Sensex, Nifty sideways for now: Thursday Closing Report

The indices closed above yesterday’s high today. The downtrend has been arrested for now but a strong uptrend looks doubtful


After remaining in the negative for a major part of the morning session, the announcement by the government approving direct transfer of urea subsidy and a positive opening of the European markets resulted in a green close. Today's gain on the Nifty reversed yesterday's losses. We may see the index moving in a range of 5,635 and 5,730. The index may probably see a reversal in the trend in case if it manages to make a close above previous day’s high in the next few trading days. The National Stock Exchange (NSE) saw a higher volume of 85.30 crore shares and advance decline ratio of 912:528.
The market opened almost unchanged from its previous close on growth concerns after global ratings agency Standard & Poor’s  (S&P) on Wednesday cautioned threatened to downgrade India’s sovereign rating to junk status in the next two years. This apart, the ratings agency has downgraded Spanish debt for a third time this year citing a severe recession that is limiting the government’s policy options.
The Nifty opened 12 points higher at 5,664 and the Sensex resumed trade at 18,627, down four points from its close on Wednesday. The market remained in the negative terrain in morning trade in the absence of any domestic triggers and as investors turned cautious ahead of the second quarter earnings season, which formally kicks off on Friday.
The benchmarks fell to their lows at around 10.30am amid a fair degree of volatility. At the lows the Nifty fell to 5,637 and the Sensex went back to 18,581.
The indices continued to move sideways till the noon session on reports of India’s exports sliding 11% to $23.69 billion in September, declining for the fifth month in a row. The decline in exports comes amid India’s economic growth slipping to 5.5% in the first quarter of this fiscal and subdued industrial output.
However, the market bounced back into the green on a positive opening of the key European indices. The Cabinet’s approval for direct transfer of urea subsidy also supported the gains.
The rebound resulted in the market hitting the intraday high in late trade with the benchmarks breaching their psychological levels. The Nifty rose to 5,721 and the Sensex scaled 18,848 at their highs.
The market settled near the highs on continuation of the economic reforms and support from its European peers. The Nifty closed 56 points (0.99%) higher at 5,708 and the Sensex climbed 174 points (0.93%) to finish the session at 18,805.
Among the broader markets, the BSE Mid-cap index surged 1.16% and the BSE Small-cap climbed 0.84%. 
BSE Healthcare (down 0.13%) was the only sectoral gauge to settle in the red. The top gainers were BSE Realty (up 4.61%); BSE Capital Goods (up 2.04%); BSE Metal (up 1.61%); BSE Power (up 1.41%) and BSE Bankex (up 1.30%).
Twenty four of the 30 stocks on the Sensex closed in the positive. The gainers were BHEL (up 2.61%); Larsen & Toubro (up 2.25%); Tata Motors (up 2.22%); Tata Steel (up 2.11%) and Bharti Airtel (up 2.06%). Cipla (down 1.97%); Wipro (down 0.61%); Maruti Suzuki (down 0.59%); Mahindra & Mahindra (down 0.18%) and GAIL India (down 0.15%) settled at the bottom of the index.
The top two A Group gainers on the BSE were—Unitech (up 17.49%) and Jaiprakash Power Ventures (up 10.14%).
The top two A Group losers on the BSE were—Cadila Healthcare (down 3.64%) and Lupin (down 3.12%).
The top two B Group gainers on the BSE were—Bheema Cements (up 19.97%) and Burnpur Cements (up 19.94%).
The top two B Group losers on the BSE were—Principal Pharmaceuticals & Chemicals (down 13.77%) and Paradip Overseas (down 12.01).
Out of the 50 stocks listed on the Nifty, 41stocks settled in the positive. The key gainers were Jaiprakash Associates (up 3.72%); DLF (up 3.71%); Bank of Baroda (up3.43%); Punjab National Bank (up 3.28%) and Axis Bank (up 2.91%). The main laggards were Lupin (down 2.905); Cipla (down 2.15%); Maruti Suzuki (down 0.61%); UltraTech Cement (down 0.53%) and Ambuja Cement (down 0.45%).
Markets in Asia closed mostly lower on concerns about slowing growth. Besides, South Korea’s central bank today cut its growth estimates for 2012 to 2.4% from 3% announced in July and that for 2013 to 3.2% from 3.8%. The country’s central bank also cut its base rate by 25 basis points to 2.75%, the second time in four months.
The Shanghai Composite declined 0.81%; the KLSE Composite fell 0.24%; the Nikkei 225 dropped 0.58%; the Straits Times shed 0.04%; the Seoul Composite contracted 0.78% and the Taiwan Weighted tanked 1.85%. On the other hand, the Hang Seng gained 0.38% and the Jakarta Composite rose 0.12%.
At the time of writing, the CAC 40 of France was trading 0.66% higher, DAX of Germany was up 0.76% and UK’s FTSE 100 was up 0.60%. At the same time, the US stock futures were in the positive.
Back home, foreign institutional investors were net buyers of shares totalling Rs407.60 crore on Wednesday while domestic institutional investors were net sellers of equities amounting to Rs396.35 crore.
Coimbatore-based auto components major Pricol is planning to tie up with a foreign partner in its move to focus on the Japanese auto companies that have a presence in India. The firm said it would transfer technology meant for Japanese cars to a subsidiary.
Towards this end, the company has decided to transfer Denso Technology instrument businesses undertaking for Japanese cars to a wholly-owned subsidiary, Pricol Components, and thereafter form a JV with a global instrument supplier. The stock fell 0.53% to close at Rs18.80 on the NSE.
Everest Kanto Cylinder (EKC), a top player in high pressure seamless cylinders segment, has redeemed the entire obligation of $49.98 million (Rs265 crore including premium) towards its zero coupon foreign currency convertible bonds (FCCBs) which matured on 10th October. The company has funded the redemption from a combination of rupee term loan and internal accruals. The stock surged 2.91% to settle at Rs33.60 on the NSE.
Syndicate Bank has raised $500 million through an overseas bond issue of 5.5 years tenor. The issue was priced at 4.125%. The public sector lender intends to utilise the proceeds of the issue to expand lending operations of its London branch. The stock rose 0.79% to close at Rs114.90 crore on the NSE.


