Apr’14 – Jun’14

April’ 2014 to June’ 2014: Samedh Dynamic Mutual Fund Portfolio

Samedh Dynamic Mutual Fund Portfolio for April to June quarter of Financial Year 2014-15, is shown in the pie-chart below. This allocation is prescribed for the part of investor’s portfolio that is intended to be invested for longer than 3-years. First time investors are recommended to visit Why Samedh? , Asset Allocation Approach , and Value Investing Philosophy pages before making investment based on the advice.

Samedh Financial Investment Portfolio India FY 2014 15 Q1

The portfolio advised for April to June Quarter of 2014 has delivered a spectacular absolute return of 16.9%. This is higher than even the annual portfolio target return of 16.0%.

The exceptionally high return is because of the general run-up in equities on decisive political mandate. This should, in no way be taken as a norm for making future investments as per portfolio recommendations. It is a known fact that a rising tide lifts all boats. Hence a rise in portfolio value with the general rise in equity market is neither a benchmark nor a true test of the strength of portfolio. The true strength of portfolio would be to outperform the market in testing conditions.

The target of Samedh Dynamic Mutual Fund Portfolio stays to ensure safety of principal while attempting to generate an adequate return. Exceptionally high returns of last quarter should not be expected in future. The returns going forward should be expected to be close to that required to meet targeted annualized return of 16.0%.

The table below shows comparative performance of Samedh Dynamic Mutual Fund Portfolio and other Financial Investment Assets, for the quarter:

Samedh Dynamic Mutual Fund Portfolio Period Nifty Gold (USD) * USDINR 3-Year FD @ SBI SDMFP Period’s Return
Nifty Gold 3-Year FD SDMFP
Quarter’s Start 1st Apr’ 2014 6,704 24,810 8.75% 100.00 N.A. N.A. N.A. N.A.
FY 2014-15 Q1 Apr’ 2014 6,696 25,087 8.75% 101.35 -0.1% 1.1% 0.7% 1.3%
May’ 2014 7,230 23,789 8.75% 111.33 8.0% -5.2% 0.7% 9.8%
Jun’ 2014 7,611 25,633 8.75% 116.95 5.3% 7.8% 0.7% 5.0%
Overall Return during the Quarter (Apr’ 2014 – Jun’ 2014) 13.5% 3.3% 2.2% 16.9%

 

Portfolio Explanation

Ideal Asset Allocation suggested for Samedh Dynamic Mutual Fund Portfolio for April to June Quarter (Q1) of Financial Year 2014-15 is as below. It has been derived from long-term pricing trends of the various asset classes and consequent return expected from them in future.

Samedh Asset Allocation India FY 2014 15 Q1

 

Asset Allocation Group 1: Growth Assets (GROWTH)

Allocation for quarter in Samedh Dynamic Mutual Fund Portfolio: 60%

During April to June quarter of 2014, 60% of Samedh Dynamic Mutual Fund Portfolio value is allocated to Growth Asset Class Group. This is to be further sub-allocated into two Asset Classes that are grouped under Growth Assets so that the sum of their sub-allocations adds up to 60%.

Growth Assets – Asset Class 1: Equity (GROWTH-EQUITY)

Allocation for quarter in Samedh Dynamic Mutual Fund Portfolio: 54%

During April to June quarter of 2014, 54% of Samedh Dynamic Mutual Fund Portfolio value is allocated to Equity Asset Class. This allocated portfolio value is to be invested in Asset Class Categories corresponding to Equity Asset Class.

Sixteen market-capitalization and sector based equity indices in India have sufficiently long data series available for them to analyze market cycles. These have been identified as the Asset Class Categories falling under Equity Asset Class for SDMFP. The various investment parameters corresponding to these Asset Class Categories, for April to June quarter of 2014, are mentioned in the table below. Current index levels can be viewed at NSE Live Indices Watch page for comparison.

