Investors in Fidelity schemes should look for an exit in the 30-day no-load window that will be available to them. Returns of L&T Mutual Fund have been nothing to be confident about
L&T Mutual Fund (MF) recently came into the Indian fund industry, having been setup through the acquisition of DBS Cholamandalam Mutual Fund in 2010. Chola was a running a poor management and investors entering the L&T Mutual Fund fold have not done any better. With the acquisition of Fidelity Mutual Fund, one of the better performing fund houses, L&T MF has become the 13th largest fund house up from 24, out of a total of 43 fund houses currently present. But the sad news for investors in the schemes of Fidelity MF is that the sale to L&T MF does not include the fund management team. Fidelity’s fund management team would be there until L&T MF builds its team to manage the newly acquired assets.
The fund management of Fidelity MF has been much better than that of L&T MF. As seen in the performance compared to the benchmark, the returns of L&T funds have fallen short of the benchmark on a number of occasions, whereas the funds of Fidelity have outperformed their respective benchmarks on all the occasions for the one-year, two-year, three-year and five-year periods ending 31 March 2012. The investors of Fidelity wouldn’t want the L&T fund management team handling their investments seeing this performance of the fund house. Investors who are worried about their investments and those who are doubtful of the fund management team of L&T should look for an exit in the 30-day window given to them where they will be charged no load for exit.
Venugopal Manghat recently joined as vice president & co head - equity investments at L&T Mutual Fund. He was earlier the head of equities at Tata Asset Management. He was the fund manager of Tata Pure Equity and Tata Equity Opportunities—two equity funds of Tata MF which have done well in the past. He took over managing L&T Growth fund from Pankaj Gupta last month. Would he be able to turn around the performance of L&T equity schemes? One would just have to wait and watch. At the same time Shobheta Manglik has joined as assistant vice president & fund manager-fixed income. She has been jointly managing the few of the debt-oriented funds and has an experience of over 10 years. Pankaj Gupta with an experience of over 10 years has been managing three of the equity funds since September 2010 and Anant Deep Katare, who has over nine years of related experience, has been managing L&T Hedged Equity fund and L&T Midcap Fund since October 2007. L&T Mutual Fund would have probably done well had Sanjay Sinha, who came in from SBI Mutual Fund, stuck around. But he joined in September 2008 and quit in August 2011.
Compare this to the current fund management of Fidelity. All the equity diversified funds of Fidelity are co-managed. Anirudh Gopalakrishnan, who has a work experience of over 10 years, is the common fund manager for all the four schemes and has been managing these funds for foreign securities investments since October 2010. He, along with Sandeep Kothari, who has an experience of 17 years, manages Fidelity Equity Fund and Fidelity India Growth Fund and along with Nitin Bajaj, who has an experience of 12 years, manages Fidelity India Special Situations Fund and Fidelity India Value fund. Fidelity does have a more experienced team but unfortunately they would not be managing the schemes once L&T Mutual Fund acquires them.
If the Nifty makes a lower low, we may see the index touching 5,165 and 5,135
Dismal global cues led the market lower for the second day. On one of the lowest volumes of on the National Stock Exchange (NSE) in the past 23 trading sessions (including today), the Nifty made a lower high and lower low for the second straight day today. Today, 50.63 crore shares were traded on NSE. The losses in the last two trading days wiped off nearly 70% of the gains made in the upmove that happened between 30th March and 3rd April. We had mentioned in our previous closing report that Monday’s move would determine the further direction. If the Nifty makes a lower low, we may see the index reaching the level of 5,165 and then to 5,135.
Opening after a long weekend, the market extended its losses on unsupportive global cues. Markets in Asia were in the red in morning trade on a disappointing US jobs report that was released over the weekend and a rise in Chinese inflation. The Nifty opened 40 points lower at 5,283 and the Sensex declined 78 points to resume trade at 17,408.
Select buying enabled the indices to hit their intraday high in initial trade itself. At the highs, the Nifty touched 5,288 and the Sensex rose to 17,408. However, selling pressure in metals, capital goods, power, banking and oil & gas stocks led the market further southwards as trade progressed.
The absence of any triggers and the key European markets remaining closed for the Easter Monday holiday saw the local market moving sideways. A small recovery was seen in the post-noon session; however, intense selling pressure once again pushed the indices lower again.
The market fell to its intraday lows in the fag end of the session. At this point, the Nifty fell to 5,228 and the Sensex dropped to 17,200.
The benchmarks settled near the lows of the day and in the red for the second day in a row. The Nifty closed trade at 5,234, down 89 points, and the Sensex finished 264 points lower at 17,222.
The advance-decline ratio on the NSE was tilted towards the losers at 685:1243.
Among the broader indices, the BSE Mid-cap index dropped 1.35% and the BSE Small-cap index fell by 0.65%.
Barring the BSE Healthcare index (up 0.32%), all other sectoral gauges settled lower. They were led by BSE Metal (down 3.44%); BSE Capital Goods (down 3.16%); BSE Power (down 2.49%); BSE PSU (down 2.05%) and BSE Bankex (down 1.81%).
Cipla (up 1.34%); Hindustan Unilever (up 1.06%); Bajaj Auto (up 0.95%); DLF (up 0.64%) and Bharti Airtel (up 0.12%) were the top gainers on the Sensex. The main losers were Hindalco Industries (down 5.18%); Sterlite Industries (down 4.34%); BHEL (down 3.71%); Larsen & Toubro (down 3.50%) and Jindal Steel (down 3.46%).
The Nifty was led by Ranbaxy Laboratories (up 3.99%); Dr Reddy’s Laboratories (up 2.01%); Cipla (up 1.73%); HUL (up 1.58%) and Bajaj Auto (up 0.96%). The key losers on the index were Hindalco Ind (down 5.41%); Cairn India (down 5.25%); IDFC (down 5.04%); Sterlite Ind (down 4.57%) and Sesa Goa (down 4.49%).