SEBI probing Mallya's UB Group companies for alleged violations of norms

SEBI is looking into contradictory statements about stake sale in Kingfisher to foreign airlines and private equity players and also about United Spirits selling stake to UK's Diageo

New Delhi: Following requests from bourses National Stock Exchange (NSE) and BSE, market regulator Securities and Exchange Board of India (SEBI) is investigating the affairs of some Vijay Mallya-controlled UB Group companies for alleged non-compliance with disclosure norms, reports PTI.


The stock exchanges have raised various concerns mainly about two UB Group units -- Kingfisher Airlines and United Spirits -- for not providing required disclosures and not adhering to deadline regarding finacial results and the Annual General Meeting.


Officials said that SEBI has started investigations into the issues related to Kingfisher and United Spirits Ltd (USL) following requests from the two bourses. The regulator has got information and is in the process of gathering more details, they added.


"SEBI will also look into contradictory statements made about stake sale in Kingfisher to foreign airlines and private equity players. The regulator may seek related information from the lenders also," a senior regulatory official said.


The regulator is also looking at reports about United Spirits selling stake to UK's Diageo Plc, the official added.


When contacted, UB Group spokesperson said that SEBI has sent a set of queries to United Spirits related to an announcement with Diageo Plc.


"The movement in share prices of our group companies has been largely influenced by the wide speculation by the media with no comments from us.


"SEBI has written to USL with a set of queries following a joint announcement with Diageo Plc on 25th September. We have provided the information," an UB Group spokesperson said.


Late last month, Vijay Mallya had said that Kingfisher was in talks with foreign airlines for possible stake sale. However, according to lenders, the domestic carrier was in discussions with private equity players.


Fidelity Investors: Now is the chance to exit

Investors of Fidelity Mutual Fund will be given a 30-day window from 15 October to redeem their holding without any exit load. With a relatively new fund management team of L&T Mutual Fund and the lack of a consistent performance track record, investors of Fidelity Mutual Fund schemes should use this opportunity to exit

In March this year, L&T Mutual fund bought Fidelity Mutual Fund and as per the Securities and Exchange Board of India guidelines (SEBI), the acquired fund house would have to give investors a month’s period to redeem their investments without any fee if they do not wish to continue with the new fund management. Unfortunately for the investors of Fidelity, the buyout of Fidelity's assets did not include the transfer of its experienced fund management team. Though critical segments like risk management and processes will be manned by the Fidelity team, the lack of an experienced fund management team may affect the future performance of the schemes.


L&T Mutual Fund which entered the mutual fund industry after the acquisition of DBS Cholamandalam in 2010 had a naïve fund management team. It has been on the lookout for hiring experienced mutual fund managers to handle the large asset base and just recently it ahs been able to strengthen its fund management team. The fund house recently hired Soumendra Nath Lahiri and Shriram Ramanathan as heads of equities and fixed income, respectively.


Before the acquisition, L&T MF had hired Venugopal Manghat as vice-president & co head-equity investments. He has worked for more than 16 years with Tata Asset Management. As head of equities, 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.


Soumendra Nath Lahiri joined as head of equities, with effect from 24 September 2012. With 17 years of experience in equity investments and research. Mr Lahri was the head of equities at Canara Robeco Asset Management Company and had a prior stint at DSP BlackRock, as well. Mr Ramanathan joined as the head of investment for fixed income, with effect from 7 August 2012. Mr Ramanathan was portfolio manager- fixed income at Fidelity Worldwide Investments India.


