DSP World Agriculture Fund - for those who have taste for something 'exotic'

DSP World Agriculture Fund invests predominantly in units of BlackRock Global Funds - Nutrition Fund (BGF - NF). The primary objective of this scheme is to fulfill requirements of those investors who are looking for long term capital growth by investing in companies around the world engaged in agriculture, food and nutrition related products & services.

This is a decade old fund. It was launched in Oct, 2011 and is managed by “Jay Kothari” since 2013. In SEBI defined Risk-o-meter, it is classified in “High Risk” category. It is classified as “Fund of Funds” scheme and treated as Debt Investment for taxability point of view, albeit real investments are done in equities of companies worldwide. 

Let's see what is good and what is bad in this scheme from our perspective:

What's good?

• Brand(isation) of Food Industry - With arrival of platform aggregators & aggressive marketing by Food Brands, organized market is rapidly taking over share from unorganized market globally, thereby making “big players bigger”.
  
  The table below indicates that market share of Organized Standalone Market and Chain Market is going to rapidly increase from 28% in 2014 to 47% in 2024
  
  
  
  

  Source: www.stocktalk.in 

  
  

  Moreover with growing popularity of online food delivery services, the brandisation of food industry is going to accelerate giving opportunity to branded players to grow themselves firther bigger.
  
  
  
  
  
    
• The Organic ‘Fad’ - Organic is a new ‘buzzword’ in food industry. Many brands have been focusing on high margin organic products thereby presenting a great opportunity to investors in them to earn multi fold returns in coming years.
  
  
  
  The growing popularity of Organic food is not limited to developed nations. It is also growing in developing regions of the world including Asia and South America.
  
  
  
  

  Also, consumers are willing to pay more for organic foods than the non-organic ones. 

What's not so good ?

• Changing Global Weather Patterns disrupting Agriculture - Weather Patterns are undergoing rapid change in last decade thereby bringing risk to agriculture production and hence, can make earnings volatile for listed players in this space.
  
  
    
  
  

  Studies indicate that crop yield can drop drastically if global climate changes do occur at the same rate, thereby bringing risks to companies operating in this industry.

Future looks promising, though Past Performance raises doubts - The scheme has so far under performed against its benchmark index (MSCI ACW Net Total Return) and Nifty 50 as well. Future looks promising but past raises concerns. Lets look at SIP returns and Lumpsum returns of this scheme against its benchmark MSCI ACW Total Net Return Index.

    

Let's have a look at scheme details.

Sector wise Allocation

Key Indicators

Who can Invest into this scheme ?

• If you want to expand your investment bucket with new themes.
• If you have interest in investing into global themes such as Mining, Agriculture, Manufacturing, etc.
• If you want to play on high beta thematic themes which are also global in nature.
• If your exposure to Equity is ‘Moderate’ – neither ‘Low’ nor ‘High’
•  If you are looking for investments to achieve goal which is beyond 5 years and more… The longer the better… 

 Who should avoid this scheme ?

• If you are new to the world of investing, then this scheme is not the ideal one to start with…
• If your exposure to equity and equity-based scheme is high.
• If you have a short-term goal, then this is not the fund for you since it may be volatile.
• If you don’t understand global themes / sectoral themes. 

Wishing you all a successful investing!! 

ICICI Prudential Business Cycle Fund - High Risk vs High Reward

Equity Markets are up and investors want some new ideas and opportunities to invest. One such opportunity is offered by ICICI Prudential Mutual Fund through its New Funds Offer (NFO) called as "ICICI Prudential Business Cycle Fund". 

The fund aims to generate wealth by investing across sectors which are at cusp of growth and at the same time move out of those sectors / themes which already have seen growth and likely either top out in the future. Few important details about the scheme is as follows:

ICICI Prudential Business Cycle Fund

Scheme Objective

The scheme aims to invest in sectors / themes which is at cusp of growth and hence generate capital appreciation. 