Markets in Asia closed lower as China’s annual inflation rose to 3.6% in March on the back of higher food prices. The disappointing US jobless data also weighed on the markets.
The Shanghai Composite declined 0.90%; the Jakarta Composite shed 0.30%; the KLSE Composite slipped 0.47%; the Nikkei 225 tanked 1.47%; the Straits Times fell 0.87%; the Seoul Composite dropped 1.57% and the Taiwan Weighted settled 1.37% lower. The Hong Kong market was closed for trade today. At the time of writing, the US stocks futures were trading lower, while the markets in Europe were closed today.
Back home, institutional investors—both foreign and domestic—were net buyers in the equities segment on Wednesday. While foreign institutional investors pumped in Rs45.82 crore, domestic institutional investors invested Rs126.70 crore.
Somany Ceramics today said it will acquire 26% stake in Gujarat-based Commander Vitrified Pvt Ltd (CVPL) for Rs3.25 crore. CVPL is at an advanced stage of setting up a new plant to manufacture about 2.65 million square meters of vitrified tiles (polished and glazed) per annum at Morbi (Gujarat). Somany declined 0.86% to close at Rs40.40 on the NSE.
Alstom T&D India has been awarded a contract worth approximately Rs74 crore by Jyoti Structures, a leader in turnkey engineering, procurement and construction (EPC) projects in the field of power transmission. The projects involve supplying power transmission equipment to state-run Power Grid Corporation for two projects. Alstom T&D declined 1.49% to close at Rs179.10 on the NSE.
Godrej Properties, through its wholly-owned subsidiary Godrej Projects Development Pvt Ltd, has entered into a development management agreement with RR Builders for redeveloping a MHADA (Maharashtra Housing & Area Development Authority) property at Byculla, Mumbai.
The project, spread over nearly 2.5 acres, would offer around 3 lakh sq ft of free saleable area. It is proposed to be developed as a residential project having 2, 3 and 4 BHK apartments. Godrej Properties closed 0.83% lower at Rs613.40 on the NSE.
Assocham, a lobby of multinationals has alleged the manipulation in price and fraud in guar gum is benefiting a few rouge traders while thousands of genuine traders, hedgers, exporters and farmers are losing their money at the commodity exchange
Associated Chambers of Commerce and Industry of India (Assocham), traditionally the lobby for multinational interests in India, has urged the government to investigate manipulations by some traders at the National Commodity Exchange of India (NCDEX) that show huge price distortions and weak regulatory provisions.
“Commodity exchanges were set up for true price discovery but have unfortunately become centre of price distortions. The situation is akin to the Harshad Mehta scam in securities whereby a few manipulators have hijacked the NCDEX,” said SK Jindal, chairman of investments committee at Assocham.
In a release, the industry body said that commodity exchanges were set up in 2003 to support small farmers, traders and exporters to minimise their risk in futures market and for price discovery of their produce. To ensure smooth and transparent working of these exchanges, the Forward Market Commission (FMC) under the ministry of consumer affairs and food & public distribution was appointed as regulator on the lines of Securities Exchange Board of India (SEBI).
However, according to Assocham, recent developments indicate that the FMC has not been able to ensure fair and transparent working of the NCDEX. There have been manipulations and heavy speculative transactions in agricultural commodities like cereals, sugar and pulses.
After the intervention from the government, the focus of traders who are in the management and control of NCDEX has shifted to other commodities like turmeric, black pepper, gaur seed and gaur gum. “These players—because of their inside knowledge and control over the NCDEX—are able to manipulate prices substantially. In the process, poor agriculturalists, traders and exporters suffer huge losses,” said Mr Jindal.
Turmeric, which was trading at Rs35 per kg in January 2009, was manipulated to increase beyond Rs150 per kg within a year. But in a few months, the same was brought down to around Rs40 per kg. Similarly, the price of black pepper was Rs225 per kg in April 2011 and was manipulated to rise above Rs432 per kg in March 2012, an increase of 95%.
In the case of gaur seed and gaur gum the price manipulation is unbelievable, said Mr Jindal. The normal price of normal guar bean in the season is Rs10 per kg, while guar seed is traded at Rs25 per kg and guar gum at Rs50 per kg. Unfortunately, due to a fraud being played by a few rouge traders, the prices were increased to Rs291 per kg for guar seed and Rs959 per kg for guar gum on 21st March.
“It is unbelievable that the fodder for animals is priced at Rs291 per kg—much more than the price of cereals and pulses used for human consumption,” said Mr Jindal. “The prices for guar have gone up by 120% in the past one month, 700% in the past four months, 875% in the past 12 months and 1,300% in the past 18 months.”
This manipulation in price and fraud is benefitting a few rouge traders while thousands of genuine traders, hedgers, exporters and farmers are losing their money, he added. This artificial price increase is against the interest of farmers who will not be able to buy expensive guar seed for their next crop.
What is most surprising is that last month the FMC suddenly banned futures trading of guar gum and guar seed on NCDEX. “The step is totally against small traders, hedgers and farmers and is in fact a reward to manipulators and rouge traders,” said Mr Jindal.
These manipulations also show a weakness in exchange regulations at the FMC and the government needs to re-visit the provisions and bring stringent regulations to avoid such scams, said Mr Jindal adding that Assocham has written to prime minister Manmohan Singh as well.
Assocham has suggested to the FMC to amend this circular and allow trading in futures contracts till 20th April—the normal terminal date for trading on NCDEX. The FMC should order an investigation into the accounts of the 20 top traders who have benefitted from the receipts of month-to-month payments from small traders and hedgers.