Mutual Fund Archives - Page 21 of 26

As equity MFs saw outflows of Rs 13k cr in Nov, debt funds got inflows worth Rs 45,000 cr

Equity MF investors seem to be in cashing-out mode. As stock markets hit new life-time highs on a regular basis in November 2020, monthly net outflows occurred in all the 10 equity fund categories totalling Rs 12,917 crore. This is the biggest monthly outflow number registered in equity MFs in many months. Though markets swiftly changed mood after hitting lows in March 2020, flows in equity funds have dried up and have been in the red for five consecutive months (July to November), shows data from mutual fund industry lobby AMFI.

November saw largecap funds witnessing the biggest monthly outflows among the 10 equity fund categories, with a net Rs 3,289 crore flowing out. Largecap funds were followed by multicap funds (-Rs 2842 crore), value/contra funds (- Rs 1,323 crore), midcap funds (-Rs 1,317 crore), smallcap funds (-Rs 1,031 crore). Sectoral thematic funds saw net outflows of Rs 987 crore, followed by ELSS/tax-saving funds (-Rs 804 crore), focussed funds (-Rs 637 crore), large & midcap funds (-Rs 615 crore) and dividend yield funds (-Rs 70 crore).

November 2020 has been one of the better months for equity markets with Nifty 50 at all-time high and a very strong recovery in the mid and small cap indices, with mid and small caps after three years of negative returns turned positive for the CY 2020. The markets are clearly pricing in the positives of recovering economic data points, lower interest rates and sign of vaccine coming out very soon and all of this leading to a very positive impact on earnings in coming quarters and more specifically FY 22, says Akhil Chaturvedi, Associate Director & Head of Sales, Motilal Oswal AMC said.

“Now, optically from the lows of March 2020 correction markets have given some stupendous returns and leading to the belief that markets are over-heated and therefore outflow from equity mutual funds to the extent of Rs 35k cr highest ever seen. Adjusted for inflows of 17k cr (50% of which would be SIP flows) the net redemptions have been almost Rs 18k cr,” estimated Chaturvedi speaking on November AMFI data.

In the hybrid funds segment, the net outflows in November 2020 is Rs 5,249 crore. Hybrid funds invest in both debt and equities, but the blend changes as per fund type mandate. Balanced hybrid funds were the worst hit, with outflows touching Rs 3,731 crore, which is even bigger than the worst hit on the equity side i.e. largecap funds. Dynamic asset allocation funds saw Rs 734 crore flowing out, followed by Rs 407 crore in equity savings funds, Rs 338 crore in arbitrage funds, Rs 178 crore in multi asset allocation funds. The only hybrid fund category which saw net inflows in November 2020 was conservative hybrid funds at nearly Rs 140 crore.

Meanwhile, debt funds saw net monthly inflows Rs 44,983 crore led by ultra short duration funds, short duration funds and dynamic bond funds.

N S Venkatesh, Chief Executive, AMFI took a different view of things and said: â€œInvestors are aligning their allocation in Debt schemes more towards duration schemes and corporate bond funds to maximize their debt returns, and on the other hand booking their profits in equity funds owing to surge in equity valuations. It is also significant to note that there has been a healthy addition of 3.39 lakh SIP accounts.

Franklin MF voting: Here are 7 things unitholders must know

As expected, the Trustee of Franklin Templeton Mutual Fund in India has approached unitholders to seek consent for the orderly winding up of the six fixed income schemes. This is as per the interim order issued by the Honâ€™ble Supreme Court on December 3, 2020.

When

The Trustee has partnered with â€™K Fintechâ€˜ for the electronic voting process and the unitholders meeting to seek unitholdersâ€™ consent.

Voting will take place from December 26â€“28, 2020 and the meeting of unitholders of relevant Schemes on December 29, 2020.

Why

The objective of the voting exercise is to seek, by â€˜simple majorityâ€™, consent of the Unitholders for the decision made by the Trustee to wind up the six fixed income schemes in an orderly fashion.

Consent will be sought from unitholders for each scheme separately.

What to do

The Trustee believes that it will be beneficial for Unitholders to vote â€˜YESâ€™ to the proposed resolution.

The Trustee is of the view that an orderly liquidation would maximize the value of the portfolio assets for distribution of cash to Unitholders on a pro-rata basis.

