Opening Bell 30.09.2014

Your world at 9am

world.2014-09-30

Equities

Major
DAX(DEU) -0.71%
CAC(FRA) -0.83%
UKX(GBR) -0.04%
NKY(JPN) -1.24%
SPX(USA) -0.25%
MINTs
JCI(IDN) -0.74%
INMEX(MEX) +0.14%
NGSEINDX(NGA) +0.70%
XU030(TUR) +0.07%
BRICS
IBOV(BRA) -4.52%
SHCOMP(CHN) +0.07%
NIFTY(IND) -0.12%
INDEXCF(RUS) -1.81%
TOP40(ZAF) -0.67%

Commodities

Energy
Brent Crude Oil +0.10%
Ethanol +0.00%
Heating Oil -0.19%
Natural Gas -0.53%
RBOB Gasoline +0.14%
WTI Crude Oil -0.12%
Metals
Copper +0.00%
Gold 100oz -0.10%
Palladium +0.06%
Platinum -0.07%
Silver 5000oz -0.43%

Currencies

USDEUR:+0.00% USDJPY:-0.13%

MINTs
USDIDR(IDN) +0.32%
USDMXN(MEX) -0.14%
USDNGN(NGA) -0.18%
USDTRY(TUR) -0.03%
BRICS
USDBRL(BRA) +1.14%
USDCNY(CHN) -0.04%
USDINR(IND) +0.60%
USDRUB(RUS) +0.71%
USDZAR(ZAF) -0.10%
Agricultural
Cattle +0.34%
Cocoa +0.00%
Coffee (Arabica) +2.55%
Coffee (Robusta) +0.00%
Corn +0.00%
Cotton +0.00%
Feeder Cattle +0.34%
Lean Hogs +0.30%
Lumber +1.64%
Orange Juice +0.21%
Soybean Meal +0.00%
Soybeans -0.38%
Sugar #11 +2.08%
Wheat -0.05%
White Sugar +0.00%

Credit Indices

Index Change
Markit CDX EM -0.54%
Markit CDX NA HY -0.62%
Markit CDX NA IG +4.79%
Markit CDX NA IG HVOL +9.61%
Markit iTraxx Asia ex-Japan IG +0.56%
Markit iTraxx Australia +1.00%
Markit iTraxx Europe +4.51%
Markit iTraxx Europe Crossover +18.23%
Markit iTraxx Japan +0.67%
Markit iTraxx SovX Western Europe +0.37%
Markit LCDX (Loan CDS) +0.00%
Markit MCDX (Municipal CDS) +6.67%
Credit spreads widen, Hong Kong is in turmoil, SPX down overnight and NKY down this morning. The long-weekend couldn’t come any sooner…

Must reads

Insurance to be free for those below poverty line. Will cover ayurveda, yoga and naturopathy, unani, siddha and homoeopathy drugs. (LiveMint)

Maruti’s Mayank Pareek joins Tata Motors. As a shareholder of Tata Motors, we wish him the very best of luck! (DNA) MARUTI 3,060.60 52.45 (1.74%) TATAMOTORS 502.70 -8.05 (-1.58%)

tl;dr on Modi’s breakfast meet with CEOs. (FP)

If the China slowdown keeps up, it could be disastrous for countries that sell metal and energy to China. (QZ)

Up to half of Earth’s water is older than the sun. (NS)

Good luck!