Asset Class Category Benchmark Index Sub Limit Index Fair Value (1st Apr) Index Start Level (1st Apr) Future Prospect Premium Investment  Phase Buy Threshold for Index (Qtr) Sell Threshold for Index (Qtr) Investment Option(s)
Smallcap Equity CNX Smallcap 5% 1,900 3,693 +95% Sell 1,300 2,500 Reliance Smallcap Fund
Realty Sector Equity CNX Realty 2% 108 189 +77% Sell 75 140  DLF, Unitech
Auto Sector Equity CNX Auto 40% 3,500 5,803 +65% Sell 2,100 4,600  UTI Transp. & Log. Fund
Metal Sector Equity CNX Metal 5% 1,700 2,521 +50% Sell 1,150 2,200 SBI Mag. Comma Fund
Banking Sector Equity CNX Bank Nifty 40% 10,000 12,742 +26% Hold 6,000 14,100 GS Bank. ETF / Reliance Bank. Fund
Largecap Equity CNX NIFTY 35% 5,800 6,704 +15% Hold 4,000 7,600 HDFC Index Fund Sensex / Nifty
Pharma Sector Equity CNX Pharma 20% 6,700 7,630 +15% Wait 5,300 8,000 SBI Pharma Fund
FMCG Sector Equity CNX FMCG 10% 15,750 18,085 +15% Wait 11,000 21,000 SBI FMCG Fund
PSU Bank Equity CNX PSU Bank 5% 2,500 2,739 +10% Hold 1,700 3,300 Goldman Sachs / Kotak PSU Bank ETF
Finance Sector Equity CNX Finance 60% 5,400 5,274 -3% Hold 4,300 6,600 Birla SL Bank. & Fin. Svc. Fund
IT Sector Equity CNX IT 20% 9,600 9,298 -3% Hold 6,700 12,500 SBI IT Fund
Infrastructure Equity CNX Infrastructure 10% 2,700 2,615 -3% Hold 1,900 3,500 GS Infra. ETF / UTI Infra. Fund
Midcap Equity CNX Midcap 25% 8,950 8,612 -4% Hold 7,000 11,000 ICICI  Value Disc. Fund
Energy Sector Equity CNX Energy 10% 9,500 8,329 -12% Hold 6,500 12,500 UTI Energy Fund
Media Sector Equity CNX Media 2% 2,150 1,793 -16% Wait 1,200 3,000 Reliance Media & Ent. Fund
Public Sector Equity CNX PSE 10% 4,900 2,843 -42%   Buy 3,400 6,400 Baroda Pio. PSU Equity Fund

One of the sixteen Asset Class Categories is in Buy phase during April to June quarter of 2014. Accordingly new investment up to portfolio allocation sub-limit for Public Sector Equity (10%) can be made during April to June quarter of 2014. This investment should be made at index levels lower than the Buy Threshold. Investors who have prior investments in other eleven Equity Asset Class Categories in Hold or Wait investment phase should make the new allocation to such extent that overall limit for Equity Asset Class (54%) is not exceeded. Four Equity Asset Class Categories are in Sell investment phase as their market pricing is substantially higher than their value. Prior investments in these should be liquidated during the current quarter.

The equity portfolio left un-allocated after following the above approach should be completed as follows:

  1. A maximum of 80% of sub-limits should be first allocated to Media Sector Equity and Energy Sector Equity. This comes to a maximum of 2% (80%*2%) for Media Sector and 8% (80%*10%) for Energy Sector.
  2. A maximum of 40% of sub-limits should then be allocated to Mid-Cap Equity, Infrastructure Equity, IT Sector Equity and Finance Sector Equity. This comes to a maximum of 10% (40%*25%) for Mid-Cap Equity, 4% (40%*10%) for Infrastructure Equity, 8% (40%*20%) for IT Sector Equity and 24% (40%*60%) for Finance Sector Equity. The amount should be divided between Asset Class Categories in proportion of their sub-limits.

By following the above mentioned approach the entire equity allocation can be completed.

