Category: Your Money

FII Investments

Yesterday, we saw how FIIs have pumped in closed to $12 billion this year alone. Lets see what stocks they have been buying up.

Since September 2013

Increases
SRTRANSFIN
40.34
JSWSTEEL
22.23
HINDPETRO
12.5
POWERGRID
10.27
YESBANK
9.95
UPL
8.45
TECHM
6.47
ZEEL
6.01
PETRONET
5.7
AXISBANK
4.9
Decreases
DABUR
-1.02
BAJAJFINSV
-1.06
ACC
-1.17
CONCOR
-2.22
EXIDEIND
-2.55
BANKINDIA
-3.38
FEDERALBNK
-6.86
HINDALCO
-11.09
GLAXO
-21.24
MCDOWELL-N
-31.47
FIIs have been active across the board. With no single sector being overly favored…

Since March 2014

Increases
ZEEL
48.68
YESBANK
7.06
KOTAKBANK
3.41
TATASTEEL
2.96
CANBK
2.53
TATAGLOBAL
2.42
PETRONET
2.23
UNIONBANK
2.2
IDEA
2.12
HINDPETRO
1.85
Decreases
WIPRO
-0.73
CAIRN
-0.75
IDFC
-0.80
BAJAJFINSV
-0.99
CONCOR
-2.27
BHARATFORG
-2.29
EXIDEIND
-2.32
FEDERALBNK
-3.77
HINDALCO
-11.55
MCDOWELL-N
-29.26
… However, they seem to have made up their minds on getting out of CONCOR and FEDERALBNK. And do we see a concentration among banking stocks?

Investment Strategy Implications

The data is delayed due to quarterly reporting and we get to hear about activity in bits and pieces, days after they occur. No sure if playing a guessing game as to what FIIs will buy or sell next will add any alpha to your portfolio. Its just nice to know what they have been up to…

Mutual Funds: A Tricky Business

There have been a couple of high profile exits from the asset management business recently. First, it was Fidelity that threw in the towel. And then it was Morgan Stanely’s turn. From where I stand, this is how I see it:

  1. The Mutual Fund business is all about accumulating Assets Under Management (AUM.)
  2. The breakeven is around Rs. 10,000 crore in AUM.
  3. Most investors focus on absolute returns so “beating a benchmark” is not rewarded with more flows.
  4. It is a distribution game. The fund house with the widest distribution network wins.
  5. The product is sold, not bought. Given the plethora of choices in the market, the average investor usually has no clue as to what is best for him. Schemes are sold on the basis of trust between the agent and the investor.
  6. The SEBI killed the distribution network by abolishing the entry load.
  7. The winners were the fund houses who had paid employees who could convert footfalls into sales.

LiveMint’s analysis back in Feb 2012:

Sources:

  • A cautionary tale of Morgan Stanley’s mutual funds in India (ET)
  • Morgan Stanley: Quit India (MoneyLife)
  • Fidelity’s exit, a slap on SEBI’s face (MoneyLife)

FII (FPI) and Mutual Fund Investment Charts

Foreign investors love the India Story

Just look at the amount of money pumped into India: $25,347.95 million so far this year alone.

fii-investments.2012-01-01.2014-08-31

And just into Equities: $11,960.36 million this year.

fii-investments-equities.2008-1-1.2014-08-31

Domestic Institutionals have a debt fixation

DIIs have bought up Rs. 3,99,840.60 crores into debt this year alone.

dii-investments.2012-01-01.2014-08-31

And have been net sellers of equities. Taking out a total of Rs. 452.30 crores this year and Rs. 22,507.20 crores since 2013.

dii-investments-equity.2008-1-1.2014-08-31

There are signs that domestic investors are finally joining the party. Here’s to hoping that a majority of those funds will come from fresh investments rather than from rotating out of debt into equity.

Also, these trends beg a question: Have our regulatory and tax system skewed incentives toward debt at the cost of equities?

REIT All the Way

We had discussed REITs (Real Estate Investment Trusts) before. The SEBI board has approved the final set of regulations.

Key take away

  1. Tax pass-through: return from investments through these instruments will be taxed only in the hands of investors and the trusts will not have to pay tax on income.
  2. REITs and Invits should have a starting asset value of at least Rs 500 crore and the initial offer has to be Rs 250 crore or more.
  3. REITs will be allowed to invest only in commercial property. They should be completed and should be generating revenue.
  4. REITs will have to be listed. But if the experience of listing NCDs is any indication, expect little no secondary market liquidity.
  5. REITs will not be allowed to invest in other REITs.
  6. Minimum investment: Rs. 2 lakhs

Impact

This will be a good way to build a diversified portfolio. Right now, investing in any form of real estate is a nightmare. Ticket sizes tend to be more than Rs. 50 lakhs for decent properties, there’s a huge legal tail-risk associated with land, the total cost of ownership cannot be fully calculated beforehand, so ROI is a matter of gut-instinct. REITs will be a net positive for investors with white money.

Right now, small ticket purchases (less than Rs. 50 lakhs) has been focused on buying up land in the outskirt of cities or Tier-2/Tier-3 cities. If REITs end up being popular, then it may negatively impact appreciation rates in these areas.