Opening Bell 29.09.2014

Your world at 9am

world.2014-09-29

Equities

Major
DAX(DEU) -0.20%
CAC(FRA) +0.91%
UKX(GBR) +0.15%
NKY(JPN) +0.43%
SPX(USA) +0.86%
MINTs
JCI(IDN) -0.64%
INMEX(MEX) +0.24%
NGSEINDX(NGA) +0.10%
XU030(TUR) +0.04%
BRICS
IBOV(BRA) +2.23%
SHCOMP(CHN) +0.38%
NIFTY(IND) +0.72%
INDEXCF(RUS) -0.13%
TOP40(ZAF) +0.37%

Commodities

Energy
Brent Crude Oil -0.30%
Ethanol -1.43%
Heating Oil -0.19%
Natural Gas -0.20%
RBOB Gasoline +0.39%
WTI Crude Oil -0.56%
Metals
Copper +0.00%
Gold 100oz +0.30%
Palladium -0.08%
Platinum +0.01%
Silver 5000oz +0.26%

Currencies

USDEUR:+0.04% USDJPY:+0.11%

MINTs
USDIDR(IDN) +0.67%
USDMXN(MEX) +0.23%
USDNGN(NGA) +0.02%
USDTRY(TUR) +0.18%
BRICS
USDBRL(BRA) -0.32%
USDCNY(CHN) +0.17%
USDINR(IND) -0.31%
USDRUB(RUS) +1.78%
USDZAR(ZAF) +0.18%
Agricultural
Cattle +1.96%
Cocoa +0.00%
Coffee (Arabica) +1.51%
Coffee (Robusta) +0.00%
Corn +0.08%
Cotton +0.00%
Feeder Cattle +0.94%
Lean Hogs +1.02%
Lumber +0.12%
Orange Juice +2.32%
Soybean Meal -1.86%
Soybeans -0.27%
Sugar #11 +5.44%
Wheat -0.21%
White Sugar +0.00%

Credit Indices

Index Change
Markit CDX EM -0.54%
Markit CDX NA HY -0.62%
Markit CDX NA IG +4.79%
Markit CDX NA IG HVOL +9.61%
Markit iTraxx Asia ex-Japan IG +0.56%
Markit iTraxx Australia +1.00%
Markit iTraxx Europe +4.51%
Markit iTraxx Europe Crossover +18.23%
Markit iTraxx Japan +0.67%
Markit iTraxx SovX Western Europe +0.37%
Markit LCDX (Loan CDS) +0.00%
Markit MCDX (Municipal CDS) +6.67%
Will trouble in Hong Kong spill over to Indian markets? NKY is up this morning and Friday was a green-day. Fingers crossed…

Must reads

RBI wants to keep retail inflation below 8% by January 2015 and 6% by January 2016. So no rate cut. (LiveMint, #rates)

Nearly $1.7 billion has left global emerging market equity funds since September 11 2014, reversing nearly six months’ of inflows. (WSJ)

Household consumption (FMCG) recovered in urban India in May-July but remains weak in rural. (BS)

Amazon’s Jeff Bezos is completely sold on India. (Hindu)

Biyani on e-commerce: is “only technology for getting orders”, doubts logic of putting billions of dollars in e-commerce. (TOI)

Meanwhile, Russia continues to self-destruct. (BI)

Good luck!

Weekly Recap: Wiener’s Laws

world.2014-09-19.2014-09-26

Equities

Major
DAX(DEU) -3.15%
CAC(FRA) -1.49%
UKX(GBR) -2.76%
NKY(JPN) -0.56%
SPX(USA) -1.37%
MINTs
JCI(IDN) -1.82%
INMEX(MEX) -1.86%
NGSEINDX(NGA) -0.56%
XU030(TUR) -3.28%
BRICS
IBOV(BRA) -1.55%
SHCOMP(CHN) +0.78%
NIFTY(IND) -1.88%
INDEXCF(RUS) +0.18%
TOP40(ZAF) -3.59%

Commodities

Energy
Brent Crude Oil -0.96%
Ethanol -5.53%
Heating Oil -0.32%
Natural Gas +4.81%
RBOB Gasoline +2.21%
WTI Crude Oil +1.35%
Metals
Copper -1.62%
Gold 100oz +0.03%
Palladium -3.99%
Platinum -2.64%
Silver 5000oz -2.23%

