Download Ph - Edelweiss Financial Services

DEBT FUND ANALYSIS
DEBT FUND ANALYSIS
Sep 01, 2008 – Sep 15, 2008
DEBT FUND ANALYSIS
Debt Market Update
Market movements
 The benchmark bond price witnessed only a singular
upward movement; strengthening the bulls in the
market for yields to fall by 23bps
 Buying pressures stemmed from banks’ requirement
for the 25% SLR mandate, the Reserve Bank of
India’s (RBI) buying in the G-sec segment, and
positive cues extended by USD 119/bbl resistance
for crude prices; total average volumes on the NDSOM were INR 68.61 bn
 Annual inflation for the week ended August 16 shied
away from the 13%-mark, backtracking 23bps to
reach 12.40% from the previous week’s 12.63%
Liquidity/borrowings:
 Liquidity made bigger strides into the financial
system; reflected in the consistent downward trail of
the overnight rate, with a sharp plunge on gross
inflows worth INR 210 bn over August 2829(inclusive of redemptions worth INR 100 bn)
Debt Market Outlook
 Liquidity scenario is likely to deteriorate from the
current level. The CRR hike (applicable from August
30), which will absorb INR 80 bn from the system,
and the INR 75 bn outflow from T-bill auction will
lead to added pressure, which may push the
overnight rate back to 9%-levels.
 Though liquidity will be tight, and the cash flow
boost received twill restrict a steep jump in
borrowing under repo as it is expected to stay
below the previous non-reporting week
 G-sec prices, which have seen a bull run this week,
are likely to run out of steam next week and may
even witness a significant pull back
Debt Portfolio Strategy
 Liquid Plus Funds are still a safer bet from a short
term (3-6 months) horizon
 Fixed Maturity Plans to offer better returns as the
short term rates to yield higher
 The call rates reported a decline of 290bps , with
the CBLO and call rates touching an intra-week low
of sub-5%
2
DEBT FUND ANALYSIS
Recommended Debt MF Categories
Liquid Plus Funds:
 These funds have favorable portfolio composition. These funds are expected to invest close to 40%
on higher side and 25% on the lower side in Corporate Bonds with maturity above 1 year
 These funds are able to take advantage of rise in Overnight rates and also increase the portfolio yield
by taking call in high duration bonds. In the current scenario where overnight rates are expected to
remain high and yields on corporate bond to ease slightly from current levels. These funds are better
positioned to take advantage of both the scenarios
 These funds provide an indirect bet on Short to Medium term bonds. In case of 100% investment in
these bonds an investor can be subject to mark to market compulsion and any rise in rates is likely
to hurt the return on investment. However, with investment in Liquid Plus Funds an investor can take
advantage of spread investment strategy of these funds
 These funds are treated as an income fund and are exempt from the rise in Dividend Distribution
Tax. Old rate of Dividend Distribution Tax is applicable to these funds
3
DEBT FUND ANALYSIS
4
DEBT FUND ANALYSIS
5
DEBT FUND ANALYSIS
6
DEBT FUND ANALYSIS
Recommended Schemes in Liquid Plus Funds
Liquid Plus Funds – Retail & Institutional
 DWS Money Plus Fund
 ICICI Prudential Flexible Income Plan
 Birla Sun Life Liquid Plus Fund
 Reliance Liquid Plus Fund
7
DEBT FUND ANALYSIS
8
DEBT FUND ANALYSIS
9
DEBT FUND ANALYSIS
10
DEBT FUND ANALYSIS
11
DEBT FUND ANALYSIS
Recommended Debt MF Categories
Fixed Maturity Plans:
 Product with various maturities
• FMPs are available with numerous maturity options –1 month, 3 months, 6 months,
1 year, 3 years and 5 years. One can invest in the relevant plan depending upon his
investment horizon and the requirement of cash flows on maturity
 Minimal risk
• Unlike debt funds, which are exposed to three kinds of risks viz. interest rate, credit
and liquidity risk, FMPs are a better option
• FMPs are least exposed to interest rate risk as the fund manager holds the
instruments till maturity getting a fixed rate of return. Thus FMP can manage to get
a specific interest on these instruments and investors have a fair idea about it. This
helps investors tailor their investments as per their future cash requirements
• They primarily invest in AAA, P1+ or such kind of good rated credit instruments
with maturity profile of the securities in line with the maturity of the plan so there is
also low credit risk with minimal liquidity risk involved
 Tax Efficient Returns
• FMPs yield competitive & tax efficient returns as the tax rates on a FMP are
comparatively lesser than the tax rates in other debt funds
12
DEBT FUND ANALYSIS
FMPs with tenure less than 1 Year
Name of the Scheme
Tenure
Closing Date
Min. Investment
Kotak FMP 6M Series 7
HDFC FMP 90D August 2008 (Insti.)
HDFC FMP 90D August 2008 (Reg.)
SBI SDFS 90 Days - 29
ICICI FMP Series 47 - 3 Months Plan B (Insti.)
ICICI FMP Series 47 - 3 Months Plan B (Reg.)
6 months
90 Days
90 Days
90 Days
3 months
3 months
04-Sep-08
01-Sep-08
01-Sep-08
01-Sep-08
01-Sep-08
01-Sep-08
5,000
10,000,000
5,000
5,000
10,000,000
5,000
Indicative Yield (Pre
Tax)
10.65%
11.10%
11.00%
10.90%
11.05%
10.75%
FMPs with tenure more than 1 Year
Name of the Scheme
Reliance Fixed Horizon Fund - IX - Series 6
(Insti.)
Reliance Fixed Horizon Fund - IX - Series 6
(Reg.)
ING Yearly FMP 366 - Series A (Insti.)
