Investing Trends

Franklin Templeton Investing Managers is the 6th biggest plus direction company in the state with AUM of Rs 26,842.22 crore (as on March 2008) and an investor alkali of Rs 25 lakh. The monetary fund house essentially follows a bottom-up approach. Its head investing officer, Sukumar Raja is of the position that this is the most opportune clip for common finances as the stock terms have got corrected sharply. Excerpts from an interview with Vandana and Tinesh Bhasin:

What's your return on the Sensex? Can it travel below 11,000?

Investors have got a inclination to extrapolate. When the Sensex was trading at 20,000, people spoke about the 25,000 levels. But with the Sensex shrinking, people are seeing a downward trend. There is a batch of support at less levels.

Global investors are buying into the Republic Of India growing story, along with the domestic institutions. A large portion of the volatility is behind us. There is not much downside left for the quality companies. I don't see the Sensex going below 11,000.

FIIs are coming back to the equity marketplaces as nett buyers. How make you see this scenario?

FIIs are not a homogeneous set of investors. There are gifts and pension finances who take a long-term view on the markets. They stayed away at the extremum and are buying at current levels.

However, there was a batch of hedgerow monetary fund activity in Republic Of India prior to the marketplace crash. Hedge finances are basically impulse investors and their activity will worsen additional from here. More value investors will come up now as assets are shrinking.

Do you believe the evaluation foam is over?

The current evaluations are reasonable, considering long-term opportunities. The Sensex looks attractive, trading at a pe of 15-16 modern times forward earnings. There are some very good purchasing chances in telecom and PSU oil companies.

Among the fiscal services, the environment for Banks and particularly commercial Banks is not good. We have got made some major alterations in our portfolio by adding substructure and construction.

What's your position on the existent estate sector?

We are underweight on this sector. The projections are too optimistic as they are based on land depository financial institution valuations. Developers believe they can sell a batch of flats at a high value.

What do you make out of the corporate earnings?

I believe there is disappointment. Corporate net income growing would come up down substantially. Companies have got been punished for seeking short-term profits in forex derivatives. Margins will decline, but from a five-year perspective. The grosses will turn in a 20-22 per cent range.

Will the weakening dollar affect earnings?

The dollar is currently undervalued. It have weakened as much as it have to. It should appreciate in the short and medium term. The Sri Lanka rupee will emerge as a better currency in the long term.

How make you happen the recently launched stock loaning and adoption chemical mechanism (SLBM) and short selling? When make you see them picking up?

I believe the chemical mechanism makes not substance much for long-term investors. There have been significant short-selling inch the last few months. There are too many short pants and not many optimists in the market. It will take clip for the new chemical mechanism to pick up. Information escape is another issue.

When you are short on a stock, the escape of information can squash you. So, we necessitate more than information security. I believe it will take clip before the chemical mechanism actually picks up momentum. We as a grouping will wait for the chemical mechanism to stabilise first.

What are your chief challenges this twelvemonth as a common monetary fund house?

Handling investors in this sort of an environment is hard for the gross sales department. Many of them are wary of investment after the crash.

As an investing team, we are not doing anything different from last year. We are focussing more than on cardinal research. In fact, the current marketplace scenario supplies more than value investing opportunities. So, it is positive for common funds.

Gold exchange traded finances are shining at a clip stock marketplaces are in turmoil, states Anirudh Laskar

In a volatile market, when your pillory are struggling and common monetary fund tax returns are headed south, gold exchange traded finances (ETFs) can be a safe bet. Gold ETFs have got got fetched eye-popping returns for investors over the past three calendar months when all the other investing avenues have gone haywire amid unsure planetary markets.

Gold ETFs, which have got the yellowish metallic element as the implicit in plus for the units, are listed and traded on bourses. Every gold ETF unit of measurement of measurement stands for a definite measure of 24 carat pure gold and the terms of the unit moves in bicycle-built-for-two with the terms of gold traded in any large gold merchandiser constitution or metallic element exchange.

The implicit in plus is held by a common monetary fund house issuing such as units of measurement either in physical word form or through gold receipt, which gives the right of ownership. Authorised participants can deliver the gold ETF units of measurement and demand equivalent value of existent gold at any time.

The recent rush in international gold terms have led to gold ETFs giving up 30 per cent tax tax returns over a three-month period and 40 per cent returns over a six-month period.

Five funds

There are five gold ETFs in the industry — Gold Benchmark ETF, UTI Gold ETF, Kotak Gold ETF, Reliance Gold ETF and the recent Measure Gold ETF. All these ETFs, except Quantum, have got given tax returns in the scope of 26-30 per cent over the past three months. Benchmark was the first plus direction company to present gold ETFs in Republic Of India last year, followed by UTI, Reliance and Kotak.

"Our plus and investor alkali have got grown 30-40 per cent over the last 1 year. Over the past couple of months, the figure of clients for gold ETFs have got got increased about 10 per cent, and we now have about 23,000 investors. On a long-term basis, 5-10 per cent of every investor's portfolio should consist gold ETF," said Rajan Mehta, executive manager director of Benchmark AMC.

Interestingly, the tramp in gold terms have positioned DSP Merrill Lynch World Gold Fund as the lone equity monetary fund in Republic Of India with positive tax returns in the past three months. Investors and analysts had expressed uncertainty about this monetary fund when it was launched in August 2007, since it put over 90 per cent of its assets in companies engaged in gold mining.

The feeder fund, which put in Merrill Lynch International Investing Funds — World Gold Fund, have wooed investors with about 63 per cent tax returns in just six months.

The fund's plus under direction have more than than doubled to over Rs 1,487 crore in December 2007 from Rs 692 crore in September 2007.

Analysts wary

Analysts, however, are discerning about the impulse gold have gained over the past few months.

"The tax returns from gold ETFs depend on the terms cycles. These finances may not be able to prolong their growing if gold terms cool down. Investors can maintain 5-10 per cent of their assets in these ETFs," Dhirendra Kumar, chief executive officer of Value Research Online, said.

Although the sum plus under direction of gold ETFs stood at Rs 493 crore at the end of February, the recent success of gold ETFs and DSPML World Gold Fund could transform gold-linked funds into attractive investing vehicles.

Cost factor

Investing in gold ETFs be givens to be costlier during the new monetary fund offering (NFO) period.

For instance, the Gold Benchmark Exchange Traded Scheme, which was launched in February 2007, charged an entry loading of 1.5 per cent and UTI Gold Exchange Traded Fund, launched in March 2007, charged 2.5 per cent. Investors can look for chances in these finances when they are listed on Bourses to avoid the entry loading in the NFO period.

Although investors are not required to pay an entry loading while investment in listed gold ETFs, they have got to pay a brokerage firm fee. Brokerage complaints are similar to what is charged while investment in pillory — around 0.5 per cent of the dealing value. However, the complaint changes from one agent to another.

A pre-requisite for investment in gold ETF is to have got a demat and trading business relationship with a broker. To keep these accounts, investors have got to pay yearly charges. There is also the disbursal ratio, a recurring expense, attached with the fund. Both Gold bees and UTI Gold ETF have got an yearly disbursal ratio of 1 per cent.

The yearly disbursals such as as storage, insurance, and direction fees are charged by merchandising a little amount of gold represented by a certificate. The amount of gold in each certification will gradually worsen over time. Investors demand to see these complaints before investing.