“There is a greater likelihood of realizing fair value from the investments within a reasonable period of time by the person authorized under Regulation 41 in an orderly winding up,” the fund-house says.

What happens if you vote ‘No’

If the decision to wind up the debt schemes in an orderly manner is not implemented, it could precipitate a rush of redemptions.

This rush would force a distress sale of the portfolio securities, likely resulting in a reduction in the net asset value (NAV) of the Schemes and substantial losses for Unitholders.

What happens if majority votes for ‘YES’

If a simple majority of unitholders vote â€œYesâ€ in favour of the orderly winding up. This will mean opting for an orderly winding up of the schemes with a potential to realize fair value from the assets.

This will allow the Trustee to proceed with the next step which is to seek further approval from unitholders for appointment of a person under regulation 41(1) to carry out the winding up.

Will it take long to get money back

An orderly winding up does not mean a lengthy wait for return of monies. Once Franklin receives a majority â€˜Yesâ€™ vote in favour of the orderly winding up of the schemes, the second vote to seek approval of the unitholders will come.

The schemes will then be able to distribute the cash already available in the schemes. Individually, Franklin India Low Duration Fund, Franklin India Ultra Short Bond Fund, Franklin India Dynamic Accrual Fund and Franklin India Credit Risk Fund have 48%, 46%, 33% and 14% of their respective AUM in cash right now. Franklin India Short Term Income Plan and Franklin India Income Opportunities Fund can’t return cash immediately as they are still under debt.

Franklin MF will also make further payments to unitholders at regular intervals as the schemes receive cash-flows from monetization of assets.

Payment and monetisation of securities

Of the Rs 11,576 crore received by the 6 funds since April 24, 2020, nearly half of this amount has been received from securities rated â€˜Aâ€™, followed by securities rated â€™AAâ€™.

Many of these securities were unlisted, and in many instances, Franklin Templeton Schemes were majority investors.

Fund-house officials say many (debt) issuers are approaching them with offers of prepayment, and with markets slowly returning to normalcy, secondary market interest for many of the securities held in the scheme portfolios is also increasing.

It is being hoped that the process of monetizing scheme assets can be sped up once the fund-house has unitholdersâ€™ consent for an orderly winding up.

Monetizing a large amount of portfolio assets over a period of time in an orderly manner will result in better outcomes for unitholders as compared to being forced to sell the same securities as a â€˜distress saleâ€™ in a short period of time.

Indiabulls Mutual Fund winds up 4 debt schemes

Indiabulls Mutual Fund is winding up four open ended debt schemes – Indiabulls Ultra Short Term Fund, Indiabulls Savings Fund, Indiabulls Banking and PSU Fund and Indiabulls Income Fund.
The schemes are said to be discontinued due to insufficient funds. There is a norm of maintaining a minimum Rs 20 crore assets under management in each debt fund on a half yearly rolling basis. Indiabulls Ultra Short Term has a daily AUM of Rs 17.84 crore. Indiabulls Savings Fund has a daily AUM of Rs 0.78 crore. Indiabulls Banking and PSU Fund has a daily AUM of Rs 14.54 crore. Indiabulls Income Fund has a daily AUM of Rs 16.35 crore.
The fund house had discontinued these schemes for any further subscription and redemption with effect from November 23.
Similarly worded four addendums pertaining to the four debt funds have been released by Indiabulls MF.
“Pursuant to Regulation 41 (1) of SEBI (Mutual Funds) Regulations 1996, a meeting of the unit holders of the Scheme will be held on Monday, December 7, 2020 at 5:00 pm at 18th Floor, Tower 1, One International Centre, Prabhadevi (W), Mumbai – 400 013,” the fund-house said.
The meeting of the unit holders will decide on approving by simple majority of the unit holders present and voting at the meeting, a resolution for authorizing the Trustees or any other person so authorized by the Trustee to take steps for winding up of the Scheme.
The Trustee or the person so authorized will dispose-off the assets of the Scheme in the best interest of the unitholders.
The sales proceeds after discharge of all liabilities and expenses will be paid to the unitholders in proportion to their respective interest in the assets of the scheme.
This is the second AMC to wind up schemes after Franklin Templeton Mutual Fund announced the winding up of six debt schemes in April 2020. The matter is currently in court, while the AMC has announced its plans to seek an unitholder vote for the winding of the schemes as per Supreme Court direction last week. Franklin debt funds issue is different from Indiabulls in size and scale as it involved about Rs 26,000 crore in AUM and 300,000 customers.