 

Growth Assets – Asset Class 2: Other (GROWTH-OTHER)

Allocation for quarter in Samedh Dynamic Mutual Fund Portfolio: 6%

During April to June quarter of 2014, 6% of Samedh Dynamic Mutual Fund Portfolio value is allocated to Other Asset Class. This allocated portfolio value is to be invested in Growth Asset Class Categories other than India Equity. These are broadly grouped as below:

  1. Precious Metals: Metals like Gold, Silver, Platinum etc that are used for investments. Gold has been identified as lead Asset Class Category for the Asset Class. Gold ETFs are available in India which are categorized as financial assets unlike physical Gold. However ETFs are not yet available for other precious metals.
  2. International Equity: Equity indices outside India that can be taken exposure of through International Equity Mutual Funds available in India, which are categorized as financial assets.
  3. Commodities: Commodities are primarily used for consumption. Investment exposure can be taken to these by investing in International Equity Funds linked to Commodities which are categorized as financial assets

Currently seven Asset Class Categories have been identified under Other Asset Class for SDMFP. The various investment parameters corresponding to these Asset Class Categories, for April to June quarter of 2014, are mentioned in the table below.

International Equity

Asset Class     Category Benchmark      Index Sub    Limit Benchmark    Index Level (Start) Position in Market Pricing Cycle Investment     Phase Buy     Threshold for Index (Qtr) Sell     Threshold for Index (Qtr) Investment Option(s)
US Equity (INR) DJIA 30 15% 16,458 75% Wait 9,500 17,000 Franklin US Opportunities Fund
Europe Equity (INR) Euro Stoxx 50 8% 3,162 75% Wait 2,000 3,200 DWS Top Euroland Fund
Hong Kong Equity (INR) Hang Seng 6% 22,151 70% Wait 18,800 23,000 Goldman Hang Seng BeES Fund
China Equity (INR) Shanghai Composite 4% 2,033 35% Wait 1,800 2,700 Mirae China Advantage

Precious Metals & Commodities

Asset Class     Category Benchmark       Index Sub    Limit Benchmark       Index Level (Start) Position in Market Pricing Cycle Investment     Phase Buy Threshold for Index (Qtr) Sell Threshold for Index (Qtr) Investment Option(s)
Crude Oil / Energy West Texas Intermediate Crude 30% $ 101 40% Hold $ 90 $ 130 DSP BlackRock World Energy Fund
Agriculture Commodities S&P Global Agribusiness 2% 2,052 90% Sell 1,300 1,950 DSP BlackRock World Agriculture Fund
Gold (INR) / 10gm Gold (USD) * INR/USD * 10gm/Ounce 20% 24,841     (1,285 * 60.12 * 0.32) 35% Wait 21,000 34,000 GS Gold ETF

None of the seven Asset Class Categories is in Buy phase during April to June quarter of 2014. Gold (INR) is at 35% market pricing level and Crude Oil is at 40% market pricing level. However Gold (INR) has artificially inflated value because of duty imposed on Gold imports to India. An investment in Gold (INR) is not advisable till this continues to be the case. A maximum of 60% of sub-limit can be freshly allocated to Crude Oil which comes to 6% (10%*60%).

One Other Asset Class Category (Agriculture Commodity) is in Sell phase during April to June quarter of 2014. Accordingly any prior investment in it should be liquidated during the quarter. The transactions should be made only at levels above the Sell Threshold.

Previous investment in Other four Asset Class Category (International Equity) should be held but no new transaction should be made during April to June quarter of 2014 until Buy of Sell Threshold levels are breached. In such a case the new allocation to Crude Oil should be limited to such an extent so that overall allocation to Growth-Other Asset Class is limited to 6%.

Asset Allocation Group 2: Income Assets (INCOME)

Allocation for quarter in Samedh Dynamic Mutual Fund Portfolio: 34%

During April to June quarter of 2014, 34% of Samedh Dynamic Mutual Fund Portfolio value is allocated to Growth Asset Allocation Group. This is further sub-allocated into two Asset Classes that are grouped under Income Assets so that the sum of their sub-allocations adds up to 34%.

