Friday, August 28, 2009


Srikanth Shankar Matrubai

Kotak Mutual Fund recently came out with a New Fund Offer named Kotak Select Focus Fund.

Kotak Select Focus Fund intends to focus on Select Sectors with untapped Current and Future Growth potential. Fund Manager Mr.Krishna Sanghvi says that this Fund provides adequate diversification compared to a Single Sector Fund while at the same time providing benefit adequate concentration in the portfolio on certain sectors expected to show strong performance.
The Fund will aim to invest in Six Sectors at a time.

The Fund is positioned between a Sector Fund and a Diversified Equity Fund and thus fails to either enthuse Aggressive Investor or the Risk Averse Investor. Also, with a target of having about 60 stocks in the Portfolio, the Fund fails to classify as a Sectoral Fund, which its name suggests.
The Fund seems to be more of an extension of Kotak Opportunities Fund with a Sectorial bias.
Having Three Fund Manager could also result in too many cooks spoiling the broth.
The Difference between Sundaram Select Focus Fund and the Kotak Select Focus Fund is that Sundaram focus on Specific Stocks and Kotak tends to be more focussed on Top Down Approach i.e, Sector Focussed. So, even if a Stock looks attractive, the Fund will shy away and NOT invest in the Stock if the Sector outlook does not look rosy.
A separate Fund Manager for Debt portion too makes the Fund unsuitable for a Risk-Ready investor looking for a 'Alpha' to his returns.
Kotak AMC has a good track record in almost all its Funds but still the Fund confuses investors with its 'neither here nor there' approach. The ball is in your court.
The Fund is obviously not for the First Time Investor. I suggest AVOID.

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Wednesday, August 26, 2009



Srikanth Shankar Matrubai

Canara Robecco has joined the NFO Bandwagon with its Canara Robecco FORCE Fund. FORCE is the acronym for Financial Opportunities, Retail and Entertainment. The new fund offer (NFOs) open for subscription from July 20 to August 18, 2009.

The Fund will primarily invest in Stocks of the above sectors. The Fund will be managed by Anand Shah who was earlier with Kotak and ICICI. Mr.Anand Shah presently manages CanRobecco Emerging Equities, CanRobecco Balance, CanRobecco Infra and CanRobecco MultiCap Fund.

Canara Robecco has had an excellent past year. And the Economic Times rated many funds right in the top Platinum slot. This should give comfort to first time investors in this AMC.

The Force Fund aims to exploit the India Growth Story by focussing on the Sectors most likely to benefit from Rising Consumer Spending.

Because of its Sector Concentration, the Fund is expected to be volatile and should be considered for investment only by Aggressive Investors who have a good risk appetite. However, the Fund does have a wider choice in terms of Stock Universe compared to other Finance Funds and should do well over a longer time frame, especially above 5 years or more.

Invest if you are willing to stay invested for more than 5 years.

Best of luck,

Srikanth Shankar Matrubai

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Wednesday, August 19, 2009


Better than Bank FDs


Srikanth Shankar Matrubai

Shriram Transport Finance Company Limited after its attractive Fixed Deposit Offering, came out with a Issue of Secured Non-convertible Debentures (NCDs).
Investors can definitely take up the offer as they not only offer Returns higher than Bank FDs but their money is also secured by the Assets of the Compnay.
The company :
Shriram Transport Finance which is among the leading asset financing (commercial vehicle financing) NBFCs in India. The Compnay has a 25% market share in pre-owned truck finance market and has a 7% market share in New Truck Market.
The offer :
The Company is offering 5 investment options.
Investment 3 and 4 come with Put and Call Options at the end of 4 years. The issue offers Coupon rates ranging between 10.75% to 11.5%.
NCD options
Option I: It pays interest every six months and has an effective yield of 11.30 per cent. Redemption is staggered in the ratio of 40 per cent, 40 per cent and 20 per cent at the end of 36, 48 and 60 months respectively.