Mutual fund NFOs: A round up of key new fund offers currently open

Aditya Birla Sun Life ESG Fund

This is a thematic fund. The fund will invest in companies following the Environment, Social & Governance (ESG) theme. The NFO period has started from Dec. 4 and will close on Dec. 18. Aditya Birla Sun Life Mutual Fund has partnered with ESG research provider â€˜Sustainalyticsâ€™ for ESG scores and ratings which will be the filter for defining the stock investment universe. The fund will be market cap agnostic.

Thematic funds cannot be part of the core portfolio. You should invest a maximum of 10% in all the thematic funds. Do not expect ESG funds to out-perform in the short-term.

Axis Special Situations Fund

This is another thematic fund. This will be an open ended equity scheme that follows a special situations theme focusing on disruptive growth opportunities. The investment area will be both domestic and global markets and across the market cap spectrum. Overseas investments will be advised by Schroder* (which is around 25% shareholder in Axis AMC). The NFO period started on Dec. 4 and will close on Dec. 18.

There is nothing special about special situations unless one is able to capitalize on them. Also, you know the standard disclaimer about thematic funds. It is better to see how the special situations fund works in live conditions, before taking a call. At a broad level, the definition of ‘special’ is loose and so a special situation can be anything. Entry and exit matters if special situations are time-bound.

HDFC Dividend Yield Fund

This open ended equity scheme will be predominantly investing in dividend yielding stocks. The NFO period started on Nov. 27 and will end of Dec. 11. The fund will be market cap and sector agnostic. Dividend yield is a good valuation indicator and companies that have high dividend yield represent good cash flow in business and management commitment towards shareholders. Also, such companies have a higher Return on Equity (ROE).

We agree that low interest rates make high dividend yield stocks attractive. Also, the current polarized valuations make high dividend yielding stocks attractive. But given the fact that dividend yield strategy in India, which is a fast-growing market, has low return potential just based on dividends, an investor has to hope that stock price appreciation happens as well in the dividend yield stocks in the MF portfolio.

ICICI Prudential QUANT Fund

This is an open-ended thematic fund which would predominantly invest in equity and equity related instruments selected based on a quantitative model. The NFO will close on Dec. 7. The success or failure of a quant fund depend on its mathematical model. There are only limited options in the Indian market when it comes to quant funds, which are a rage globally. In this context, the ICICI Pru scheme does widen the quant fund choice basket.

Unfortunately, the quant model of ICICI Prudential QUANT Fund is not as clear as we would want. It seems there is some amount of secrecy involved. The details provided in fund documents filed with SEBI give an overall picture, but is it not as detailed as some would want. In the absence of higher levels of clarity, it will be a leap of faith to invest in such a fund. Do note that quant funds have to be operated by human fund managers at the end of the day. Also, during extreme short-term market volatility, the tide is against quant funds.

UTI Small Cap Fund

UTI Mutual Fund has launched an open-ended equity scheme which will predominantly invest in small cap stocks â€“ â€˜UTI Small Cap Fundâ€™. The New Fund Offer opened on Dec. 2 and will close on Dec. 16.

Smallcap funds require an investment horizon of 5-7 years at the minimum because smallcap stocks do take about 10 years to become midcap and then largecap stocks. The expansion of the cap size coincides with large stock price returns. Smallcap funds historically have given the best returns among all categories over the long-term. In the short-term, they are prone to higher volatility. They are a good addition to an investor portfolio only if the core of the portfolio has been formed with largecap and midcap funds, or flexicap/multicap funds.Â

Note: If you want to invest in NFOs, you can reach out to the team at Wealthzi onÂ service@wealthzi.comÂ or open an account atÂ https://www.wealthzi.com

Sanjay Sapre, President, Franklin, updates on SC hearing on debt funds

Dear Partner,

I had shared an update with you about our decision to file a special leave petition before the Honâ€™ble Supreme Court to ensure appropriate implementation of the law in the best interest of unitholders. The Honâ€™ble Supreme Court heard the matter today and I am pleased to share an update on the way forward:

An update on the Supreme Court Hearing on December 3, 2020

The Honâ€™ble Supreme Court issued an interim order allowing the Trustee of Franklin Templeton to seek consent of the unitholders for the winding up of the six schemes under Regulation 18(15)(c) of SEBI (Mutual Fund) Regulation 1996. Redemptions will continue to be suspended till further notice. We believe that the Supreme Court order will be helpful in ensuring orderly monetization and distribution of scheme assets. We will issue the notice for seeking consent of unitholders shortly.