Income Assets – Asset Class 1: Government Income (INCOME-GOVT)

Allocation for quarter in Samedh Dynamic Mutual Fund Portfolio: 25%

Government Income represents fixed-income investments backed by Government of India and carry lowest credit risk for Indian investors. These investment options have highest credit rating of AAA for Indian investors. During April to June quarter of 2014, 25% of Samedh Model Financial Investment Portfolio value is allocated to Government Income Asset Class. This allocated portfolio value is to be invested in Asset Class Categories corresponding to Government Income Asset Class.

Eight Asset Class Categories have been identified under Government Income Asset Class for SDMFP. The various investment parameters corresponding to these Asset Class Categories, for April to June quarter of 2014, are mentioned in the table below. Current benchmark index levels can be viewed at Investing.com for comparison.

Asset Class     Category Current Interest Rate Benchmark     Index Benchmark     Index Level (Start) Position in Market Pricing Cycle Investment  Phase Buy Threshold for Index (Qtr) Sell Threshold for Index (Qtr) Investment Option(s)
Senior Citizens’ Saving Scheme (SCSS) – 5 Yr (AAA) 9.20% G-Sec (5 Yr) 8.87% 5% Buy 8.30% 6.70% SBI SCSS
Post Office Time Deposit – 5 Yr (AAA) 8.81% G-Sec (5 Yr) 8.87% 5% Buy 8.30% 6.70% India Post
National Savings Certificate – 5 Yr (AAA) 8.50% G-Sec (5 Yr) 8.87% 5% Buy 8.30% 6.70% India Post
Government Securities – 10 Yr (AAA) 8.81% G-Sec (10 Yr) 8.81% 5% Buy 8.70% 7.00% Templeton G-Sec LT Fund
Inflation Indexed National Saving Securities -10 Yr (AAA) 9.80% Consumer Price Inflation + 1.5% 8.3% (CPI) Floating Buy N.A. N.A.  RBI IINSS Bond
Public Provident Fund (PPF) – 15 Yr (AAA) 8.70% G-Sec (15 Year) 9.15% Floating Buy N.A. N.A. Any Bank
PSU Bank Fixed Deposit – 3 Yr (AAA) 9.25% G-Sec (3 Yr) 8.75% 5% Buy 8.20% 6.20% SBI Fixed Depost
PSU Tax Free Bonds – 15 Yr (AAA) 8.52% G-Sec (15 Year) 9.15% 5% Buy 8.60% 7.40% NHAI, PFC Tax Free Bonds

All the Asset Class Categories are in Buy phase during April to June quarter of 2014. Accordingly new investment up to portfolio allocation for the asset class (25%) can be made in Government Income Asset Class during the quarter. This investment should be made only at Interest Rates above the Buy Threshold for benchmark index.

Income Assets – Asset Class 2: Corporate Income (INCOME-CORP)

Allocation for quarter in Samedh Dynamic Mutual Fund Portfolio: 9%

Corporate Income represents fixed-income investments floated by private Indian companies. They carry higher credit risk than Government Income for Indian investors. These investment options may have various credit ratings but in SDMFP, investment is only considered in instruments with AAA or AA Credit Rating for Indian investors. During April to June quarter of 2014, 9% of Samedh Dynamic Mutual Fund Portfolio value is allocated to Corporate Income Asset Class. This allocated portfolio value is to be invested in Asset Class Categories corresponding to Corporate Income Asset Class.

Four Asset Class Categories have been identified under Corporate Income Asset Class for SDMFP. The various investment parameters corresponding to these Asset Class Categories, for April to June quarter of 2014, are mentioned in the table below. Current benchmark index levels can be viewed at Investing.com for comparison.

