Mutual Funds
ICICI Prudential Dividend Yield Equity: Another dividend yield fund

The new scheme from ICICI Prudential Mutual Fund has a mandate to invest in companies with high dividend yield. Will it?

Following the success of several dividend yield schemes over the last few years, ICICI Mutual Fund plans to launch a dividend yield scheme—ICICI Prudential Dividend Yield Equity Fund. This scheme will compete with seven other schemes present in this category. Similar to the other schemes, the scheme from ICICI Mutual Fund will invest 65% to 100% in stocks that offer ‘attractive’ dividend yield. According to the offer document filed with the Securities and Exchange Board of India (SEBI), the fund manager would endeavour to maintain the portfolio’s dividend yield higher than the prevailing dividend yield of the S&P CNX Nifty. The scheme would focus on identifying and investing in a basket of high dividend yield companies, which are expected to declare dividends on a consistent basis.

There have been a few dividend yield schemes that have done well with a performance as good as other equity diversified schemes in the last five years. Recently, India Infoline launched its index scheme based on the CNX Dividend Opportunities Index—IIFL Dividend Opportunities Index Fund. The performance of the scheme from ICICI Prudential MF too will be benchmarked to the CNX Dividend Opportunities Index. High dividend yield stocks are more likely to provide greater degree of protection to investors than other stocks in falling equity market. However, our recent analysis of dividend yield schemes (Dividend Yield Schemes: A better choice?) has shown that the stocks picked do not necessarily have a high dividend yield and the top 10 holdings are similar to those of other equity diversified schemes. Their performance in earlier periods has been inconsistent as well. A lot would depend on the stock picking skills of the fund manager. The scheme would be managed by Mrinal Singh who also manages ICICI Prudential Discovery Fund, one of the better performing mid-cap schemes.

Below is how some of the schemes with the same investment objective have performed in the past (arranged alphabetically):

ICICI Prudential Mutual Fund has put up a relatively good performance in the past. (Read: Best Fund Houses ) The fund house figures among the top 10 fund houses in all the categories. Even over a fixed period of one year, three years and five years, there have been just two instances where a scheme has underperformed the benchmark. (See table below).


Motilal Oswal revises FY13 growth estimate for corporates downwards to just 5.2%

In its earnings review report, Motilal Oswal finds that the corporate earnings for the second quarter have been in line with estimates but several macro-economic concerns remain

According to Motilal Oswal Securities, earnings for the September quarter have largely been in line with estimates, albeit a little less than what it had predicted. It has been a lacklustre quarter. It was found out that 54 companies in Motilal Oswal’s universe reported net profit higher than estimated, 41 in-line and 40 below estimate. This isn’t too impressive nor is it too bad. Sales grew 12% year-on-year (y-o-y), as against the forecast of 13%, while EBIDTA grew 6% versus 8%. Net profit growth fell short of estimate by one percentage point, at 8%. Despite some semblance of growth, margins shrank. According to Motilal Oswal, aggregate EBITDA margin (ex financials) was down 130bp (basis point) y-o-y as against 120bps.
Check here what we had to say about Espirito Santo’s earning review. Several other earnings results reviewed by us can be accessed here.
One of the key reasons for mediocre performance is unfavourable macro-economic factors, which has made it a difficult quarter to operate, apart from the erratic monsoon which threw planning out of gear. Trade deficit widened due to higher oil imports on account of rising demand and failing domestic production, the report said. Industrial growth hardly grew during the first half of the fiscal while agriculture was affected by scanty rainfall. Even though inflation had indeed moderated, it wasn’t good enough to spur growth. It appears that both RBI’s growth and inflation estimate which were recently revised are too high, according to Motilal Oswal in its report. Another pertinent problem is the lack of liquidity as interest rates remain high even though cash reserve ratio (CRR) has been brought down. Growth estimates was slashed to 5.2%.
Some of the sectors that performed well during this quarter, according to Motilal Oswal were cement, technology, healthcare, private banks. The worst performers were media, metals, auto and, not surprisingly, public sector banks. We had written a cover story about public sector banks a while back, when their non-performing loans are threatening their very existence.
Amongst the large- and mega-cap companies, Motilal Oswal has upgraded, to name a few: United Spirits, IDFC, UltraTech Cement, Kotak Mahindra Bank and HCL Technologies. Some of the biggest downgrades are: Tata Steel, Bank of India, Cadila Healthcare, JSW Steel and NMDC. While it is not surprising to see United Spirits upgraded in face of new facts, we question how long the company can remain solvent if it wants to support ailing Kingfisher Airlines, whether directly or indirectly. Steel companies have been going through a long and lean phase, as global demand slows down.
We will putting our observations on the earnings trend tomorrow. Stay tuned.


Pepsi bags IPL title sponsorship rights

Pepsi, which placed a bid of Rs396 crore, pipped Airtel, which had offered Rs316 crore, in the bid for the title sponsorship of the Twenty20 cricket tournament

Mumbai: Soft drink giants Pepsi today became the new title sponsors of the cash-rich Indian Premier League (IPL) after it won the bid for title rights for five years by paying a whopping Rs396 crore, reports PTI.
Pepsi pipped Airtel, which had offered Rs316 crore, in the bid for the title sponsorship of the Twenty20 tournament.
IPL chairman Rajeev Shukla said that the title-sponsorship contract was for five-year period and will end in 2017.
Realty firm DLF ended its five-year-long association with the IPL as the title sponsor in August and the BCCI floated the tenders last month. DLF paid Rs200 crore for the five year period of 2008-12.
“So far our records of selling various properties of IPL has been very good. We have doubled, tripled or quadrupled the amount while selling some of the properties,” Mr Shukla told reporters after the meeting of the IPL Governing Council.
Deepika Warrier, executive director-marketing of Pepsico Beverages, said she was very happy that the company has reaffirmed its commitment to cricket.
“We have been associated with cricket for the last 20 years. The IPL is a tremendous product. It is a brand which rivals any other sporting brand across the world,” she said.
The title sponsor rights include a number of branding and other marketing benefits to be received by the title sponsor at every IPL match during the season as specifically outlined in the Invitation to Tender.
The BCCI had made it clear in its tender notice that the companies which intend to sell off the rights after winning the bid are ineligible to apply in the first place.
Only corporate entities, whether in India or abroad, which are interested in placing a bid for themselves and/or their holding or subsidiary company(ies), for the purpose of the advertisement and promotion of their own brands within their primary product or services categories were eligible to participate in this tender process and to submit bids. 


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