Investment Scope

The scheme aims to invest in equity and across all kinds of stocks from large cap, mid cap and small cap. (Multi cap theme). The stock has to be in Nifty 500 index.

Benchmark Index

Nifty 500 Tri (Total Returns Index). The benchmark returns are as follows:

• 1 Year - 23.06%
• 3 Year - 8.62%
• 5 Year - 14.31%

NFO Period

December 29,2020 - January 12,2021

Lock-in Period

It is an open ended scheme with no lock-in period.

Mode of Investments Available

• Lumpsum - 5000 Rs
• SIP / SWP / STP - Available
• Top Up Available - Yes. Minimum - 1000 Rs

Suitable For:

• Suitable for those investors who are willing to take risk by investing in turnaround themes.
• The scheme objective enables investing across all sizes and sectors and hence brings maximum flexibility but discretion to the fund manager(s). So, the scheme can turn out to be either "a blockbuster" or "a buster" for investors.

Not Suitable For:

• Not for that class of investors who have already invested heavily in equities since most of stocks where this scheme will invest be already covered in other schemes.
• Since turnaround stories don't turn fruitful always, it can lead to some investments which will turn bad and hence investors must be aware that this scheme brings high risk and high reward.

Scheme Details

Presentation

https://www.icicipruamc.com/docs/default-source/default-document-library/ipru-business-cycle-fund---investor-ppt.pdf

One Pager

https://www.icicipruamc.com/docs/default-source/default-document-library/ipru-business-cycle-fund-onepager-investor-(1).pdf

Wishing you a profitable investing!

Why moving some funds from Equity to Gold a good idea before US Elections?

In a week's time, we all will come to know who will be the head of state of world's most powerful country. With such a big macro event in offing, it will surely have an impact on all financial asset classes.

Indian Equity markets are trading within 5% range from all time highs. Noticeably, it has recovered a whooping 60% from this year's low which makes the decision all that difficult on how to position oneself for this political event. Let us evaluate the possible outcome on Equities, Precious Metals & US Dollar in case of Joe Biden and Trump win respectively.

Equities

If Joe Biden wins

Some parts of Equities would definitely do well if Joe Biden wins. Tech stocks especially those which came under heavy fire from Trump would do very well. Even for Indian IT Stocks, it will be a good news which is right now comes under regular fire due to 'Make America Great Again' slogan. Similarly, global commodities should also do well on account of softer regime in place in USA. On the other side, Joe Biden regime may not be as corporate friendly and supportive as Trump administration and hence broader market may see a sentimental sell off.

If Trump wins

US Equities would surely see a bump up in case of Trump win as it will seen as a thumbs up of economic policies of incumbent president. On the contrary, Tech stocks may see a sell off due to reasons mentioned above. For Indian Equities, it is again positive since major political event has passed without any disruption.

Precious Metals 

If Joe Biden wins

Precious metals should either decline or remain stagnant since Joe Biden brings more amicable and moderate face to US regime and hence doesn't bring that level of unpredictability as Trump is. 

If Trump wins

Trump win would keep Precious Metals on a stronger feet since he will definitely tweet 'more' in the coming few days 😀. So brace yourself with a pot of Gold if Donald Trump wins.

USD and INR

If Joe Biden wins,

USD will definitely pump on Joe Biden win since he may not take aggressive stance as Trump. This will in turn pressurize INR and it can depreciate to levels of 75 Rs against USD.

If Trump wins,

USD should further depreciate since Trump promises low interest rates for a long period of time. He also doesn't have any problem with bludgeoning Fed Balance sheet.

Considering both possible outcome, it is wise to move some funds from Equities to Gold for next 3 months especially for Indian investors since Gold is better poised to outperform Equity in both scenarios.