Asset Class      Category Current Interest Rate Benchmark     Index Benchmark      Index Level (Start) Position in Market Pricing Cycle Investment  Phase Buy Threshold for Index (Qtr) Sell Threshold for Index (Qtr) Investment Option(s)
Private Bank Fixed Deposit – 3 Yr (AAA) 9.25% G-Sec (3 Yr) 8.75% 5% Buy 8.20% 6.20% ICICI Bank Fixed Deposit
Corporate Bonds / Debentures – 3 Yr (AA) 11.60% G-Sec (3 Yr) 8.75% 5% Buy 8.20% 6.20% Edelweiss, IIFL, Muthoot NCD
Corporate Fixed Deposit – 3 Yr (AAA) 10.25% G-Sec (3 Yr) 8.75% 5% Buy 8.20% 6.20% Mahindra Finance FD
Corporate Tax Free Bonds – 15 Yr (AAA) 8.52% G-Sec (15 Year) 9.15% 5% Buy 8.60% 7.40% L&T Inf. Fin. / IDFC Tax Free Bonds

All the Asset Class Categories are in Buy phase during April to June quarter of 2014. Accordingly new investment up to portfolio allocation for the asset class (9%) can be made in Corporate Income Asset Class during the quarter. This investment should be made only at Interest Rates above the Buy Threshold for benchmark index.

Asset Allocation Group 3: Liquid Assets (LIQUID)

Weightage for quarter in Samedh Dynamic Mutual Fund Portfolio: 6%

During April to June quarter of 2014, 6% of Samedh Dynamic Mutual Fund Portfolio value is allocated to Liquid Asset Class Group. This portion is to be invested in the only Asset Class that is available under Liquid Assets. Even though the overall portfolio has 3-year investment horizon, a small allocation of 2% has been maintained to Liquid Asset Class which represents the capital in-between two investment transactions. For current quarter an allocation of 4% from Growth-Other Asset Class has been parked in Liquid Asset Class due to lack of investment opportunity in Growth-Other Asset Class.

Liquid Assets – Asset Class 1: INCOME (LIQUID-INCOME)

Allocation for quarter in Samedh Dynamic Mutual Fund Portfolio: 6%

Liquid Income represents fixed-income investments with highest liquidity for Indian investors. During April to June quarter of 2014, 6% of Samedh Dynamic Mutual Fund Portfolio value is allocated to Liquid Income Asset Class. This allocated portfolio value is to be invested in Asset Class Categories corresponding to Liquid Income Asset Class.

Two Asset Class Categories have been identified under Liquid Income Asset Class for SDMFP. The various investment parameters corresponding to these Asset Class Categories, for April to June quarter of 2014, are mentioned in the table below:

Asset Class Category Current Interest Rate Benchmark     Index Benchmark     Index Level (Start) Position in Market Pricing Cycle Investment  Phase Buy      Threshold for Index (Qtr) Sell Threshold for Index (Qtr) Investment Option(s)
Saving Bank Account 4.00% Govt. Regulation 4.00% N.A. N.A. N.A. N.A. ICICI Saving Bank Balance
Liquid Mutual Funds 8.55% G-Sec (90 Day) 8.55% N.A. N.A. N.A. N.A. HDFC Liquid Fund

Investment Phase is not applicable to Liquid Income Asset Class and transactions can be made in corresponding Asset Class Categories as pre requirement. Accordingly new investment up to portfolio allocation for the asset class (6%) can be made in Liquid Income Asset Class during April to June quarter of 2014. Of this Saving Bank balance should be limited to 1% and 5% should be allocated to Liquid Mutual Funds.

 

SDMFP Index (Starting Level: 100)

SDMFP Index has been introduced to track the performance of Samedh Dynamic Mutual Fund Portfolio. The starting level of index was 100 as on date 1st April 2014 which was based on closing value of Investment Products on 31st March 2014. Quarter end value of the index was 116.95 based on closing values of 30th June 2014. This implies an absolute portfolio return of 16.9% in FY 2014-15 Q1.

