The year 2011 has been the year for gold funds. Canara Robeco too does not want to be left out
Recently Canara Robeco filed an offer document with the Securities and Exchange board of India (SEBI) to launch a gold Exchange Traded fund (ETF) and gold Savings Fund. The gold ETF will invest 90%-100% of its assets in physical gold while the gold Savings Fund will in turn invest 95%-100% of its assets in the units of the gold ETF. This new offering will be an addition to the eight gold funds already present in the market, all of which were launched this year.
Why have so many funds taken to gold? According to the Association of Mutual Funds in India (AMFI) data, as on September 2011 there were 4.29 lakh folios (accounts) of retail investors in gold ETFs, up by 76% (1.77 lakh) over September 2010. Investor interest towards gold has significantly increased over the last year owing to the uncertainty and volatility of the equity markets. The folios of retail investors in equity-oriented schemes and ETFs have fallen from 387 lakh in September 2010 to 382 lakh in September 2011. The folios may have reduced by just 1.22% but the number of folios amount to nearly 5 lakh. But naturally fund houses would be inclined to launch schemes to capitalise on this investor interest.
By launching gold mutual funds, they can also capture those investors who do not have a trading account as ETFs, as the name suggests, can be only bought and sold only through the exchange. Therefore gold funds save the investors the trouble of trading by themselves and invest on their behalf in gold ETFs. This is why out of the 12 fund houses that have they own gold ETF, eight of them have a gold fund and one of them will be launching its gold fund soon. (Read: IDBI Gold Fund: More of the same http://www.moneylife.in/article/22323.html)
But is investing in gold a safe and smart option? Gold is a high risk asset class and one should be aware of these risks before investing in a highly speculative product like gold. Investors who shun equities due to risk should think twice before investing in gold because it carries a huge risk of a crash having gone up six times in the last 10 years.
The Nifty hit our initial target of 4,800 today
For the second day today the National Stock Exchange (NSE) traded on a very low volume of 38.64 crore shares. As we mentioned in our yesterday’s closing report that the Nifty has to close strongly above 4,800 for the upmove to continue. But today the index reached this level in opening session itself and after range-bound movement in the morning session it went into the negative. At present the market is in an indecisive zone and is likely to stay sideways.
The market opened flat despite a rebound in infrastructure growth in November and in the absence of any global cues. Wall Street and Europe remained closed on Monday for Christmas holidays, resulting in the Asian pack opening weak this morning. The Nifty opened one point higher at 4,780 and the Sensex began the day at 15,984, up 13 points.
Volatile trade saw the indices slipping into the red in early trade. But select buying lifted the benchmarks into the green a short while later. The buying helped the market hit its intraday high at around 11am. At the highs, the indices breached their psychological levels with the Nifty scaling 4,801 and the Sensex touching 16,049.
The debate on the Lokpal Bill in the Lok Sabha made investors jittery which resulted in the indices paring their gains and entering the negative territory in noon trade. Intense selling in the second half of the day pushed the market to the day’s lows in post-noon trade. At the lows, the Nifty fell to 4,724 and the Sensex went back to 15,800.
The market made a minor recovery towards the end of trade but closed in the red. The Nifty settled 29 points lower at 4,751 and the Sensex lost 97 points to end the day at 15,874.
The advance-decline ratio on the NSE tilted in favour of the declining stocks at 685:981.
Among the broader indices, the BSE Mid-cap index declined 0.69% and the fell 0.35%.
With the exception of the BSE Consumer Durables index (up 0.15%), all other sectoral gauges ended lower. BSE Realty (down 1.72%); BSE Metal (down 1.38%); BSE Bankex (down 1.23%); BSE PSU (down 1.18%) and BSE Power (down 1.08%) were the top losers.
The key gainers on the Sensex were Tata Power (up 1.92%); Bajaj Auto (up 1.19%); ONGC (up 0.50%); ITC (up 0.37%) and Larsen & Toubro (up 0.30%). The losers were led by DLF (down 2.70%); Cipla (down 2.68%); Coal India (down 2.44%); Tata Steel (down 2.42%) and Tata Motors (down 2.36%).