What this means for Investors

We will now be proceeding with next steps to seek unitholder consent for the winding up of the six schemes under regulation 18(15)(c) of SEBI (Mutual Fund) Regulation 1996. In order to ensure maximum participation, the process of seeking unitholderâ€™ consent will be through an â€œElectronic Voteâ€ followed by a meeting through video conference. As stated above, the details and modalities of the same will be shared with you soon. The objective of the voting exercise is to seek consent, by â€œsimple majorityâ€, Â to implement the decision taken by the Trustee to wind up the six fixed income schemes and thereby enable an orderly liquidation of assets and distribution of investment proceeds. Consent will be sought from the unitholders for each schemeÂ separately.

Unitholders will have two choices:

Vote â€œYesâ€ in favour of the orderly winding upÂ â€“ A â€œYesâ€ vote will allow us to proceed with the next step which is seeking unitholder authorization under Regulation 41. Post this, the Trustee or any other authorized person can proceed with monetization of assets and distribution of monies to Unitholders. This will also mean that the schemes will not be required to make a distress sale of portfolio securities to fund redemptions.
Vote â€œNoâ€ against the orderly winding upÂ â€“ A â€œNoâ€ vote will mean the funds will be required to re-open for purchases and redemptions. The schemes may suffer significant losses due to the need to sell securities at distress prices to fund heightened redemption volumes.

Why we believe unitholders should vote â€œYesâ€ in favour of the Trusteeâ€™s decision to orderly wind up the six schemes

We seek unitholders consent for the orderly winding up and believe this will result in the best possible outcomes for unitholders under the current circumstances. In normal market conditions, the opportunity to liquidate assets at fair value will increase with time.Â Let me share some data to support this.

From April 24 to November 27, 2020, the schemes under winding up have received over INR 11,576 crores from maturities, pre-payments, and coupons. Out of the INR 11,576 crores, the schemes have received INR 2,836 crores in the month of November 2020.
You are aware that four out of the six schemes are already cash positive. Even though the schemes could not actively monetize the portfolio, the cash available for disbursement as on November 27, 2020 stands at INR 7,226 crores for these four schemes, subject to fund running expenses. This shows that subject to unforeseen credit events, if any, the securities held in the funds can be liquidated at fair value, if the schemes are allowed to undertake an orderly process of liquidation. This is preferable to a distress sale of securities (at steep discounts) that would occur if a rush of redemptions forces an emergency liquidation of the securities at prices far below their realizable value under normal market conditions.
Individually, Franklin India Low Duration Fund, Franklin India Ultra Short Bond Fund, Franklin India Dynamic Accrual Fund and Franklin India Credit Risk Fund have approx. 48%, 46%, 33% and 14% of their respective AUM in cash as on November 27, 2020.
We also continue to make good progress in reducing borrowings in the other two funds. The outstanding borrowing (net of cash available for repayment of borrowings) in Franklin India Short Term Income Plan stands at approx. INR 62 crores (1% of AUM) and in Franklin India Income Opportunities Fund, at approx. INR 305 crores (18% of AUM) as on November 27, 2020.
All this money has been received without undertaking any secondary market sales (active monetization) of the securities in these six schemes. VotingÂ â€œYesâ€ for orderly winding up,Â gives the person authorised under regulation 41, the time needed to monetize scheme assets without resorting to distress sales and thus gives an opportunity to the scheme to return maximum value to unitholders.

I would also like to assure you, that voting for an orderly winding up does not mean a lengthy wait for return of monies.Â Once we receive a majority â€œYesâ€ vote in favour of the orderly winding up of the schemes,Â we will immediately proceed with a second vote to seek approval of the unitholders as required under regulation 41 of SEBI (Mutual Fund) Regulation 1996 to authorize the Trustee, or any other person, to proceed with the winding up of the schemes. The person authorised under regulation 41 would then be able to distribute the cash already available in the schemes and make further payments at regular intervals as the schemes monetize assets and receive cash-flows.