How has been the performance of L&T mutual fund schemes?


We took the average of the quarterly returns of the schemes from 1 March 2010 to 30 September 2012. Compared to their benchmarks the schemes of Fidelity have performed much better. All the schemes of Fidelity MF outperformed their respective benchmarks over the period. The only schemes of L&T that did better than the benchmark were L&T Growth and L&T Midcap.  L&T MF has a contra scheme which has failed to perform. Another scheme L&T Hedged Equity which aims to minimise risk by using hedging instruments such as index and stock derivative instruments to generate returns with lower volatility, however, failed to deliver returns sufficient to outperform the benchmark. L&T Opportunities, a multi-cap scheme, has failed to deliver as well. Even over the last quarter (June-Sept 2012) only L&T Midcap was able to outperform the benchmark. Fidelity MF kept up with its performance with three of its four schemes outperforming the benchmark over the same period.


The new fund management has still not got enough time to settle in. Therefore whether the performance of the existing Fidelity schemes will continue their outperformance, it is hard to judge. Handling a huge fund corpus is not an easy job. Given the opportunity to exit without any cost, investors can use this opportunity to invest in other better performing schemes with a stable fund management.


Effective from 16 November 2012 they will be many changes to the fundamental attributes of a few of Fidelity schemes and there will be some schemes that will be merged with other L&T schemes. We have mentioned the changes below scheme-wise. There could be some good reasons why you should consider redeeming your investments while you have the chance.

Proposed merger of schemes
-L&T Contra Fund and Fidelity India Value Fund will be merged to form L&T India Value Fund. 
-L&T Hedged Equity Fund, L&T Opportunities Fund and L&T Growth Fund will be merged with Fidelity India Growth Fund to form L&T India Large Cap Fund. 
- Fidelity India Children’s Plan–Savings Fund will be merged into L&T Short Term Income Fund.
In the past we have mentioned that many fund houses merge schemes mainly to hide the underperformance of another scheme. Here again, L&T Contra Fund—one of the worst performing scheme of the fund house—will be merged with Fidelity India Value Fund.
Similarly for the other merger, L&T Hedged Equity and L&T Opportunities Fund do not have much of a performance track record as well. The new scheme that would form L&T India Large Cap Fund will have a changed investment objective. The scheme would keep the asset allocation of the Fidelity India Growth Fund but instead of an objective to “invest largely in growth-oriented companies in Indian and international markets”, it would “invest predominantly in large cap stocks which would comprise the top 100 companies by market capitalisation”. The benchmark would change from BSE 200 to BSE 100.  
Change in fundamental attributes
Increase in expense ratio of Fidelity Global Real Assets
The total expense ratio of Fidelity Global Real Assets would increase by as much as 175 basis points from 0.75% to 2.50%. This is apart from the additional expense ratio that can be charged as per SEBI’s new mutual fund reforms. 
Unbundling of Fidelity India Children’s Plan and change in asset allocation
Fidelity India Children’s Plan (FICP) comprising three funds—Education Fund, Marriage Fund and Savings Fund—will be unbundled and form three different plans with a changed asset allocation strategy. As mentioned earlier the FICP-Saving Fund will be merged with L&T Short Term Income Fund.
FICP- Education Fund will be named as L&T India Prudence Fund. The equity component would change from 65%-100% to 65%-75%. The debt component will now be a minimum 25%.
FICP Marriage Fund will be named as L&T India Equity and Gold. The equity component would change from 65%-100%  to 65%-90%. The minimum allocation to gold will increase from nil to 10%, thus increasing the risk of the scheme further. The exit load norms have been changed for both the above schemes to 1% if exited within one year.
Investors of Fidelity Tax Advantage Fund (ELSS)
Unfortunately for those who have invested in Fidelity Tax Advantage Fund (ELSS) and who are still under the statutory lock-in period of three years as under Section 80C of the Income tax Act, 1961, the exit option is not available for them.




Manoj Verma

4 years ago

I had invested in Fidelity Tax Advantage Fund, while working in Fidelity itself. The only proof I have is the portfolio no and I have confirmed that with my PAN card, it is able to show my investment.
How and Where can I redeem my this investment?


5 years ago

When such sell off / exit is announced, in most cases it is better to redeem immediately by paying the exit load. Because during such times, fresh inflows invariably stop as investors / advisers are not keen on allocating fresh investments (even if the fund happens to be FIDELITY) in a fund which is being sold. The situation worsens when redemptions gather momentum with no inflows happening. When such a large and reputed international Mutual Fund decides to quit, It is better to be safe than sorry.

Why even wait till the no exit load window? When a mutual fund like FIDELITY chooses to sell its business, what’s the rationale for the investors to wait for a few months and save on the exit load of a few percentage points?

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