HDFC Prudence is one of the best performing balanced funds with a return of 26.8 per cent compounded annually. This compares favourably with a good number of diversified equity funds. With a mandate that allows it to move to debt substantially, the fund may be well placed to not only contain downside risks from equity but also benefit from rallying interest rates.

Performance: HDFC Prudence has managed to beat its benchmark ? the Crisil Balanced Fund index ? over a three and five-year period. While it has trailed its benchmark over the last year it has, nevertheless, managed to contain losses better than indices such as the Sensex and the Nifty. The fund has, over a long-term period, delivered returns superior to peers such as FT India Balanced and DSPML Balanced fund.

During market rallies, the fund may not be able to fully participate to deliver superlative returns, given its debt exposure. It may at best deliver steady returns. The fund has so far retained its bias for equity (about 75 per cent of assets at present) and kept its debt holding limited when compared to other balanced funds. But importantly, during phases of market fall the current year, the fund has contained losses better than its benchmark.

Strategy: HDFC Prudence has around 40 per cent of its portfolio in midcaps (with less than Rs 7,500 crore market cap) stocks and has retained this proportion for over a year. This strategy worked well for the fund during last year?s market rally. The fund also invested in momentum sectors such as capital goods, banks and power. It does not indulge in heavy churning in sectors. But exposure to defensive sectors such as pharmaceuticals and consumer non-durables has seen an increase.

http://personalfinance201.com/mutual-funds/

Mr Kenneth Andrade, Vice-President of Equity at IDFC Mutual Fund, having over 14 years of experience in equity research and fund management, spoke to Business Line about the mutual fund scenario in the country.

Infrastructure Development Finance Co (IDFC) took over Standard Chartered?s mutual fund business in India in March. Currently, the fund house manages assets under management to the tune of Rs 12,255 crore.
What do you have to say about markets at this point?

In the current macroeconomic environment, equities are not the most-favoured asset class, so there is a lot of money going into alternative assets, and as long as the fixed maturity plans, and debt markets continue to give double-digit returns, the appetite for equity will be low. I think that the way we are valued or the way the market is trading, we have a market which is already reasonable in terms of multiples.

retweeting @manuscrypts

with a name like that, its no wonder that the sensex gets screwed regularly problem is I do too, by association!

Investing in the equity market directly is exciting and rewarding over a long period.

But the volatility and the information overload make it a very difficult task.

It is important to understand that everyone has different financial goals and risk appetite. So the first step would be to be aware of your own financial goals and your risk profile before you take a d ip into the Stock Markets!

CERC has issued draft guidelines for tariffs for the period 2009-14. The proposed guidelines has retained the 14% ROE for tariff fixation. However, it has proposed to link incentives based on plant availability as against the earlier practice of incentive based on PLF. There has been change in depreciation charges which is aimed at avoiding front-loading of tariffs.

Fuel efficiency norms tightened. If implemented, may reduce fuel cost savings for generators like NTPC

The new guidelines propose linking incentives to plant availability as against the earlier practice of plant load factor (PLF). Several power generators including NTPC and NLC have earlier favoured incentive based on plant availability. According to them, generator can only ensure availability of the station whereas generation schedule depends on demand by the customers. Plant availability is within the control of the plant management while the generation depends on available demand from the SEBs

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Stocks News 

• An unknown Mauritius based entity has picked up a 17% stake in BPL Mobile, a cellular services player with operations in Mumbai. (ET)
• The Tata group is close to diluting its stake in Tata Teleservices for around Rs 5000 cr. The interested parties are France Telecom and NTT DOCOMO. (ET).
• Norway;s Telecom firm Telenor is within striking distance of picking a 26% stake in Unitech’s telecom arm for a consideration of around USD 500 mn. (ET)
• 3i infotech bags government deal for setting up 12000 IT kiosks across the country. (ET)
• Rico Auto expects to double exports of engine components to Rs 300 cr. in this fiscal. (BL)
• Vedanta Resources plans to invest USD 9.8 bn to increase its aluminium production capacity to 2.6 mn ton and emerge as the world’s fifth largest produced of metal by 2012. (BL)
• GVL Power and Infrastructure and Nuclear Power Corp of India plan to buy reactors and equipment from GE Co and Westinghouse Electric Co. (BS)

Depth and breadth of private banking space has now increased. You see significantly large private banks. And the private sector is getting market share. I feel the valuation of PSU banks continue to trade at a discount.

People are talking of reforms in financial sector in general and banks in particular. Will that increase activity in PSU bank stocks?

We have to pay for the subsidies. There is no other way than through the capital receipts. The gap can’t be filled with revenue receipts. Capital receipts can come only via disinvestment.

But, disinvestment doesn’t necessarily mean selling off. It could be like the selling of 3G licence. It could be through public sector IPOs.

Business is booming as usual. Biggest consumption and raising per capita income means they are at slight premium to the indices. From business point of view, they will feel pangs of liquidity. We are little unsure if they can quote at the non-cyclical valuations they are quoting at this point, which shouldn’t be the case

Program trading is casually defined as the use of computers in stock markets to engage in arbitrage and portfolio insurance strategies.

The term has also been defined as “a wide range of portfolio trading strategies involving the purchase or sale of 15 or more stocks having a total market value of $1 million or more” without any direct reference to the use of computers. The word “program” can be interpreted in its earlier, more general meaning of a defined and pre-arranged sequence of steps, rather than specifically a computer program.

In recent times, there has been a subset of program trading called algorithmic trading. This is when a computer program takes a large order, breaks it up into small pieces (typically 100-300 shares per piece), and gradually submits these pieces to the market.