Option II: It pays interest annually. The principal is redeemed as under option I. Senior citizens are offered an extra return of 0.25 percentage points under both these options. The effective yield on this option comes to 11.25 per cent.

Option III: It offers an interest rate of 11.03 per cent compounded quarterly, with the effective yield coming to 11.50 per cent. It is a cumulative option and hence offers the highest yield. This option comes with a put and call option at the end of 48 months.

Option IV: This option pays interest annually. The yield comes to 11 per cent. Put and call option are available at the end of 48 months.

Option V: This option has been designed for those who want to invest for only three years. The interest rate has been capped at 10.75 per cent and there is no Put and Call option. The maturity amount is paid at the end of 36 months.

Depending on the option you choose, you will get interest semi-annualy, annually or on a cumulative basis.
The minimum application amount is Rs.10000 and in the multiples of Rs.1000.

The NCD has been rated CARE AA+ by CARE and AA (Ind) by Fitch, which indicates that the company is stable and capable of timely servicing of debt. Further, the NCD is secured by the company’s assets. Consequently, the claims of NCD holders will be superior to the claims of unsecured creditors (like company FD holders, which are unsecured deposits). Bank FDs are insured up to a maximum of Rs 1 lakh.

1)No TDS is payable on Interest Income.
2)Ample liquidity due to listing of NCD on the NSE.
3) Interest recd will treated as “other income”and so will get added to your total income and taxed at the marginal tax rate.
4) If you sell at the stock exchange after 12 months, your gains will be treated as long-term capital gain and will be taxed at 10 per cent without indexation. If you sell in less than 12 months, your gains will be treated as short-term capital gains and taxed at the marginal income tax rate.
5)For low risk taking investors this issue offers a unique opportunity. The current rate on bank deposits is for a tenure of 48-60 months is between 7.5%-8.0%. This issue can earn an investor a spread of 275-350 basis points at a negligible incremental risk.
6) Shriram's Interest Coverage Ratio of 1.49 indicates its ability to service the interest on debt and is better than other Finance Companies like Gruh finance and HDFC.


Even for a risk-averse saver bitten by ever falling Bank FD rates, NCDs are great alternative. After all, a three-year fixed deposit will earn you 6-6.5% interest, but a three-year NCD will fetch between 10.5-10.75%.

Not only will you be locking your returns at a higher rate than a Bank FD but also liquidity is easy due to its trading in the Stock Markets!!! If you want to get out, you can get out any time.

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Monday, August 17, 2009



Mr.Mukesh Pandya asked,

Can you explain what is a Quant Fund??/


Dear Mukesh,

Quant Funds are a scientific approach to investing in Stock Markets based on Mathematical model.

The Portfolio of a 'Quant Fund' is based on Computer-based quantitative analysis working on a mathematical model, with no involvement of human judgement. Thus, there is no provision for any emotion or sentiment involved when buying/selling stocks in the Quant Portfolio. The quantitative analysis is undertaken using computer-based models either designed inhouse or outsourced by the fund.

Reliance Mutual fund, for instance, for its Reliance Quant Plus Fund has developed an in-house model, whereas Benchmark has based its Quant Fund on a model designed by Citigroup
Religare Agile Fund (formerly Lotus Agile Fund) launched in Novermber 2007 is India's First Quant Fund.
Quant funds are more popular among the private funds such as hedge funds, rather than among public funds.

The fund invests in a stock universe selected by pre-programmed guidelines. For example, in the case of Religare Agile Fund, the stock should have been listed for at least one year, the market cap of the stock should be higher than the market cap of the S&P CNX Nifty stock that has the lowest market cap, and so on.

The portfolio of stocks is reviewed and reset every month using the quantitative analysis model.

Quant Funds first emerged in the 1970s and became popular in the 1990s as computing methods evolved. According to an estimate, currently over $800 billion in assets under management are invested in quant funds globally.

There are around 200 fund houses in the quantitative space with 120 in the US alone.


