Moneylife Events
Moneylife Foundation holds seminar on the truths behind mutual funds and how to select the right scheme

There are 240 schemes with different flavours, combinations and sectors. An ordinary investor would find it difficult to decide which scheme to buy and when, given the current market volatility. Debashis Basu, Trustee, Moneylife Foundation, told the audience on how to analyse each sector and pick the right scheme for specific needs

The high volatility in the market and the huge drop in the indices recently have left many investors confused. Investors are wondering if they should exit the market, or if they should look at the situation as a buying opportunity. Newbie investors are pondering if this is the right time to start investing in the market—or should they wait?

All these questions were answered at the 75th seminar conducted by Moneylife Foundation. The Foundation’s trustee, Debashis Basu, enlightened investors today on how to be safe and smart in selecting the right mutual fund scheme.

Financial products are not designed for easy use, pointed out Mr Basu. Investors need to constantly have to evaluate these financial products. In the seminar, Mr Basu gave the participants a detailed perspective on mutual funds and how investors should choose the right mutual fund schemes.

The participants were explained about the different types of schemes available, like equity funds, ELSS (equity linked saving schemes), bond funds, liquid funds and SIPs (systematic investment plans). Mr Basu explained the benefits and the risks associated with each of these plans and investment strategies.

Mutual funds allow investors to diversify over shares and bonds of different kinds. Investors in a mutual fund have a professional fund manager who would make investment decisions on their behalf. However, some fund managers are no better than amateurs and this can be evaluated through their fund’s performance. The money of an investor is left at the mercy of the manager.

As every investment comes with a cost, mutual funds come with a cost as well. Presently there is no entry load—but soon, investors may have to shell out as much as Rs150 if they invest more than Rs10,000 in mutual funds. Apart from this, there are fund management charges that are deducted in the form of units. Even if investors plan to exit, they would have to pay an exit load.

Mutual funds, however, are a safer way for those who would like to invest in the capital market compared to putting all their investments only in one stock. One can start with an investment as low as Rs500. Open-ended funds are highly liquid and can be converted into cash easily. Investors can avail of tax benefits as well through investing in ELSS.

SIPs (systematic investment plans) are a good option, but are flawed if they are not adjusted for the growth option. Investors usually don’t consider inflation and invest the same amount over years. In fact, the value of money falls over the years, therefore, investors should incrementally increase their investment amount.

Mr Basu introduced the idea of value averaging, a better option compared to SIP. It is a strategy through which investors should buy more when the NAV (net asset value) is less and vice-versa, thus increasing returns.

On how to choose the best equity scheme, ideally, returns over a five-year rolling period should be considered to analyse the performance of a fund. Moneylife regularly puts out such analyses. There are usually just four-five fund houses that consistently register good performance. A portfolio which is diversified across all sectors should be chosen; therefore, sector funds should be avoided. Investors should avoid NFOs (new fund offerings) and funds with fancy names.

A safe and smart option for investors—who don't have any experience about the markets and don't want to make any effort either—is making money from the market through index funds.

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OVL qualifies for Iraq’s oil exploration bidding

Bidders must accept service contracts that pay them a flat fee for each barrel extracted, rather than production-sharing agreements in which they gain a stake in the crude produced. A service contract means that they do not benefit from a rise in oil prices

New Delhi: ONGC Videsh (OVL), the overseas arm of state-owned Oil and Natural Gas Corporation (ONGC), is among 41 international oil majors who have qualified for Iraq's fourth bidding round for exploration blocks, reports PTI.

Besides OVL, others who have qualified to bid for the 12 exploration blocks due to be awarded in January next year are ExxonMobil, Shell, Total, BP, Chevron and a host of multinational oil companies.

Industry sources said 50 companies had submitted qualification documents for consideration by a 6th June deadline. Of these 41 qualified.

The Iraqi oil ministry is planning to hold a roadshow at the end of September with contracts due to be awarded on 25th or 26th January.