Over the next few days, we will update you on the next steps related to the process of seeking consent. In the meanwhile, my team and I are here to answer any questions or concerns you may have.

We deeply appreciate the support of our investors and partners till date and hope to commence distribution of investment proceeds at the earliest.

Please note that a similar communication has also been sent to all impacted investors.

In case of any further queries,Â please call our dedicated helpline at 1-800-425-9100 or 1-800-258-9100 from 9 a.m. to 6 p.m., Monday to Friday, and 9 a.m. to 2 p.m. on Saturday. Alternatively, you can also e-mail us atÂ distserve@franklintempleton.com.

Note: This is verbatim reproduced from Sanjay Sapre’s letter to partners.

Should you consider gold mutual funds?

Finally, gold prices have come down from their highs. Gold prices had touched Rs. 57,950 per 10 grams this year. Now, they are around Rs. 49,000. If you want to invest in gold, gold mutual funds might be better investments than physical gold. You can redeem your investment easily and also benefit from higher gold prices.

What are gold mutual funds?

Gold mutual funds are open-ended funds that invest in Gold Exchange Traded Funds (ETF). The net asset value (NAV) of gold mutual funds are linked to performance of the underlying ETFs. If you didnâ€™t know, gold ETFs gather money from investors to invest in gold bullion that are having purity of 99.5 per cent. The aim of ETFs is to track the price of domestic physical gold prices. The ETF represents gold in terms of units and are listed on the stock exchanges. On the stock exchange, one can buy and sell the ETF units.

Do gold funds reflect gold prices?

Yes. Thereâ€™s an indirect link between gold mutual funds and the gold prices. Any fluctuation in gold prices will affect gold ETFs which in turn will impact the NAVs of the gold mutual funds.

As gold mutual funds invest in gold ETFs, gold mutual funds make returns based on the movement in the gold ETFs. So, the NAV of the funds change based on the price of the gold ETFs in which they have invested. So, by investing in a gold mutual fund, you will benefit from the change in gold prices.

Why gold funds may be better than gold ETFs?

Itâ€™s easier to invest in gold mutual funds when compared to gold ETFs. You can approach the fund house or invest online in gold mutual funds through a distributor. However, to invest in gold ETFs, you need to have a demat account.

Another advantage with gold mutual funds is that investors can choose to invest in them through the Systematic Investment Plan (SIP) route while this facility is not available with gold ETFs. So, only seasoned investors who can time the market might prefer investing in gold ETFs. Gold mutual funds are preferred by retail investors who want to lower their investment costs.

The minimum investment for gold ETFs is higher as there is no SIP. You will need to invest at least one unit of gold if you choose gold ETFs as your investment. This is about Rs. 4,900. You can invest in gold mutual funds for Rs. 1,000 which is best suited for retail investors.

Gold ETFs invest mostly in gold bullion only. They donâ€™t have any other investments. 90 to 100 per cent of the assets of a gold ETF are invested in 99.5 per cent pure gold while the remaining is invested in debt. Gold mutual funds can keep their investments flexible and can reduce their gold ETF investments when markets touch highs.

The value of your gold mutual funds is in terms of rupees as the gold investments are based on the NAV of the fund. For gold ETFs the minimum investment is based on the grams of gold you invest. So, it is easy to get the value of your investment.

Investors can choose the dividend option in gold mutual funds. These dividends are usually paid out of realised gains of the funds and not from the income of the fund.

How are gold mutual funds better than gold bonds?

The Reserve Bank of India-backed Sovereign gold bonds allow you invest in gold online and offer an annual 2.5% interest over and above the price of gold on the day of maturity. However, gold bonds do not offer the SIP option. Also, gold mutual funds are more liquid than gold bonds. Why? This is because gold bonds have a tenure of 8 years.

What about gold mutual funds taxation?

Investments in gold mutual funds are regarded as long-term if they are for more than three years and the gains from the investments are called long-term capital gains (LTCG). The LTCG on gold mutual funds are taxed at 20% with indexation benefit. Short-term capital gains (STCG) on gold mutual funds are taxed as per the tax bracket applicable to the investor.

How to choose gold mutual funds?

