Transcript Slide 1

DEBT FUND ANALYSIS
DEBT FUND ANALYSIS
Oct 01, 2008 – Oct 15, 2008
DEBT FUND ANALYSIS
Debt Market Update
Market movements
 The G-sec market was on a negative note as bears
clawed down the bond prices on back of tight
liquidity and devolvement of the 7.94% 2021
 The 10-year bond is trading at a four week high of
8.73% and the auctioned bonds are trading over
10bps above their cut-offs, participants found these
levels too lucrative to miss
 Annual inflation for the week ended September 20,
2008, witnessed a pull back falling below the 12%
mark to 11.99%. Major contributor to this fall was a
pull back in primary articles and food products
Debt Market Outlook
 Liquidity is expected to ease from current levels. A
steep rise in inflows on account of redemptions and
interest payments will inject money into the system
 Participants are likely to have made their CRR
provisions this will reduce overall pressure on
liquidity
 Overnight money market rates are expected to
soften from present levels; improvement of 200300bps will not be surprising
Debt Portfolio Strategy
Liquidity/borrowings:
 Liquid Plus Funds are still a safer bet from a short
term (3-6 months) horizon
 Liquidity remained constrained for issuers of nonconvertible debentures on October 1; the LAF repo
reporting the highest-ever borrowing of INR 917.20
bn
 The current FMP yields are high and may not sustain
in the long run, therefore investment in long term
FMPs is recommended
 Participants remained cash-starved during this non
reporting week, as investor demand for fixed
income instruments continued to reel (dwindle)
under advance tax outflows of INR 400 bn; the daily
average LAF repo at INR 908.40 gained INR 270 bn
over the previous week
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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
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DEBT FUND ANALYSIS
Recommended Schemes in Liquid Plus Funds
Liquid Plus Funds – Retail & Institutional
 Birla Sun Life Liquid Plus Fund
 DWS Liquid Plus Fund
 ICICI Prudential Flexible Income Plan
 Reliance Liquid Plus Fund
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DEBT FUND ANALYSIS
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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
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DEBT FUND ANALYSIS
FMPs with tenure less than 1 Year
Tenure
Closing
Date
Min.
Investment
Indicative
Yield (Pre
Tax)
ING Quarterly FMP 91 – Series A3 (Insti.)
91 Days
06-Oct-08
500,000
11.35%
ING Quarterly FMP 91 – Series A3 (Reg.)
91 Days
06-Oct-08
5,000
10.55%
HDFC FMP 90D September 2008 (Insti.)
90 Days
06-Oct-08
10,000,000
11.70%
HDFC FMP 90D September 2008 (Reg.)
90 Days
06-Oct-08
5,000
11.60%
UTI Fixed Income Interval Fund - Series II - Quarterly Interval Plan
VII (Insti.)
3 months
06-Oct-08
1,000,000
11.60%
UTI Fixed Income Interval Fund - Series II - Quarterly Interval Plan
VII (Reg.)
3 months
06-Oct-08
10,000
11.40%
DSPML FMP -3M - Series 16 (Insti.)
3 months
06-Oct-08
10,000,000
11.90%
DSPML FMP -3M - Series 16 (Reg.)
3 months
06-Oct-08
10,000
11.70%
DSP Merrill Lynch FMP - 1M - Series 3 (Insti.)
1 months
06-Oct-08
10,000,000
11.90%
DSP Merrill Lynch FMP - 1M - Series 3 (Reg.)
1 months
06-Oct-08
10,000
11.85%
ABN AMRO Interval Fund – Series 2 - Quarterly Plan N
3 months
06-Oct-08
10,000
11.95%
Name of the Scheme
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DEBT FUND ANALYSIS
FMPs with tenure more than1 Year
Name of the Scheme
Tenure
Closing
Date
Min.
Investment
Indicative
Yield (Pre
Tax)
TATA FIXED INVSTMENT PLAN Series 4 Scheme B (SHIP.)
18 months
16-Oct-08 10,000,000
11.40%
TATA FIXED INVSTMENT PLAN Series 4 Scheme B (HIP.)
TATA FIXED INVSTMENT PLAN Series 4 Scheme B (RIP.)
JM FMF -XIII - Yearly Plan (Insti.)
JM FMF -XIII - Yearly Plan (Reg.)
Kotak FMP 19M Series 1 (Insti.)
Kotak FMP 19M Series 1 (Reg.)
BIRLA SUN LIFE FIXED TERM PLAN - SERIES BG (370 Days)
(Insti.)
BIRLA SUN LIFE FIXED TERM PLAN - SERIES BG (370 Days)
(Reg.)
IDFC Fixed Maturity Plan Nineteen Months Series 1 (Insti.)
IDFC Fixed Maturity Plan Nineteen Months Series 1 (Reg.)
ABN AMRO Fixed Term Plan - Series 14: Plan A (Insti.)
ABN AMRO Fixed Term Plan - Series 14: Plan A (Reg.)
ING Yearly FMP 366 - Series A2 (Insti.)
ING Yearly FMP 366 - Series A2 (Reg.)
18 months
18 months
375 Days
375 Days
19 months
19 months
16-Oct-08
16-Oct-08
15-Oct-08
15-Oct-08
13-Oct-08
13-Oct-08
11.00%
10.60%
11.40%
10.75%
11.40%
10.60%
2,500,000
10,000
500,000
5,000
1,000,000
5,000
370 Days
08-Oct-08 10,000,000
11.35%
370 Days
08-Oct-08
10.75%
19 months
19 months
370 Days
370 Days
366 Days
366 Days
5,000
07-Oct-08 10,000,000
07-Oct-08
5000
06-Oct-08 2,500,000
06-Oct-08
5,000
6-Oct-08
500,000
6-Oct-08
5,000
11.00%
11.00%
11.30%
10.70%
11.35%
10.55%
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DEBT FUND ANALYSIS
Contact Details
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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]
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DEBT FUND ANALYSIS
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