Sources said OVL had bid for the giant Halfaya oilfield along with state-run Oil India and Turkish Petroleum Corporation (TPAO) in Iraq's second post-war bid round in December 2009.

It lost the bid for the third largest field on offer in that round to a consortium led by a Chinese firm.

A group led by China National Petroleum Corporation bid lower than the $1.76 per barrel fee OVL and partners sought for boosting output from Halfaya field to 550,000 barrels per day.

CNPC, Petroliam Nasional Bhd (Petronas) and Total SA offered to boost production to 535,000 bpd from current 3,000 bpd at a cost of $1.40 a barrel. The Halfaya oilfield has estimated reserves of 4.1 billion barrels of oil.

OVL had, in the first round in June that year, lost the Zubair oilfield when it along with OAO Gazprom of Russia and TPAO had asked for a remuneration that was about five times higher than $1.90-$2 a barrel that Baghdad was willing to pay.

The Indian firm had also qualified for the third round last year but failed to make the mark.

In the fourth round, Iraq is offering seven gas fields and five oilfields.

Iraq, holder of the world's third-largest oil reserves, is seeking foreign investments to boost output after six years of conflict destroyed its infrastructure.

Bidders must accept service contracts that pay them a flat fee for each barrel extracted, rather than production-sharing agreements in which they gain a stake in the crude produced. A service contract means that they do not benefit from a rise in oil prices.

Sources said the formula for the two bidding parameters-the dollar-per-barrel remuneration fee and plateau production target-has been weighted 80% toward the fee, with the aim of dissuading companies from promising unrealistically high output targets.

Companies qualifying for the Iraq's fourth bid round were dominated by Japanese firms which included Inpex Corp, JX Nippon, Mitsubishi Corp, Mitsui and Sumitomo.

Russia's Bashneft, Gazprom, Lukoil, Rosneft and TNK-BP too qualified along with US' ExxonMobil, Chevron, Hess Corp and Occidental. Three Chinese firms-Cnooc, CNPC and PetroChina also figure in the list of 41.

Also among those qualified were Edison and Eni of Italy, BP and Premier Oil of the UK, Anglo-Dutch Shell, Norway's Statoil and France's Total.

The Egyptian General Petroleum Corporation, Kuwait Energy, the UAE's Mubadala, Angola's Sonangol and Turkey's TPAO are also among bidders.

The qualifiers also include Korean Kogas, Pakistan Petroleum, Petro Vietnam E&P, Petronas of Malaysia, Pertamina of Indonesia and Thailand's PTTEP International Holding Company.

Iraq has signed 12 oil field development contracts with international companies including ExxonMobil, BP, Shell, Eni, Lukoil and the Chinese National Petroleum Corp since late 2009, and plans to increase oil production capacity from 2.7 million barrels per day now to more than 13 million bpd in seven years.

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L&T bags $185 million contract for UAE gas pipeline project

Abu Dhabi Gas Industries (GASCO) has awarded a lump-sum turnkey contract worth an estimated $185 million for engineering, procurement, construction and commissioning works on a new gas pipeline to the company

Abu Dhabi Gas Industries (GASCO) has awarded a lump-sum turnkey contract worth an estimated $185 million for engineering, procurement, construction and commissioning works on a new gas pipeline to Larsen & Toubro (L&T), according to an announcement.

The new gas pipeline in the UAE is intended to supply natural gas to the Abu Dhabi Oil Refining Company's new refinery expansion project and to the Abu Dhabi Water and Electricity Authority (ADWEA), a statement released by the UAE's official news agency, Wam, said.

The project is said to be worth $185 million (695 million dirham).

L&T will undertake home office (design and procurement) activities from its office near New Delhi and the team will later move to the site for managing the construction activities, the statement said.

These EPC works will deploy a significant quantity of construction equipment and labour personnel, technicians and supervisors at the site, while adhering to health, safety and environment (HSE) requirements.

L&T closed at Rs 1,610.55 per share (1.18% down from its previous close of Rs1,629.85), while the benchmark BSE Sensex ended 132.27 points down at 16,857.91 from its previous close of 16,990.18.

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