Based on the performance of the existing Quant Funds, the answer is Firm NO. The model is still new in India and not proven yet but the Quant Fund strategy can be useful when the model is built properly. Religare Agile has had a disastorous performance since its launch inspite of its Large Cap bais.
Religare has underperformed its Benchmark both in Bull and Bear phases. It has lost 32% since inception compared to 12% of its Benchmark.
However, Reliance Quant Plus Fund has done much much better giving a postive return of 4.92% compared to its Benchmark returns of -5.08%.

Let the concept prove itself and then you can commit your funds. For now, if you are really interested, take a sip way to investing and take a call in future.

Best of luck,

Srikanth Shankar Matrubai

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Saturday, August 15, 2009


Mr.S. Rao wrote :

"Dear sir

I came across your website accidentally and found it very helpful and interesting. You are doing great job!

My investment goal 5 year, 15 year and 20 year horizon for child's education, marriage and retirement annuity respectively. I am 44 and able to save & pay upto 50000 per annum for the next 20 years.

My bank suggested Unit linked childs plan (with guaranteed maturity benefit) and Pension plans or both of which are high in policy charges. Is it wise to stay away from ULIP plans and invest in SIP MF's, ELSS and ETF'S. Can you please advise the best tax free investment portfolio. How best can I use 10 lakhs which is presently in FD.

Other investments I posess:

Birla Sunlife Income plus Rs 10000

IDFC Income plus:10000

SBI arbitrage opportunities fund:49000

FYI:I recently purchased a site fully paid out. I took Jeevan Astha for 2 lakhs. I have LIC endowment policy for 75000 SA and PPF account.



Dear Sridhar Rao,
At the outset, I thank you for your kind words.
For your age, you have done well by already having a site and Good Amount of Savings. Sadly, your investment seems to be too conservative to me. Maybe, in hindsight, this was good as these conservative has protected your capital in the Last year's Crash.

Jeevan Aastha was an avoidable investment. You can find the details about the same in my blog whose link is There is very little you can do now, after you have invested.
Continue your LIC Endowment Policy and your PPF Account.
Continue your present investments in
Birla Sunlife Income plus Rs 10000
IDFC Income plus:10000
SBI arbitrage opportunities fund:49000
For now, it is okay to stay invested in the above schemes.
For your investment goal of Children's education, marriage and retirement, you better consider the following.
Out of your existing Mutual Fund Investment (listed above), you can consider these for your child's education. After 1 year or so, when rates stop declining and in case, start going up (not impossible), switch your Debt Funds to Balanced Funds, as your investment horizon is 5 years. Alternatively, take out the money from SBI Arbitrage Fund and invest in the Corporate FD of Tata Motors (3years FD will yield you 12.83%). Click on link

For Marriage & Retirement(15 & 20 years horizon), go for Diversified Equity Funds like
Birla Sunlife Equity Fund
DSPBR Top 100 Fund
DWS Tax Saving Fund
Fidelity Equity Fund
HDFC Top 200 Fund
Sundaram Select Focus Fund
Tata Pure Equity Fund

As and when you near your target/horizon, switch from the above funds and invest in either Debt Funds or Arbitrage Funds gradually., to protect your capital from volatility and lock in the gains you would have made.

For a 15/20 year horizon, ULIPs can be considered. I always say ULIPs are expensive products with high initial charges. I am not in favour of any child plan . If one has enough term cover that will do. Child plans are long term gambles like ULIPs. How well an insurance company manages your investment part is a gamble. These are all ways to get more money from you. At maturity you will realise that the returns are not great. Better to keep INSURANCE & INVESMENT separate.
Compared to Other Child Plans, HDFC in addition to Death Benefit option also offers Critical Illness Benefit.
I however felt ICICI Smart Kid RICH fund is slightly better. You can compare it with HDFC Young Star Plus also, though ICICI Smart Kid scores over it in many aspects.
Invest your 10 lakhs FD in some Debt Fund and go for a Systematic Transfer Plan where in you will gain from both Interest Earnings and as well as Automatic Market Timing through SIPs.
For all your other doubts, refer to my other posts in my blog.
Best of luck,
Srikanth Shankar Matrubai

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Thursday, August 6, 2009



Srikanth Shankar Matrubai

Franklin Templeton Investment India has launched Franklin Build India Fund, an open-ended equity scheme. The scheme will invest in stocks of companies engaged either directly or indirectly in infrastructure-related activities.

