Mutual Funds
Motilal Oswal launches ETF of liquid funds

It’s a trading product, meant for the big boys

Motilal Oswal has filed an offer document with SEBI (the Securities and Exchange Board of India) to launch the Motilal Oswal MOSt Liquid Shares ETF. It is the second of its kind. Goldman Sachs GS Liquid BeES was the first Liquid ETF (Exchange Traded Fund).  

The investment objective of the scheme is to enhance returns and minimise price risk by investing in a basket of call money, short-term government securities and money-market instruments of short- and medium-maturities while maintaining safety and liquidity. The scheme will be listed on the National Stock Exchange and the Bombay Stock Exchange.

The scheme offers only daily dividend re-investment option. It will be benchmarked to the CRISIL Liquid Fund Index.

ETFs charge a maximum of 1.5%, as against 2.25% by actively-managed funds. But while actively-managed funds have higher charges, most of them are not known to have beaten their benchmarks. This is the principal reason why index funds or ETFs are a preferred option. In effect, on lower costs, the returns are higher and volatility is also lower.

On the flip side, these liquid ETFs have not proven themselves. The first liquid ETF launched by Benchmark (now Goldman Sachs) was launched in 2003. It has been able to give a compounded return of only 5% in the last 8 years. In such kind of schemes, you just have to buy and sell at the right time. It is all about market timing.

The minimum application amount for the scheme is Rs10,000 and in multiples of Rs1. Minimum target amount is Rs1 crore under the scheme.

The scheme will invest 20%-100% of assets in CBLO, T-Bills, CMBs, repos with low risk profile and invest up to 80% in CDs with low- to medium-risk profile. The scheme will make investment in/purchase debt and money market securities with maturity of up to 91 days only. The fund manager of the scheme is Abhiroop Mukherjee.


Still under stress: Monday Closing Report

A fall to 4,700 may be possible

The decline in the global markets and domestic factory output at a 30-month low resulted in the indices closing lower for the second day. Today, the Nifty traded below Friday's closing in the range of 4,824 to 4,879, which is well below the level of first support of 4,920. As mentioned in our weekly report on Saturday that the market would be under stress, and the Nifty would trade between 4,800 to 5,000; we may see the fall extending to 4,700. The National Stock Exchange (NSE) saw a volume of 45.73 crore shares being traded, which was lowest in the past 52 days (including today).

The market opened lower as concerns regarding the global recovery persisted and on expectations of a slowdown in domestic growth. The Nifty opened below its psychological level of 4,900 at 4,874, down 69 points from its previous close, and the Sensex began the day down 198 points at 16,256. Metal, realty, banking and consumer durables sectors were under selling pressure in early trade.

The market traded sideways with the Nifty rising to its intraday high at 4,879 in late morning trade. The opening figure was the Sensex's intraday high. Range-bound trade continued with the Nifty falling to its day's lows at 4,824 around noon. The Sensex touched its intraday low at 12.30pm, with the index falling to 16,056.

While a minor recovery helped the market come off the day's lows, the gains were capped by European stocks opening lower on worries that Greece is likely to face difficulties in achieving its deficit targets this year and the next. Finally, the market settled with a cut of almost 1.90%, ending lower for the second straight day. The Nifty shaved off 94 points to settle at 4,850 and the Sensex closed trade at 16,151, a contraction of 302 points.

The advance-decline ratio on the NSE was 414:1251.

Among the broader indices, the BSE Mid-cap index tanked 1.90% and the BSE Small-cap index declined 1.48%.

All sectoral indices settled lower with the BSE Realty (down 4.59%) as the top loser. It was followed by BSE Metal (down 4%), BSE Bankex (down 2.82%), BSE Capital Goods (down 2.52%) and BSE Consumer Durables (down 1.63%).

Coal India (up 1.13%), ONGC (down 1.07%), Hero MotoCorp (up 0.87%), Mahindra & Mahindra (up 0.85%) and Bharti Airtel (down 0.65%) were the top gainers among the Sensex stocks. On the other hand, DLF (down 7.82%), Jindal Steel (down 6.02%), Hindalco Industries (down 5.45%), Tata Steel (down 4.95%) and Sterlite Industries (down 4.30%) were the key losers on the index.