You will need to look at the returns that the gold mutual fund has provided in comparison to physical gold. If the returns are higher or similar to that of physical gold, it means that the fund is worth considering. You can look for the average returns generated by other gold mutual funds just to make sure that you have chosen the best one. You will need to look at the expense ratio of the gold funds. The lower the expense ratio, the higher will be your returns from the fund.

If you donâ€™t have the time to choose gold ETFs, need professional fund management and are looking for smaller investment amounts, you might find gold mutual funds are a good investment avenue.

Franklin case: Supreme Court allows to seek consent of unit holders on winding up 6 schemes

The Supreme Court on Thursday permitted Franklin Templeton trustees to call a meeting of its unit holders to seek their consent for the closure of 6 debt funds, even as requests of redemption from investors remain suspended.

Steps to call the meeting will have to be taken within a period of one week.

“The Honâ€™ble Supreme Court on December 3, 2020 issued an interim order allowing the Trustee of Franklin Templeton to seek consent of the unitholders for the winding up of the six schemes u/r 18(15)(c) of SEBI (Mutual Fund) Regulation 1996. Redemptions will continue to be suspended till further notification,” said a Franklin Templeton spokesperson.

Interestingly, according to Bar & Bench, which tweeted the SC proceedings live, the apex court asked SEBI that if they knew people will withdraw money like anything during COVID, why didn’t SEBI do something like RBI? In response, Advocate Pratap Venugopal for SEBI said that the regulator doesn’t have any powers in the winding up process.

Franklin Templeton MF said it believes that the Supreme Court order will be helpful in ensuring orderly monetization and distribution of scheme assets.

The fund-house is expected to issue the notice for seeking consent of unitholders shortly. It hoped to commence distribution of investment proceeds at the earliest. The cash available (for distribution) as of November 27, 2020 stands at Rs 7,226 crore for the four cash positive schemes, subject to fund running expenses.

Franklin Templeton MF had approached the apex court against the Karnataka High Courtâ€™s decision according to which prior consent of unit holders was required to close the six debt fund schemes during the pandemic. The closure was challenged due to the fact that no consent was taken from investors. But according to Franklin Templeton, it was under the impression that no prior consent or approval was required from investors.

The six schemes are Franklin India Low Duration Fund, Franklin India Ultra Short Bond Fund, Franklin India Short Term Income Plan, Franklin India Credit Risk Fund, Franklin India Dynamic Accrual Fund and Franklin India Income Opportunities Fund.

Mirae Asset Banking and Financial Services Fund NFO – Should You Invest?

MiraeÂ AssetÂ Mutual Fund has unveiledÂ MiraeÂ AssetÂ Banking and Financial Services Fund, an open-ended equity scheme investing in Banking & Financial Services Sector shares. This is a sector oriented fund. This is a New Fund Offer (NFO). Investors can get NFO units at Rs 10 per unit if they apply between November 25 to December 4. From December 14 onwards, the price of the mutual fund scheme’s units will be based on market movement of its portfolio. Banking and Financial Services sector is one of the most important in the Indian market. Read on to know more.

Why banking and financial servicesÂ

Banking and Financial Services sector is one of the most important in the Indian market. In an economy with fast-growing potential, Banking and Financial Services is the major growth driver. The sector as a whole gives a lot of opportunity to buy different businesses. Also, the runway for growth is fairly good given the low penetration of the sector’s segments.

How is the sector doing

There are many Banking and Financial Services funds. A cursory glance will tell you that as a sector Banking and Financial Services has faced some pressure due to the cascading effect of Covid-induced pandemic. As a result, Banking and Financial Services funds are not chart-toppers like they once were. In the last 1-year period, this category of funds has fallen 9.3%, which is the 2nd worst (the worst are PSU funds). In the 3-year time period, Banking and Financial Services funds are the 4th worst.Â

Some investment experts feel this period of under-performance for Banking and Financial Services funds allows them to rebound when the Indian economy recovers. Â

Do note that all banking and financial services companies are not good even though RBI/IRDA/SEBI regulates them. Just in the case of the banking sector, over the 1-2 years we have seen listed banks like YES Bank, Lakshmi Vilas Bank on the verge of bankruptcy and ultimately a bail-out was given to save depositors’ money. Shareholders in such businesses suffer the most. So, selecting the right stock is very important.Â Â

Where will the fund investÂ

MiraeÂ AssetÂ Banking and Financial Services Fund aims to build a portfolio that is invested predominantly in equity and equity related securities of companies engaged in the banking and financialÂ services sector.