Franklin Templeton has launched a New Fund after a long time.


The minimum investment amount under the fund is Rs 5,000 . The scheme will charge an entry load of 2.25 per cent for investment of less than Rs 5 crore. An exit load of 1 per cent will be levied for investments less than Rs 5 crore if the same is redeemed within a year. The scheme will be benchmarked against S&P CNX 500. The NFO will close on August 8.

Finally, Franklin Templeton too has finally fallen to the charm of the "infrastructure" tag after resisting all these years.
Infrastructure as a theme covers almost all Sectors like banking and finance, Construction, Real Estate, Cement, etc.
and Franklin Build India Fund has a wider scope than the recently launched Reliance Infrastructure Fund.

The Scheme does sound thematic in nature but is more like a Diversified Equity Fund because of its Huge Coverage of Sectors and thus merits attention.
Fund Managers Anand Radhakrishnan & Roshni jain have had a good track record and provide comfort.
The UPA Govt's positive emphasis on Infrastructure will ensure good times for companies in these sector and the fund should be able to cash in on this.
Investors willing with a horizon of 3 years can consider investing in the Fund, especially through SIP.
Though there are about 14 Funds in the Infrasturcture space, Franklin's track record and the growth potential of the Infrastructure sector should work in the favour of the Franklin Build India fund.

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Tuesday, August 4, 2009


Safe Fund from Unproven AMC

Srikanth Shankar Matrubai.

Investors can give the New Fund Offer from Religare, the Religare Business Leaders Fund a miss and not regret one bit.
The Scheme aims to invest in Equities of companies whare are Business Leaders in their respective segments. The Scheme would aim to be fully invested at all times and would invest in a diversified portfolio of Large Caps and Mid Caps.

There are much betters choice of similar kind of Funds like the UTI Leadership Fund, Sundaram Leadership Fund, Kotak K30 fund. This Fund is thus similar to any Large Cap Fund and thus you are better served by investing in a Proven Fund rather than betting on an unknown Angel.
Don't forget, the Fund itself is quite new, although they have two good winners in Religare Tax Plan and Religare Contra fund.
True, the Scheme would offer sufficient sectoral diversification but the Gains would be restricted in Large Caps in a bull market as seen by none so impressive performance by UTI Leadership and Sundaram Leadership Funds which play on a similar mandate.
By and large, the Fund would be a safe bet for Conservative Investors but it would be wise for the Fund to prove its mettle before you commit your money.

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Monday, August 3, 2009



If you ready to pay me, Raise your Hands,

If not, Raise your standards...


With the ban on Entry loads, it is inevitable that Mutual fund Advisors charge consultation fees.

SEBI has virtually killed the Mutual Fund distribution business. Now distributors will SELL ULIPs which give them 40% approx commission instead of Mutual Funds which give them ZERO commission. SEBI is telling Distributors to take two different cheques from investors. One for his investment, one for your fees. Advisors, if they find investors unconvinced about paying Fees, will not Service these Small Investors at all.


Even if the investor goes directly to the fund house, Can the Investors be sure of unbiased recommendation by the AMC????

Incidentally, last year SEBI has abolished entry load for direct applications yet only 10 per cent of fund investors since then have actually chosen to go directly to the fund. This just goes on to show that investors need the support of advisors to decide on the investment.

Imagine buying a shirt for Rs600 and giving two cheques, one for the manufacturer for Rs450 and one for the shopkeeper for the remaining amount. This is the same thing. It is not going to be easy to convince the consumer what he is paying for.

Not only for selection of Funds, if a customer wants services such as consolidated statements, portfolio advice, etc., he would have to pay for it.