Post Covid world may see a meltdown in various asset classes

Currently, all homo-sapiens of the planet Earth are eagerly waiting for an announcement. The announcement of a vaccine which can get this specie rid of Corona virus a.k.a Covid-19. It has created ruckus all across the social, political and economic spectrum in last one year.

From an economic perspective, it is widely speculated that post Covid world could see jump in risk-on asset classes such as Equities due to tremendous amount of money supply in the system and society eagerness to consume goods and services which have been 'on hold' due to Covid. I also 'buy' this theory strongly, though my only deviation is that it may not translate into appreciation of asset classes, even though global economy may continue to improve.

The primary reason behind this view point is that various asset classes such as Equity, Gold and even Fixed Income have already priced in economic recoveries which can happen after Covid. Equity Markets of various countries are trading close to pre-covid levels now. Gold too has been strong on anticipation of low interest rates and weaker USD. So I don't see any other strong trigger for these asset classes to move up as of now.

On the contrary though, I think that Central Banks may attempt to tighten their purse in post Covid era. In this year, Central Banks have expanded their balance sheet to fight economic impact during Covid. There are strong chances that Central Banks may attempt to close this bridge and resume to normal economic measures. If this happens, it will surely impact the liquidity in the market and may turn out to be negative for Equity and Gold.

With Indian economy, the situation is going to be further precarious. Another cause of concern with India is high levels of Inflation. Due to supply disruptions and demand for agri-products, Inflation is at 6 year high at the moment @ 7.66%. With people coming back to normal life, it would further accelerate due to sudden demand of goods and services which got hold due to Covid. This should definitely pinch the inflation and it can go to as high as 10-11%. In this scenario, Reserve Bank of India would have no choice but to either call of rate cuts or at worse increase a bit to match up with rising Inflation. All this more, it is likely to impact Equity markets in India.

Another factor is the resumption of Banking sector operations which right now have been shielded by Central Bank rule of 'not declaring NPAs'. Once commercial banks start declaring actual NPAs in their book, it will surely impact the banking sector and demand for more liquidity.

Summarizing, few risks to asset classes in post Covid era could be as follows:

Well as we say, one must always look at "unexpected than "expected" while making any investments. Hope the vaccine comes quickly and life resumes to normal. But whether investments would also return to normal trajectory or it will take an "un-expected turn" is yet to be seen!

Happy Investing!

Gold Prices on uprise - Technical Charts View

Gold Prices have shown some considerable strength over the period of last 6 months. It has risen by more than 10% and if experts are to be believed, it is entering into a new growth phase due to lowering of Interest Rates across the globe, higher inflation outlook in the coming years and stagnant Gold prices in last 7 years which makes its attractive investment in Risk vs Reward matrix.

On technical charts, the asset is gaining stronghold. Few indicators are being highlighted below:

Bollinger Band

On daily charts, the asset is consistently running above the median line in last 3 months which indicates strong and compelling buying by investors despite it gaining 10% over the same period.

Charts Source: www.investing.com

RSI

RSI is also at comfortable levels at 59 which indicates strong possibilities of gaining traction in the coming days. (Tip: RSI above 80 is an overbought zone and below 20 is an oversold zone)

Charts Source: www.investing.com

Breakdown of Key Resistance Levels

On daily, weekly & monthly charts, Gold prices have been breaking key resistance levels. 

On daily chart, the resistance was placed at USD 1420 on a time period of 2 years. This has been broken last week and until Gold Price sustains above it, albeit with minor deviations, it is likely to run towards 1520-1540 USD levels.

Charts Source: www.investing.com

On weekly charts, there was a strong resistance at USD 1400. This has been broken during early June and since then it has been standing strong above it. Again a technical breakout!

Charts Source: www.investing.com

On Monthly charts as well, the chart has now broken a key resistance level of USD 1400. This marks the final confirmation of likelihood of a bull rally in Gold in the coming months which may take it to USD 1600 levels over a period of next 1 year.