The Nifty leaders were BPCL (up 4.38%), Reliance Power (up 2.02%), Reliance Capital (up 2.01%), GAIL India (up 1.86%) and Cipla (up 1.67%). The main laggards were DLF (down 8.77%), Jindal Steel (down 6.92%), Hindalco Ind (down 5.59%), Tata Steel (down 4.89%) and SAIL (down 4.69%).

Markets in Asia posted a sharp decline with the Hong Kong market tumbling to its lowest level since May 2009 on fears that the debt problems in Europe might stifle global growth. This apart, a slowdown in manufacturing growth across the region and a decline in commodities also weighed on investor sentiments.

The Hang Seng plunged 4.38%, the Jakarta Composite plunged 5.64%, the KLSE Composite declined 1.41%, the Nikkei 225 skidded 1.78%, the Straits Times slipped 2.01% and the Taiwan Weighted erased 2.93%. Markets in China and South Korea were closed for local holidays.

Back home, foreign institutional investors were net sellers of stocks worth Rs459.47 crore on Friday. On the other hand, domestic institutional investors were net buyers of equities worth Rs517.34 crore.

Anil Ambani-led Reliance Power today said it would earn Rs2,000 crore by trading carbon credits from its Tilaiya ultra mega power project (UMPP) during the first 10 years of its operations. The Clean Development Mechanism Executive Board (CDM-EB) of UNFCCC allows the Tilaiya project-to be commissioned during the 12th Five-Year Plan period, starting next year-to earn Certified Emission Reductions (CERs). Reliance Power gained 2.02% to close at Rs78.30 on the NSE.

Pharma major Strides Arcolab today said it has received the US health regulator's approval to market injectable Clindamycin USP, used in the treatment of bacterial infections, in the American market. The product will be available in three single-dose vial sizes and in pharmacy bulk packaging, Strides Arcolab said in a statement. According to IMS data, the size of the US market for injectable Clindamycin stood at $65 million (including bags) in 2011. The stock tumbled 5.57% to Rs334 on the NSE.

Business conglomerate Mahindra & Mahindra, through its real estate arm Mahindra Lifespace Developers,  plans to make an entry into the affordable housing segment with homes priced up to Rs10 lakh across many cities in the country. Mahindra Lifespace fell 1.33% to close at Rs294 on the NSE.


Southwest monsoon showers above-normal rainfall this season

Over the past month, the southwest monsoon has picked up substantially and finally ended on a positive note. According to a study released today, cumulative rainfall for the week ended 28th September stood at 2.3% over the Long Period Average. But will food inflation drop?

The monsoon season is coming close to its end. During the previous week, there was reduced rainfall, though the meteorological department expects scattered showers over the north-eastern parts of the country like Nagaland, Manipur, Mizoram and Tripura. South-peninsular India is also expected to receive some rainfall.

In an update released today on the economy, research firm Emkay Global has said that cumulative rainfall has ended approximately 2.3% over the LPA (Long Period Average) for the season ending on 28th September. What is most heartening is the fact that rainfall in rain-dependent areas is approximately 8.3% above the LPA. However, regions like Himachal Pradesh, Telangana and north-interior Karnataka, which are dependent on rainfall, have received monsoon showers at a huge 10%-12% below normal. Telangana especially will be the hardest-hit considering the fact that this region of Andhra Pradesh has been embroiled in political turmoil over the past few months.

The report also indicates that acreage for kharif crops has touched 104.50 million hectares as of 30th September. This is a healthy increase of 2.7% in acreage over the same year-ago period. Rice, oilseeds, sugarcane and cotton have seen an increase in acreage of 9.5%, 2.7%, 3% and 9.4% year-on-year (Y-o-Y) respectively. But the acreage of cereals and pulses has seen a fall of 5.6% and 9% Y-o-Y respectively. Moneylife had written earlier (See: Price hike of 10%-15% seen in select pulses like yellow peas, 'tur dal' and lentils ) on how the drop in kharif production had caused an increase in prices in cash crops. This drop in acreage and hike in prices will have a direct impact on food inflation, which is already reaching for the stratosphere.

However, reservoir levels are at a robust 87% of their full levels, a welcome sign for the agricultural sector. The report also says that "the number of divisions experiencing excess/normal rainfall remained unchanged at 33 from last week. The number of regions experiencing scanty rainfall stood at 3", and this figure also remained unchanged.

Now that the rain gods have smiled on India, can we expect food inflation to at least moderate a little bit?


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