Working out a client’s risk profile is a serious business and can take up a lot of time.

SEBI has been doing a great job all these years in terms of investor protection and the waiver of Load is a Welcome step that will no doubt benefit the small but informed investor. I use the word 'informed', but what about the uninformed investor???

The way ULIPs are advertised and promoted, it is difficult for an uninformed investor to differentiate and tell apart a mutual fund from an ULIP product.

Distributors will definitely pitch for ULIPs because of HUGE commission compared to NIL commission in Mutual Funds. It is here that SEBI should not have signalled out Mutual Funds separately. Why would a distributor sell MF schemes where he earns nothing, when he can sell a ULIP product and get a very high commission

India had just 0.3 percent of the $18.97 trillion global asset management industry in 2008, and only 7.7 per cent of its household savings went into mutual funds as compared to 26 percent in the UK, according to data compiled by KPMG.




Not everything is gloomy. Because of the Ban on Entry load, Mutual Funds have the Cheapest form of Investment. As more and more people start getting this into their head, they will shun ULIPs and will pitch for Mutual funds.

The scrapping of entry load would ensure responsibility and accountability and would act as a key differentiator between a good and a bad financial planner.

Investors too will shift towards seeking Professional Advise and Portfolio services backed by Strong Knowledge and Research, enabling them to select from over 300 Equity Schemes available in the Market. Likewise, they WILL willingly pay Fees to the Advisors.




Dear Investors, do not get into a trap by scouting for a NO COMMISSION Distributor. He may be selling you a Fund with a Poor Track Record on which he receives 'internal' commission. That may not be the best fund for your portfolio. Please bear in mind that a consistent long term track record and a risk profile that suits your appetite should be the key factors that determine your investment choice.


Ensure that you are not sold an ULIP when you do not want one. ULIPs are long term insurance-cum-investment products. They generally build in expenses upwards of 10 per cent, in the initial years. This sum would be deducted from your investment amount.

So as an investor, what should be your response to this change?

As always, ensure that you choose a fund based on its track record. Expenses or commissions come next.

Do not be diverted into buying ‘other’ products if your objective is to buy a mutual fund

If you are a less-informed investor and need advice, do not hesitate to pay a decent sum to a good financial advisor/distributor. THERE IS NO SUCH THING AS A FREE LUNCH.

If you are a well-informed investor, making your own investment decisions, you can apply for funds directly through their portals or approach any of the local offices of the fund house you want to invest in. This way there would be no commission. If you wish to make such an investment through your online broking account, you may do so; this would however entail paying a fee.


However, do note, for every follow up services, like statement of account, dividend not recd, you may forced to leave your work and spend more than 2-3 hours of your precious time.




I will retiterate what I have said right at the beginning...

If you ready to pay me, Raise your Hands,

If not, Raise your standards...



Best of luck,

Srikanth Shankar Matrubai

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Planning to get married in 3 years

Mr.Kumar Babu wrote :

hi Srikanth,

i am kumar,

You are doing a great job with your blog.
i have planned to get marriage after three years & need to do my higher studies, so i need to start savings for my happier days.... by investing in one of the them like mutual funds, ulip's, or through gold.... and need to save tax also as iam working currently

but bit confused on which i should invest ... can you help me ... please

With Love,


Dear Kumar,
It is good to see that you are already thinking of Financial Planning at such an young age. As you plan to get married in 3 years, it would not be wise to invest in Direct Equities or Equity Funds as such, you can consider investing in Balanced Funds which have a high Debt allocation and a bit of Equity Portion as well, namely, DSPBR Savings Plus Fund - Aggressive which has a 70-30 ration in favour of Debt.
Avoid ULIPs. Never mix insurance with investments.
For Tax Savings, invest in Good ELSS like
Fidelity Tax Advantage Fund
HDFC Tax Saver Fund
Sundaram Tax Saver.

See my other posts in my blog for more details.

Srikanth Shankar Matrubai

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