Find below the SDMFP Index details table for FY 2014-15 Q1:

Asset Class / Asset Class Group / Investment Product Benchmark Index Quarter Start (1st Apr. 2014) Quarter End (30th June 2014)
Benchmark Index Level NAV / Interest Rate Allocated Amount %age Benchmark Investment
Level Return NAV /
Int. Rate
Return Updated Amount Updated %age
Baroda Pio. PSU Equity Fund CNX PSE 2,843 6.71 10.00 10% 3,779 32.9% 9.20 37.1% 13.71 11.7%
Reliance Media & Ent. Fund CNX Media 1,793 40.41 2.00 2% 2,118 18.1% 48.72 20.6% 2.41 2.1%
UTI Energy Fund CNX Energy 8,329 9.69 8.00 8% 9,968 19.7% 12.83 32.4% 10.59 9.1%
ICICI Value Disc. Fund CNX Midcap 8,612 68.81 8.00 8% 11,097 28.9% 90.03 30.8% 10.47 9.0%
UTI Infra. Fund CNX Infrastructure 2,615 32.79 3.00 3% 3,373 29.0% 42.26 28.9% 3.87 3.3%
SBI IT Fund CNX IT 9,298 34.56 6.00 6% 9,912 6.6% 37.72 9.1% 6.55 5.6%
SBI FMCG Fund CNX FMCG N.A. N.A. N.A. N.A. N.A. N.A. 58.98 N.A.
Birla SL Bank. & Fin. Svc. Fund CNX Finance 5,274 11.22 17.00 17% 6,247 18.4% 13.81 23.1% 20.92 17.9%
Growth-Equity CNX Nifty 6,704 N.A. 54.00 54% 7,611 13.5% N.A. 26.9% 68.52 58.6%
DSPBR World Energy Fund WTI Crude 101 14.24 6.00 6% 106 5.0% 15.73 10.5% 6.63 5.7%
Growth-Other Gold (USD) * USD/INR 24,841 N.A. 6.00 6% 25,663 3.3% N.A. 10.5% 6.63 5.7%
Growth N.A. N.A. N.A. 60.00 60% N.A. N.A. N.A. 25.2% 75.15 64.3%
Templeton G-Sec LT G-Sec – 10 Yr 8.81% 27.26 20.00 20% 8.75% 2.8% 28.80 5.6% 21.13 18.1%
SBI Fixed Deposit (3 Yr) G-Sec -3 Yr 8.75% 9.00% 5.00 5% 8.38% 3.2% 9.00% 2.3% 5.11 4.4%
Income-Govt G-Sec 10 Yr 8.81% N.A. 25.00 25% 8.75% 2.8% N.A. 5.0% 26.24 22.4%
Edelwiess NCD: 3 Yr Cumulative G-Sec -3 Yr 11.60% 1000.00 6.00 6% 11.60% 2.9% 1060.00 6.0% 6.36 5.4%
Mahindra Finance FD – 3 Yr G-Sec -3 Yr 10.25% 10.25% 3.00 3% 10.25% 2.6% 10.25% 2.6% 3.08 2.6%
Income-Corp G-Sec 3 Yr 8.75% N.A. 9.00 9% 8.38% 3.2% N.A. 4.9% 9.44 8.1%
Income G-Sec 10 Yr 8.81% N.A. 34.00 34% 8.75% 2.8% N.A. 4.9% 35.68 30.5%
Saving Bank Account Regulation 4.00% 4.00% 1.00 1% 4.00% 1.0% 4.00% 1.0% 1.01 0.9%
HDFC Liquid Fund G-Sec -90 day 8.55% 25.31 5.00 5% 8.55% 2.1% 25.87 2.2% 5.11 4.4%
Liquid G-Sec – 90 day 8.55% N.A. 6.00 6% 8.55% 2.1% N.A. 2.0% 6.12 5.2%
SDMFP Index N.A. N.A. N.A. 100.00 100% N.A. N.A. N.A. 16.9% 116.95 100.0%