ING Yearly FMP 366 - Series A (Reg.)
DWS Fixed Term Fund - Series- 59 (Insti.)
DWS Fixed Term Fund - Series- 59 (Reg.)
Lotus India FMP - 375 - Days Series XVI (Insti.)
Lotus India FMP - 375 - Days Series XVI (Reg.)
SBI SDFS - 370 Days - 1 (Insti.)
SBI SDFS - 370 Days - 1 (Reg.)
Templeton Fixed Horizon Fund- Series XI-Plan B
ABN AMRO Fixed Term Plan - Series 13: Plan
C(Insti.)
ABN AMRO Fixed Term Plan - Series 13: Plan
C(Reg.)
Tenure
Closing Date
Min. Investment
Indicative Yield (Pre
Tax)
19 months
9-Sep-08
10,000,000
11.50%
19 months
9-Sep-08
5,000
11.00%
366 Days
366 Days
2 Years
2 Years
375 Days
375 Days
370 Days
370 Days
367 Days
8-Sep-08
8-Sep-08
4-Sep-08
4-Sep-08
2-Sep-08
2-Sep-08
1-Sep-08
1-Sep-08
1-Sep-08
500,000
5,000
5,000,000
5,000
500,000
5,000
500,000
5,000
5,000
11.50%
10.60%
11.50%
11.25%
11.00%
10.50%
11.50%
11.00%
11.30%
370 Days
1-Sep-08
2,500,000
11.50%
370 Days
1-Sep-08
5,000
10.90%
13
DEBT FUND ANALYSIS
Contact Details
Edelweiss Securities Ltd
11th Floor, 1101 A&B Godrej Coliseum
Off Eastern Express Highway, Sion (E)
Mumbai – 400022
Ph: +91 22 4088 5757
Edelweiss Securities Ltd
10th Floor, Hindustan Times House,
18-20, Kasturba Gandhi Marg,
New Delhi - 110001
Ph: +91 11 4367 1111
Edelweiss Securities Ltd
2nd Floor, Savitri Towers,
3A Upper Wood Street,
Kolkata – 700017
Ph: +91 33 4010 4646
Edelweiss Securities Ltd
1st Floor, Plot No. 4009,
100 ft Road, HAL II Stage,
Bangalore – 560008
Ph: +91 88 4150 1214
Edelweiss Securities Ltd
10th Floor, Arcadia,
Nariman Point,
Mumbai – 400021
Ph: +91 22 4097 9400
Information/Sales: +91 22 4097 9400
[email protected]
14
DEBT FUND ANALYSIS
Disclaimer
This document has been prepared by Edelweiss and is strictly confidential and is intended for the use by recipient only and may not be circulated, redistributed, retransmitted or
disclosed, in whole or in part, or in any form or manner, without the express written consent of Edelweiss. Receipt and review of this document constitutes your agreement not to
circulate, redistribute, retransmit or disclose to others the contents, opinions, conclusion, or information contained herein.
In the preparation of the material contained in this document, Edelweiss has used information that is publicly available, including information developed in‐house Information
gathered & material used in this document is believed to be from reliable sources and is given in good faith.
Edelweiss however does not warrant the accuracy, reasonableness and/or completeness of any information. For data reference to any third party in this material no such party
will assume any liability for the same. Edelweiss and/or any affiliate of Edelweiss does not in any way through this material solicit any offer for purchase, sale of any financial
transaction/commodities/products of any financial instrument dealt in this material. All recipients of this material should before dealing and or transacting in any of the products
referred to in this material make their own investigation, seek appropriate professional advice. The investments discussed in this material may not be suitable for all investors. Any
person subscribing to or investigating in any product/financial instruments should do so on the basis of and after verifying the terms attached to such product/financial instrument.
Edelweiss (including its affiliates) and any of its officers, directors, personnel and employees, shall not be liable for any loss, damage of any nature, including but not limited to
direct, indirect, punitive, special, exemplary, and consequential, as also any loss of profit in any way arising from the use of this material in any manner. The recipient alone shall
be fully responsible/are liable for any decision taken on the basis of this material.
Edelweiss has included statements/opinions/recommendations in this document which contain words or phrases such as “will”, “expect”, “should” and similar expressions or
variations of such expressions, that are “forward looking statements”. Financial products and instruments are subject to market risks and yields may fluctuate depending on
various factors affecting capital/debt markets. Please note that past performance of financial products and instruments does not necessarily indicate the future prospects and
performance thereof. Actual results may differ materially from those suggested by the forward looking statements due to risks or uncertainties associated with our expectations
with respect to, but not limited to, exposure to market risks, general economic and political conditions in India and other countries globally, which have an impact on our services
and/or investments, the monetary
and interest policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or rates or prices, the performance of the financial
markets in India and globally, changes in domestic and foreign laws, regulations and taxes and changes in competition in the industry. By their nature, certain market risk
disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains or losses could materially differ from those
that have been estimated.
Edelweiss (including its affiliates) or its officers, directors, personnel and employees, including persons involved in the preparation or issuance of this material may; (a) from time
to time, have long or short positions in, and buy or sell the securities mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or
other compensation in the financial instruments/products/commodities discussed herein or act as advisor or lender/borrower in respect of such securities/financial
instruments/products/commodities or have other potential conflict of interest with respect to any recommendation and related information and opinions. The said persons may
have acted upon and/or in a manner contradictory with the information contained here.
This document is intended to be used only by resident Indians, non‐resident Indians, persons of Indian origin, subject to the applicable laws and regulations of any Indian or
foreign regulatory authority. This document should not be regarded as solicitation of business in any jurisdiction including India. Mutual Fund investments are subject to market
risk please read the offer document carefully before investing.