Reliance Communications (up 5.11%); Ranbaxy (up 2.69%); Tata Power (up 2.38%); Siemens (up 2.35%) and Ambuja Cement (up 2%) gained the most on the Nifty. The laggards were led by Axis Bank (down 3.21%); IDFC (down 3.15%); Kotak Bank (down 2.88%); DLF (down 2.77%) and Coal India (down 2.66%).
Markets in Asia closed weak on negative economic news and low trading volumes. Japanese shares settled lower as minutes from a central bank meeting held last month cautioned that the Eurozone debt crisis could hamper growth. This apart, South Korean consumer index fell sharply in December from November on the back of an already slowing global economy.
The Shanghai Composite declined 1.09%; the Jakarta Composite slipped 0.20%; the Nikkei 225 fell by 0.46%; the Straits Times shed 0.11%; the Seoul Composite contracted by 0.79% and the Taiwan Weighted settled 0.11% lower. At the time of writing, the key European indices were trading 0.5% to 1% higher and US stock futures were in the green.
Back home, foreign institutional investors were net buyers of stocks amounting to Rs113.43 crore on Monday. On the other hand, domestic institutional investors were net sellers of equities amounting to Rs118.98 crore.
Hindustan Construction Company (HCC) has received its board’s approval to raise Rs120 crore through the issue of Secured Redeemable Non-Convertible Debentures (NCDs) on private placement basis to Axis Bank. The stock declined 2.23% to close at Rs17.55 on the NSE.
Gift and greeting cards major Archies on Tuesday said the Department of Posts has allowed the company to sell postal stamps at its retail outlets across the country. The order is valid till 31 March 2012, as a pilot project and can be extended for the future also, the company said. The stock fell by 1.75% to close at Rs25.25 on the NSE.
Sun Pharmaceutical Industries’ US arm Caraco Pharmaceuticals has received tentative approval from the US Food and Drug Administration (USFDA) for marketing its generic dexmedetomidine hydrochloride injection in the US. Dexmedetomidine is a sedative and anaesthetic medication, and provides sedation without causing respiratory depression. Sun Pharma fell 0.72% to settle at Rs497.55 on the NSE.
According to the report, hygiene awareness, health, personal grooming and convenience seems to be the driving force behind increased consumption in middle India
‘Middle India’, a region made of about 400 towns with a population of one to 10 lakh each, has outperformed all-India fast-moving consumer goods (FMCG) growth story, says Nielsen’s report titled ‘Managing the Middle India Gold Rush’. Terming this region as ‘vastly underrated’, the report states that middle India would emerge as a key growth engine in a decade.
‘Middle India is are home to 100 million Indians and today constitute up to 20% of the country’s FMCG consumption. In fact, only the metros and Middle India have outpaced the all-India growth story in the last eight years. Even today, Middle India leads the pack across urban and rural segments for FMCG value growth rates,” says the report.
It states out of the Rs1.4 trillion ($280 billion) in FMCG sales in 2010, goods worth about Rs287 billion ($5.74 billion) were consumed by the Middle India population. This number makes up more than 20% of the overall FMCG sales, and 30% of the urban FMCG sales.
Interestingly, focus on hygiene, health, personal grooming and convenience seems to be driving the rapid growth in these towns. The top five fastest growing categories like diapers, scourers, liquid toilet soaps, acne preparations and air fresheners, which fared strongly in the past year, performed even better in 2011, indicating continued possibility of robust growth in the near future.
Middle India is also home to 30% of all urban stores, comprising over 900,000 million stores today. From 2002 to 2010, the region has seen a vast increase in sales values, going to Rs287 billion from Rs83 billion. Only metros have registered more growth, from Rs110 billion to Rs412 billion during the same period. This is a significant achievement for these smaller towns, considering the fact that the metros breached the Rs280 billion mark as recently as in 2009.
“Although some companies have partially penetrated the Middle India market, many tend to overlook smaller towns, ignoring the fact that these markets are perhaps easier to penetrate due to relatively sparse competition,” says the report.
However, a few major players with adequate capital and wide distribution networks are already cashing in on the opportunity.
The report from Nielsen says, “The annual turnover of the top ten FMCG players from the Middle India segment rose more than 42% or by Rs35.8 billion ($716 million) in just two years between 2009 and 2011.”