As per rules, the fund has to invest a minimum of 80% in Equity and equity related instruments in the Banking and Financial Services Sector.

The fund has the flexibility to invest across market capitalization (largecap, midcap, smallcap). There is no restriction as such.Â

Our understanding is that the fund will be growth-oriented in terms of selecting stocks. These stocks can include Banks, Non-Banking Finance Companies (NBFCs), Housing Finance Companies (HFCs), Broking and Securities, Stock Exchanges, Depositories,Â AssetÂ Management Companies (AMCs), Insurance Companies, Credit Card and payment gateway, Digital Financial Institutes, Investment companies and rating agencies etc.

How the fund will invest

The focus would be to build a portfolio of strong growth companies, reflectingÂ MiraeÂ Assetsâ€™ most attractive investment ideas at all points of time.Â

The fund manager does have the flexibility to follow a focussed approach on the investments. In doing so, he will try to avoid liquidity risk.

The fund-house says the fund manager will monitor the trading volumes in a particular stock before investment to avoid liquidity risk.

Other fund details

Minimum NFO investment amount – Rs 5000Â

Minimum NFO SIP investment amount – Rs 1000 per applicationÂ

Plans available – Regular Plan and Direct Plan

Options available – Growth Option and Dividend Option (Payout & Re-investment)

Fund manager – Harshad Borawake & Gaurav Kochar

NFO unit allotment date – December 11

Benchmark index for fund – NIFTY Financial Services index

Exit load – 1% if switched or redeemed within 1 year from date of allotment. No exit load if switched or redeemed after 1 year from date of allotment.

NFO Verdict

There are many Banking and Financial Services funds.Â Since these funds are concentrated on one sector, they tend to show similar tendencies over time. The Banking and Financial Services sector swings more than the market over time. Consequently, a fund investing in the sector will also move more than the market on both sides (up or down). The returns of the funds can be volatile and even negative depending on market conditions. Â

You should consider investing in a Banking and Financial Services fund if you have at least 5 years.

Do understand that during these 5 years or more time, your principal will be at high risk due to the nature of the Banking and Financial Services sector.

If you already have invested in equity mutual funds, you can take extra exposure (5-10%) to sectoral funds.

If you are a first-time investor, avoid sectoral funds.

Do not base your investment decision on the past performance.

Why you should invest in equities only for the long term

There are many kinds of buyers and sellers in the stock market. They are often classified as speculators, traders or investors based on how they view the stock investments and how long they are holding the stocks.

While speculators are those who look at the daily or hourly movements of stocks in the stock markets, traders are those who buy or sell stocks on a daily or weekly basis. Speculators and traders churn stocks very frequently. This could in a few months, weeks or days, sometimes even a few minutes. Investors, on the other hand, donâ€™t look at the technical indicators for the stocks. They look at the fundamentals, financials and management philosophy of the company or the mutual fund house before investing in the stocks or mutual funds. They hold the investments for years or even decades to make profits over the long term. While speculators and traders have more possibility for losses, there will be very limited losses for investors if they choose the right stocks or mutual funds. Hereâ€™s why you need to be an investor in equities who invests for the long term.

No need to time the market

Trading is a different game. To be successful at trading, the trader needs to have a certain amount of money to start with. This is often much higher than that needed for an investor. Traders need to dedicate time on a daily basis if they want to make profits. Traders also need to develop a level of experience for identifying when to buy and sell stocks. Trading profits are made by buying at a lower price and selling at a higher price. This needs to be done within a relatively short period of time. This could result in profits or losses. So, the traders need to have high risk tolerance. So, it is clear that traders need to time their investments and not everyone can be a trader.

However, an investor neednâ€™t keep reviewing the investments on a daily basis. The investor needs to do some basic research on the investment or can take the help of an investment advisor to choose the right stocks or mutual funds for the long term. Investors neednâ€™t bother about short term downturns in stock prices. On a day-to-day basis, stock prices experience fluctuations. However, in the long run, stock prices reflect the value of the business. Therefore, a stockâ€™s price will move upwards in the long term if the fundamentals of the company are good.

