Thursday, December 31, 2015


If there is one question which is most trending in Mutual Fund space, it is SHOULD I CONTINUE WITH HDFC EQUITY FUND?

While there is no right or wrong answers simply because it depends on a number of factors like your Risk Profile, Your other investments, et al.
This article is not written to convince you to continue to hold or sell or invest afresh  (that will be done better by your Financial Advisor), I am trying to show you some data points which are very very useful and could help you in your Investment decisions.

The Fund's performance for the past 4-6 quarters has been pretty insipid and has been panned by many investors. True.
But, its long term performance continues to inspire.
And, its underperformance for some quarters is not new at all. It has this habit of underperformance for quite a while and then bouncing back in style. It has done for so many times in the past.
And, yet, we in the MF field say "Past Performance may not be repeated"!!!!
What is most astonishing some self proclaimed "experts" comparing HDFC Equity Fund's performance with FD and RD!!
Come on! You can’t compare Oranges with Apples.
If you do compare HDFC Equity with Fd and Rd...Then do not compare for 3 or 5 years, but compare for 15 years or 20 years and show me the result!!

Courtesy : Morningstar


As I analysed HDFC Equity fund's performance history....the following amazing points I noticed :

1. The Fund which was launched in January 1, 1995 at Rs.10
Was quoting its NAV as follows:

Year 1 (Jan1, 1996) - Rs.7.29
Year 2 (Jan1, 1997) - Rs.5.67
Year 3 (Jan1, 1998) - Rs.6.79
Year 4 (Jan1, 1999) - Rs.9.29

and the Fund crossed the physiological mark of Rs.10 NAV only on 19th Jan 1999, a full 4 years after its launch!!!!

And, surprise on Year 5 (Jan1, 2000) the Fund's NAV was Rs.24.91.....MORE THAN DOUBLE!!

2. Even for a SIP investor, the value of his investment would have been like this....

Till March 1998, (that is 39 sips)
Invested Amount = Rs.39, 000
Investment Value = Rs.38400/-

So, even the proponents of SIP would have got the stick

The Interesting part is, if the Investor had continued for just 1 more year
Then his
Invested Amount = Rs.51, 000
Investment Value = Rs.86, 451...


Not only he would have gained profit, it would have been a good decent appreciation.
Now, if the investor had continued for one more year

Invested Amount = Rs.63, 000
Investment Value = Rs.1, 95,000

What many would have done is...they would have started in this fund as "Long Term", bought it in the Year 2 and SOLD (!) in year 4, after all your NAV went up from 5.67 to 9.29.
Even After 4 Years NAV Is 8.22,  then, yes, one definitely needs to rethink.
But You would have also noted that the NAV Has Increased From 6.68 to 8.22. It Shows Some Positive Changes In Fund.

Second, Third & Fourth, Year Fund Is Performing.

By the way, for your information, the NAV of HDFC EQUITY FUND  is today Rs.443 and the CAGR for those who have stayed invested since the NFO is 19.78% TAX FREE!!

I am NOT (repeat, not) advocating that you should start investing in HDFC Equity or continue to stay invested... (for that, your Advisor would be in a better position).
What I am trying to say is...if you have started in a fund with a Long Term view, then please do stay invested.
The reward for just staying put is huge.

Caveat: The Fund strategy should be good and so should be the Fund Manager. (This, of course, your Financial Advisor would be able to guide).
Panning a fund for its non-performance (even for a short term) has been a fashion.
Should always compare a fund not only with the Benchmark but also its peers.
A Fund's space in your portfolio Depends on many factors like
Bench mark returns, investment objective , underlining assets where the fund has invested in , fund house, fund manager etc etc .
There are various schemes which have gone through rough patch in the initial few years. The reasons could be multiple. At the same time some schemes have fantastic start and track record and have not been doing well in the recent past.

It is important to for an investor and distributor to stay invested with conviction. Rankings are temporary.

Srikanth Matrubai
SriKavi Wealth Advisors

Tuesday, December 8, 2015


As expected, there is a mad scramble to invest in IRFC's Tax Free Bonds which opened today.
People are rushing in to invest as if there is no other alternative to this issue.

IRFC tax free bond bidding status:

Bidding @ 11.04 am

CAT I        0050.000
CAT II       0708.679
CAT III      0810.370
CAT IV      0659.285

TOTAL      2228.333

Figs in crores

Already more than 2000 crores in 1 hour flat!!

AT 1 PM:
IRFC tax free bond bidding update

Bidding @ 01.15 pm

I      0305.000  44.87%
II     1044.939 115.28%
III    1283.805 113.31%
IV    1325.228  73.10%

TOT 3958.972   87.36%

Figs in crore

And 4000 crores in 3 hours!!

Is it so good?
Are you missing something by not investing?
Lets analyse....

IRFC will be giving you max of 7.53% TAX FREE return (15 year )...meaning, the interest earned on this investment will NOT BE TAXED.

But, do not get confused, the Investment itself will NOT qualify for deduction u/s Sec80C!!!

Just today morning, I was telling a client whose Portfolio was equity heavy and there was definite space for Debt exposure and he was hell bent on investing in this Tax free Bonds.
I suggested him to rather look at Debt Funds at this stage and maybe Arbitrage Funds too.

The BIGGEST ARGUMENT IN FAVOUR OF DEBT FUNDS is that Indexation benefit is allowed but is not allowed in these Tax Free Bonds if you sell before the tenure closes.
That means, the long-term capital gains is taxed at 10%.

Now, when you are investing in a instrument for 15 years, I wonder why should anyone be happy with the paltry return of 7.53% when he can easily earn much more than that in Equity.
Yes, equity is volatile but we all that TIME IN MORE IMPORTANT IN MARKETS and over a period of time, the returns will compensate for the volatility.

If your goal is only to PRESERVE WEALTH, then sure, go ahead, invest in these Tax Free Bonds, but if you want to CREATE WEALTH, then you have to look hard and think seriously about diverting this money into EQUITY MUTUAL FUNDS.

There is absolutely no doubt that India is in a stage where it is poised to take off in a big way....and this is a given and as & when this happens, the Inflation will definitely bounce back and your returns from the Tax Free Bonds will not even match the Inflation and thus your Real Return could well be NEGATIVE.

Wherever there is GUARANTEE , you need to understand you are sacrificing wealth creation.

Never forget the monster called INFLATION................

The MOST important point for me is that TAX TREATMENT ALONE should never be the ONLY criteria for any investment and if someone is investing in Tax Free Bonds with only Tax Benefit as backdrop, he is making a huge huge mistake.

Investments should always be Goal Based

And, please contact your Financial Advisor before investing as he will be in the Best Position to guide you based on your Asset Allocation and Risk Profile.