Currencies

USDEUR:+1.21% USDJPY:+0.30%

MINTs
USDIDR(IDN) +0.65%
USDMXN(MEX) +1.59%
USDNGN(NGA) +0.35%
USDTRY(TUR) +1.23%
BRICS
USDBRL(BRA) +1.60%
USDCNY(CHN) -0.23%
USDINR(IND) +0.54%
USDRUB(RUS) +1.93%
USDZAR(ZAF) +1.31%
Agricultural
Cattle +1.71%
Cocoa +0.85%
Coffee (Arabica) +3.76%
Coffee (Robusta) +1.24%
Corn -2.56%
Cotton -3.36%
Feeder Cattle +1.22%
Lean Hogs +0.71%
Lumber -0.40%
Orange Juice +0.70%
Soybean Meal -5.19%
Soybeans -4.96%
Sugar #11 +14.81%
Wheat +0.11%
White Sugar +4.54%

Credit Indices

Index Change
Markit CDX EM +0.47%
Markit CDX NA HY -0.62%
Markit CDX NA IG +2.16%
Markit CDX NA IG HVOL +4.37%
Markit iTraxx Asia ex-Japan IG +2.42%
Markit iTraxx Australia +3.32%
Markit iTraxx Europe +1.58%
Markit iTraxx Europe Crossover +10.58%
Markit iTraxx Japan +2.76%
Markit iTraxx SovX Western Europe -1.81%
Markit LCDX (Loan CDS) -0.04%
Markit MCDX (Municipal CDS) +1.93%
The dollar rally continued and most equity markets ended the week in the red. It took S&P’s pat on the head for the Indian markets to post a decent number on the board. Things could have been much worse if not for that. This may not be “taper tantrum” but as the US embarks on tighter monetary policy, capital has a tendency to flee frontier/emerging markets.

Nifty Heatmap

CNX NIFTY.2014-09-19.2014-09-26

Index Returns

index performance.2014-09-19.2014-09-26

Sector Performance

sector performance.2014-09-19.2014-09-26

Advance Decline

advance.decline.line2.2014-09-19.2014-09-26

Market Cap Decile Performance

Decile Mkt. Cap. Adv/Decl
1 (micro) -10.46% 62/80
2 -6.95% 63/79
3 -7.08% 57/85
4 -6.95% 54/88
5 -6.63% 49/93
6 -5.12% 62/80
7 -6.80% 54/88
8 -6.25% 63/79
9 -5.39% 65/77
10 (mega) -2.06% 69/73
Midcaps and Smallcaps bled out. The Nifty maybe down 1.88% but just look at the rest of the market…

Top Winners and Losers

ITC +3.42%
GSKCONS +5.25%
GLAXO +8.18%
OFSS -15.09%
BANKINDIA -14.23%
JINDALSTEL -12.65%
Flight to safety? OFSS doesn’t count because it paid out a dividend of Rs 485/- per share… JSPL got dinged because of the coal verdict…

ETFs

GOLDBEES -0.13%
CPSEETF -0.40%
NIFTYBEES -1.50%
BANKBEES -2.53%
JUNIORBEES -3.50%
PSUBNKBEES -6.04%
INFRABEES -6.21%
WTF?! All ETFs in the red?

Yield Curve

yield Curve.2014-09-19.2014-09-26

Bond Indices

Sub Index Change in YTM Total Return(%)
GSEC TB +0.01 +0.15%
GSEC SUB 1-3 +0.02 +0.29%
GSEC SUB 3-8 -0.19 +0.66%
GSEC SUB 8 -0.35 +2.52%
Long end of the curve is probably over-bought at this point… But then again, falling inflation and an expectation of rate-cuts will do that.

Nifty OI

nifty.puts.calls.OCT.2014-09-19.2014-09-26

Bank Nifty OI

bank-nifty.puts.calls.OCT.2014-09-19.2014-09-26

Theme Performance

Thought for the weekend

To make planes safer these days, engineers have designed automated systems that basically allow the planes to fly themselves. An unintended consequence of increased safety for the plane is increased complexity for the pilots. Industry experts have warned of the side effects that can arise from this increased complexity for a number of years now. One of the cautionary voices was that of an engineer named Earl Wiener. Here’s “Wiener’s Laws” adapted to the financial markets:

Every device creates its own opportunity for human error.
Any financial model is only as good as the person or team using it.