The goal is to complete the order without other market participants realizing that a large trade is in progress, because they would change their behaviour (and thus the price) to the detriment of the program trader if they recognized a large trade.

See this Wikipedia page for more details

There’s no better formula for losing money than to buy high and sell low. And data for 2008 shows people have been doing exactly this

Indian stock markets were lower by around 29% in the current year, and have since recovered around 14% from the low. Market participants cite various reasons for this performance: inflation, deteriorating macro numbers, selling by foreign institutional investors (FIIs), declining global risk appetite, and so on.

Often, I run into investors who recount their own investing experiences. Here are a few samples of varying perspectives on the stock market. First, a young graduate who has got his degree and has been working since 2003, says, “Stock markets? A place to make quick money. Hardly any downside, invest at every correction. Markets will always go up.”

Next, a gent in his late 30s who has been working for 10 years, says: “You can make money, but watch for sharp corrections, and a scam every five years.”

Third, a home maker who started investing in 2008. This lady says, “Stock markets? Stay away! The kitchen is safer! I lost money in intraday trading. Experts on the business TV channels say the markets will not rise.”

Fourth is a retired bank manager. He says, “Stock markets are highly risky! I lost money in the past, when IT stocks crashed. There’s no guaranteed income. Bank deposits are safer.”

Fifth, a gentleman in his late 40s, with a career of 20 years, says, “Stock markets are all about timing. If you time it right, you make money. If not, the volatility will kill you.”

Next, a day trader in stocks says, “I’m a daily wage earner. I leverage in futures markets. I make or break Rs 10,000 to Rs 20,000 a day.” And lastly, we have a stock market investor who says, “Buy stocks when crude oil falls, and vice versa.”

These views seem diverse, but there’s a common underlying thread: they all take an unfortunately short-term view. No one refers to stocks as a long-term wealth creation tool. The Sensex hit its 2008 intraday low of 12,595 on July 15, 2008—four days after crude oil touched its all-time high of $147/barrel. On the same day, the yield on 10-year government bonds touched a recent high of 9.55%.

Once crude oil prices started falling, due to worries about global demand and the unwinding of speculative positions, Indian markets recovered sharply. The trend to sell stocks and buy oil seems to have reversed. Oil is now 20% below its peak.

Nothing has changed significantly in the fundamentals other than sentiment and the drop in oil prices. But the stock market rallied 14% from the bottom. There could be other reasons besides oil, but crude certainly facilitated the rally. What if the trend were to reverse, so that oil prices started climbing again towards $150/barrel? Would the market fall again? If it were that easy, everyone would make money in the stock markets!

Only if the price of oil falls substantially and remains low for a long time will it translate into benefits for the economy, earnings and markets. Although crude prices are crucial to the Indian economy, it’s surprising that at every dollar drop or rise in oil, speculators take the markets up or down.

Retail investors often get carried away by short-term movements. Sometimes newer correlations between different factors emerge in stock markets, such as now, buy equity and sell oil. Such correlation trades often influence market movements in the short run, which then deviate from fundamentals.

The long-term winners are the fundamentals.

Often, stock markets are regarded as an arena for shortterm speculation, especially in a rising market. Stock markets and equity mutual funds are vehicles for long-term wealth creation. Investments in these should be made in a disciplined way, irrespective of market levels.

A retail investor should remain invested in stock markets over a few market cycles—at least five years—to create wealth. A short-term market timer is likely to lose money in the long run, unless he has the gift of predicting the future.

Goldman Sachs issued a report in 2003 predicting that India’s economy will be the world’s third largest by 2035. The report cited expected annual growth rates of 5.3% to 6.1%.Though it has been a bumpy ride as of late, India has the potential to fulfill these optimistic promises. Unfortunately, I’m about as confident in “potential” macroeconomic projections as I am in my own ability to read the future. After all, questions about economic reform, infrastructure, and education must be addressed first.

But if these projections are even close, the Indian stock market will show you the money.

China vs. India: showdown of the 21st century
The real question is: How much of these two looming giants should you have? Both are growing at accelerated rates, so it’s not a simple decision. You really need both — a good piece of China will pay off over the next few decades.

That said, I look to India to exploit an edge: its commitment to the democratic process. Yes, this may sound cliche. India’s government has long been criticized for extended periods of unremarkable reform. Yet I prefer it.

Advantage: India
Long term, India’s commitment to democracy and free markets are a massive benefit. The economies of Brazil, Taiwan, South Korea, and yes, even the United States can testify to that.

At its simplest, India is attempting to build a foundation of sustainable yet powerful growth. And it is doing it through a functional democratic process, which is accountable to its citizens.

Taking stock
When it comes down to companies, India has some specific areas of critical advantage. The IT outsourcing world has been hit before. But I think Satyam is still an intriguing investment opportunity that has been tremendously volatile as of late. The company is closing in on becoming the developing world’s first global consulting firm — similar to IBM’s (NYSE: IBM) role in the tech consulting industry. In the financial world, our Global Gains team of analysts picked up on two Indian banks (ICICI was one) that have posted strong financial performance of late. The other, HDFC (NYSE: HDB), continues to be an intriguing investment in a country that is building wealth quickly.

Attacking its own content-hungry consumers, Rediff.com has created a strong online presence that is beginning to resemble Microsoft’s (Nasdaq: MSFT) MSN site in its early years. Rediff is certainly not on the same scale of popularity or profitability yet; it may be getting there soon. If you are paying attention to SINA (Nasdaq: SINA) in China, you might want to look into Rediff.com as well.

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