Lower possibility of losses

Since stock prices are not predictable, traders can make profits or losses depending on the movements of the markets. If they donâ€™t monitor the prices or donâ€™t predict them well, they could lose some part of the capital they invested. This is not the case for investors.

Equity markets tend to do well over the long term. Take the Nifty 50 index. 15 years back, the Nifty was at 1900 levels. Today, Nifty has touched 12,900. So, markets keep moving up over the long term.

Apart from the capital gains that investors get when markets move upwards, investors can even earn income such as dividends while they are holding the stocks or equity funds. So, the prospects of investors making losses on investments over the long term is low.

Why short-term equity investing doesnâ€™t work?

Let us consider the monthly returns from Nifty 50 this year to understand this.

Month	January	February	March	April	May
Nifty Returns	-1.7%	-6.3%	14.7%	-2.8%	7.5%

If you wanted to invest on a monthly basis, you would have had to time the market. While the markets have given negative returns most of the months, there are months where there are positive returns. Letâ€™s take another year, say 2014.

Month	January	February	March	April	May
Nifty Returns	-3.4%	3%	6.81%	-0.1%	7.9%

There are months were the Nifty has provided negative returns, there is no pattern in returns on a monthly basis. What about yearly returns? Can you invest in the markets for a year and make profits? The data below will help.

Year	Nifty Return
2012	27.7%
2013	6.7%
2014	31%
2015	-4%
2016	3%
2017	29%
2018	3.1%
2019	12%

Even if you wanted to invest for a year which is a short term, you would have had to time the markets. So, investing for the short term doesnâ€™t work for equities.

However, long term investing does work. If you look at the five-year return for Nifty, it is a good 63%. What about ten-year returns? It is 119%.

Therefore, equity investors need to give time for their investments to do well and for returns to compound over a long period. Remaining invested for a minimum period of 5-7 years is advisable for equity. This way you can gradually build wealth over an extended period of time. You can get the benefits of perks such as dividends and stock splits along the way. You will “ride out” the downtrends in the stock market in the long run.

Franklin debt funds collection gathers momentum by mopping up Rs 11,576 cr so far; Rs 2,836 cr collected in Nov alone

Franklin Templeton Mutual Fund â€“ whose six debt funds are under winding up procedure â€“ has collected a whopping Rs 1,895 crore from maturities, pre-payments, and coupon payments during the period November 14 to 27. This is more than double of the Rs 941 crore collected in the previous fortnight, which was itself double of the amount collected by the 6 funds in October 16 to October 29 fortnight.

Cash registers ringing

With the Rs 1,895 crore collected in the latest period, the total cash flows received by the 6 debt schemes till date now stands at Rs 11,576 crore till 27 November 2020. Out of which, Rs 2,836 crore was received in the month of November.

More importantly, out of the Rs 1,895 crore coming in, as much as 87% or Rs 1,664 crore was from pre-payments. A large proportion of pre-payments could indicate the strength of the borrowers who, even in a Covid-19 affected economy, are pre-paying debt. This should assuage some worries of investors about the portfolio health of the six embattled debt funds.

The cash available (for distribution) as of November 27, 2020 stands at Rs 7,226 crore for the four cash positive schemes, subject to fund running expenses.

Scheme level details

Individually, Franklin India Low Duration Fund, Franklin India Ultra Short Bond Fund, Franklin India Dynamic Accrual Fund and Franklin India Credit Risk Fund have 48%, 46%, 33% and 14% of their respective AUM in cash right now. These are the four cash positive schemes.

Borrowing levels in Franklin India Short Term Income Plan at Rs 943 crore or 17% of AUM and Franklin India Income Opportunities Fund at Rs 497 crore or 29% of AUM continue to trickle down, but they are not cash positive yet. In fact, the absolute borrowing amount for both the schemes has remained constant since October 29. Each scheme can return monies to investors only after paying all the obligations/ liabilities towards borrowings/ expenses/provisions.

According to Franklin Templeton MF, post the judgement of the Honâ€™ble High Court of Karnataka, the AMC has considered all possible options over the last few weeks to start returning money to unitholders “in the shortest possible time in an orderly manner”. This included the option of seeking unitholder consent according to the judgment of the Honâ€™ble High Court. However, after detailed deliberations, the fund-house determined that it will be necessary to seek judicial intervention from the Honâ€™ble Supreme Court to ensure an appropriate implementation of the law in the best interest of unitholders.

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