Charts Source : www.investing.com

If you have any queries, please send an email to contact@growyourpaisa.com

Happy Trading!

Why Diversification in Asset Classes are Important?

Undoubtly today, Indian Investors are heavily invested into equities as an asset class, thanks to formalization of investments ecosystem and extensive campaigns run over media such as 'Mutual Funds Hai To Sahi Hai' , 'Soch Kar... Samajh Kar... Invest Kar...', & 'Invest through SIP' to name a few.

With HNIs who have seen various cycles until now, this scenario may be different, but among upper middle class & middle class investors today, most investors are seen heavily tilted towards equity as an asset class, few as high as 90%. The situation becomes more precarious for few investors who also have real-estate on mortgage, and hence most vulnerable towards deep deep cuts in their portfolio.

It also bring onto fore a very important question that why diversification of asset classes is very important. It also becomes very important to investors to review not only CAGR (Average Returns) but also aspects like Volatility & Individual Risk Profile, before deciding which asset class one should invest into.

Let us look at few important statistics over the period of last 20 years to understand more objectively.

CAGR (Average Returns) on certain time scales

The table above must open up eyes of every investor. It clearly indicates that no one asset class provides optimal returns over all time periods. Anything greater than 10 years, returns in Gold & Equity are largely equivalent while for short term periods such as 2-10 years, all asset classes have given almost similar kind of returns. Now as an investor who is not a financial expert, it is wise to keep its allocation balanced over various asset classes and do not tilt too much towards one asset class.

Volatility in Asset Classes

Over a period of 20 years, Average Movement in prices is seen maximum in equity which is around 25% per annum, while for Gold it is 13% which clearly reflects that Equity should be the preferred medium for investors with high risk appetite, and not for ones who have long term mortgages on their head. It doesn't mean that investors should either heavily invested / do not invest in equities but proportion of investments can be adjusted according to one's risk appetite.

Also, if we compare yearly returns for Gold vs Nifty vs Bond Yields, Equity outperforms other asset classes in 9 out of 20 times in last as many years, which indicates that equity usually outscores other asset classes, but due to high volatility, there are years in between when it dips more than any other asset class.

So from now on, if you get a sales call from a mutual fund distributor or stock broker, do ask him about other products as well, apart from usual Large Cap, Multi Caps and Small Cap Funds. Also, do your own risk profiling and measure how much you should invest in a particular asset class.Don't forget an old saying 'Do not put all eggs into one basket.'

Happy Investing!

Know Mutual Funds Commissions and Charges

In India, Mutual Funds companies charge various commissions and pass on to the agents and distributors. And it is essential to know about them as these are either charged directly to you or indirectly charged by deducting from Funds value.

 

Given below are details about them:

 

1. Direct Commission to Agent - SEBI has allowed agents to charge fees to the customers for the service they are giving to them. Though it is optional, but it can be charged from 0.5 to 2% of the investment you are making. Earlier, Mutual Funds companies used to charge "Entry Load" and those were passed on to the agents. SEBI banned it in 2010 and since then, it has allowed agents to charge to the customer directly.
2. Upfront Commission -  This is commission paid to agents / distributors out of your first year investments in a particular scheme. This is usually high in equity based schemes and low in debt schemes.
3. Trail Commission - This commission is paid out of your investments done in subsequent years, after completion of first year. This commission is paid out of your total Asset Under Management (AUM) with that scheme. It is deducted indirectly from your investments by charging it from Scheme NAV. This commission is different for each scheme and one must enquire about it from your sales agents to ensure he is not pushing your investments into schemes that pay higher commission.
4. Total Expense Fee - the total expenses which will be paid out from the fund is defined as Total Expense Fee. The fees may include Funds Management Fees, Marketing  / Selling expense, audit fees, registrar fees, trustee and custodian fees. SEBI has put a cap on the expense fees which a mutual fund scheme may charge which is around 2.5% for equity schemes and 2.25% for debt schemes.