Exotic devices create exotic problems.
Complex strategies can create unforeseen complications.

Digital devices tune out small errors while creating opportunities for large errors.
Risk comes in many forms and some models can lead to a false sense of security if you’re not aware of the imbedded risks.

Some problems have no solution.
You have to choose which form of risk you want to deal with, risk now or risk in the future.

It takes an airplane to bring out the worst in a pilot.
Financial markets magnify bad behavior in even some of the most intelligent people.

Whenever you solve a problem, you usually create one. You can only hope that the one you created is less critical than the one you eliminated.
There’s no such thing a perfect portfolio or process. Every strategy involves trade-offs.

Sources:
When Exotic Devices Create Exotic Problems
The Human Factor

Long-term Gilt Funds

With the consensus on RBI rate cuts beginning next year, investors have been lapping up long-term government bonds (gsecs or gilts, if you wish.) The long-end has been bid so hard that the yield curve is flat as a pancake.

zero.curve.2012-01-05.2014-09-25

GSec Total Return Indices have tracked this, except for the hiccup back in May last year.

Short-term:

GSEC_SUB_1-3.2012-01-05.performance

Medium-term:

GSEC_SUB_3-8.2012-01-05.performance

Long-term:

GSEC_SUB_8.2012-01-05.performance

Drawdowns

May’13 was a rude reminder to investors who thought that you cannot lose money investing in government bonds. You can. Investors in the long-end of the curve are yet to recover from the drawdown last year.

gsec draws

Should you expect actively managed gilt funds to do better?

UTI – GILT ADVANTAGE vs. ICICI Prudential Long Term Gilt

UTI’s fund has a much shorter duration compared to ICICI’s (4.1 vs. 7.35 years.) And the returns that the funds have posted exemplify the importance of incorporating the fund portfolio’s duration into your decision making.

Since 2012-01-05, UTI – GILT ADVANTAGE-LONG TERM has returned a cumulative 24.59% vs. ICICI Prudential Long Term Gilt Fund’s cumulative return of 20.16%.

UTI – GILT ADVANTAGE vs. Birla Sun Life Gilt Plus

Since 2012-01-05, UTI – GILT ADVANTAGE has returned a cumulative 24.59% vs. Birla Sun Life Gilt Plus’s cumulative return of 14.79%. And BSL’s fund is yet to recover from the May’13 drawdown.

birla gilt drawdown

UTI – GILT ADVANTAGE vs. HDFC Gilt Fund-Long Term

Since 2012-01-05, UTI – GILT ADVANTAGE has returned a cumulative 24.59% vs. HDFC Gilt Fund-Long Term’s cumulative return of 22.01%. Of the three funds we compared, this is the closest any gilt fund has come to matching UTI’s returns.

UTI – GILT ADVANTAGE vs. GSEC SUB 3-8 TRI

Since 2012-01-05, UTI – GILT ADVANTAGE-LONG TERM has returned a cumulative 24.59% vs. GSEC SUB 3-8′s cumulative return of 18.55%. The fund beat the sub-index hands-down.

Conclusion

It looks like the UTI Gilt Advantage fund is a well managed fund that has beat its peers and benchmarks. But as the standard disclaimer reads, “past performance does not necessarily predict future results.”

You can run the comparison tool here: FundCompare
 
 
 

Please don’t treat the information here as investment advice.
If you want advice on investing in mutual funds, please get in touch with Shyam.
You can either WhatsApp him or call him at 080-2665-0232.
He is an AMFI registered IFA who can advice you on HDFC, ICICI Pru, UTI and Birla Sun Life funds.