Full text:

Weekly Recap: 30 Things

world equity markets 2014-08-01.2014-08-08

The Nifty ended the week -0.45% (-1.59% in USD terms.)

Equities

Major
DAX(DEU) -2.18%
CAC(FRA) -1.31%
UKX(GBR) -1.67%
NKY(JPN) -4.80%
SPX(USA) +0.04%
MINTs
JCI(IDN) -0.69%
INMEX(MEX) +0.62%
NGSEINDX(NGA) +1.58%
XU030(TUR) -3.76%
BRICS
IBOV(BRA) -0.44%
SHCOMP(CHN) +0.42%
NIFTY(IND) -0.45%
INDEXCF(RUS) -1.80%
TOP40(ZAF) -0.38%

Commodities

Energy
Brent Crude Oil -0.06%
Ethanol -2.87%
Heating Oil -0.20%
Natural Gas +4.28%
RBOB Gasoline -0.14%
WTI Crude Oil -0.42%
Metals
Copper -0.93%
Gold 100oz +1.33%
Palladium -0.27%
Platinum +0.83%
Silver 5000oz -2.45%

Currencies

USDEUR:+0.13% USDJPY:-0.47%

MINTs
USDIDR(IDN) -0.20%
USDMXN(MEX) +0.43%
USDNGN(NGA) +0.74%
USDTRY(TUR) +0.64%
BRICS
USDBRL(BRA) +1.07%
USDCNY(CHN) -0.37%
USDINR(IND) -0.07%
USDRUB(RUS) +1.10%
USDZAR(ZAF) -0.02%
Agricultural
Cattle -2.98%
Cocoa +0.65%
Coffee (Arabica) -5.78%
Coffee (Robusta) -7.01%
Corn -0.21%
Cotton +2.18%
Feeder Cattle -2.25%
Lean Hogs -3.43%
Lumber +7.05%
Orange Juice +0.71%
Soybean Meal +2.34%
Soybeans +5.83%
Sugar #11 -0.92%
Wheat +0.60%
White Sugar -0.62%

Credit Indices

Index Change
Markit CDX EM -0.94%
Markit CDX NA HY -0.18%
Markit CDX NA IG +1.57%
Markit CDX NA IG HVOL +2.63%
Markit iTraxx Asia ex-Japan IG +5.84%
Markit iTraxx Australia +3.13%
Markit iTraxx Europe +2.10%
Markit iTraxx Europe Crossover +18.10%
Markit iTraxx Japan +1.89%
Markit iTraxx SovX Western Europe +3.59%
Markit LCDX (Loan CDS) -0.02%
Markit MCDX (Municipal CDS) -0.21%
Credit blew out. No sector was spared with even the high quality Investment Grade (IG) index getting hit. Japanese equities down almost 5%, Asian IG spreads +5.84%. What a mess…

Nifty Heatmap

CNX NIFTY.2014-08-01.2014-08-08

Index Returns

index performance.2014-08-01.2014-08-08

Sector Performance

sector performance.2014-08-01.2014-08-08

Advance Decline

advance.decline.line2.2014-08-01.2014-08-08

Market Cap Decile Performance

Decile Mkt. Cap. Advance/Decline
1 (micro-cap) -7.55% 59/73
2 +1.64% 68/64
3 +0.28% 65/67
4 +0.26% 67/65
5 -0.83% 65/67
6 -1.03% 66/66
7 -0.28% 70/62
8 -1.34% 64/68
9 -1.13% 64/68
10 (mega-cap) -0.51% 66/66
Most of the market bled out. Large-caps continued to out-perform the rest of the market.

Top Winners and Losers

TATACHEM +4.71%
ADANIENT +8.16%
CUMMINSIND +9.13%
UPL -8.75%
PETRONET -7.88%
ZEEL -6.02%
UPL swung like a yo-yo. Up 5.65% last week, down 8.75% this week. Most analysts maintain a target of Rs. 400 (Rs. 303.50 on Friday.) What gives?

ETFs

GOLDBEES +2.68%
JUNIORBEES +1.61%
PSUBNKBEES +0.81%
NIFTYBEES -0.47%
INFRABEES -1.04%
BANKBEES -2.48%
Surprisingly, JUNIORBEES ended in the green while NIFTYBEES ended red.

Investment Theme Performance

Yield Curve

Is it officially time to panic? The yield curve inverted this week…

yieldCurve.2014-08-01.2014-08-08

Total return bond indices

Sub Index Change in YTM Total Return(%)
GSEC TB +0.01 +0.16%
GSEC SUB 1-3 +0.24 -0.23%
GSEC SUB 3-8 +0.26 -1.47%
GSEC SUB 8 +0.13 -1.43%
Yields went up across the term-structure…

August Nifty OI

nifty.puts.calls.AUG.2014-08-01.2014-08-08

August Bank Nifty OI

bank-nifty.puts.calls.AUG.2014-08-01.2014-08-08

Thought for the weekend

An introspection that is worth a read. My favorite:

Everything is mediocre. Most jobs are mediocre. Most people’s work is mediocre. Most products and experiences are mediocre. Most lives drift to mediocre. When you rise above the mediocrity, people will notice.

What is yours?

Read: Thirty Things I’ve Learned