Franklin UST, Investing behavior, Budget wishlist & more!

Franklin Mutual Fund has taken a 100% markdown on its exposure to debt securities of Vodafone Idea Ltd. (VIL). This move is pursuant to uncertainty around VIL’s ability to honour it’s near term debt obligations ahead of the Supreme Court ruling on AGR dues. FT has restricted further purchases in the schemes to below Rs 2 lakhs per day.

By doing so FT has created two incentives for investors – 

1/ Marking VIL debt to zero is in effect a gate to prevent existing investors to sell as selling now would mean realizing complete loss in VIL debt and not participating in any subsequent recovery. This is justified because if FT doesn’t write down then the smart money would have sold at higher prices and those who do not sell would have been left holding the can when the write-down eventually happened. If the exits were to be high then they would only be able to liquidate non-VIL paper and the fund may have gone into passive non-compliance. Other fund houses who have not written down will/should see selling except the close-ended ones – and that would be the smart money exiting those schemes.

2/ By marking VIL debt to zero investors have an incentive to buy VIL debt at zero cost through the fund and still participate in any future recovery. That you can only invest up to Rs 2 lakh per day is not a meaningful restriction for most retail investors. So marking VIL debt to zero becomes a selling point for the fund for new money.

So while we think taking the full write-down was a good idea, they should have restricted all new buys into the fund.

 

Learn how your investing behaviour or when you sell and when you buy determines your returns more than the schemes or equities you select. We also discuss why a robo-advisor is actually a better choice for you… and it is not what you think  

 

The Association of Mutual Funds in India (AMFI) has put forth a wishlist to the Finance Ministry for the Union Budget 2020-21. Some of the key proposals include –

• Switches within Mutual Fund Schemes be exempted from Capital Gains Tax.
• Introduce Debt Linked Savings Scheme (DLSS) with tax benefits under Sec. 80 C, subject to a lock-in period of five years
• Definition of Equity Oriented Funds (EOF) be revised to include Equity Oriented “Fund of Funds”
• Rate of TDS for NRIs on STCG from Debt Schemes be reduced from 30% to 15%, in line with Equity Schemes.
• Mutual Funds be notified as ‘Specified Long-Term Assets’ qualifying for Tax exemption on reinvestment of Long-Term Capital Gains under Sec. 54 EC.

 

Tax Saving ELSS funds featured in the top 5 most bought fund on Kuvera this week. Visit our ELSS Help Center to learn everything you need to know to save taxes while investing in Mutual Funds. You can find ELSS funds on Kuvera here.

 

Index Returns Index 1W 1Y 3Y NIFTY 50 0.8% 13.3% 13.6% NIFTY NEXT 50 1.7% 4.8% 8.4% S&P BSE SENSEX 0.8% 15.3% 15.5% S&P BSE SmallCap 4.0% 0.7% 4.7% S&P BSE MidCap 3.6% 3.7% 7.4% NASDAQ 100 2.3% 36.4% 22.1% S&P 500 2.0% 26.2% 13.7% Source: BSE / NSE

 

Top 5 best performing funds Name 1W 1Y 3Y PGIM India Midcap Opportunities 5.1% 12.1% 8.2% DSP Small Cap 4.4% 10.3% 4.4% Nippon India Small Cap 4.3% 6.7% 11.5% Baroda Mid Cap B 4.2% 6.4% 7.5% Sundaram Small Cap 4.2% 3.1% 3.1% Source: Kuvera.in

 

Top 5 worst performing funds Name 1W 1Y 3Y UTI Credit Risk -10.2% -13.8% -0.3% Franklin India Low Duration -6.7% -1.6% 5.1% Franklin India Income Opportunities -5.1% 0.9% 6.2% Franklin India Credit Risk -4.8% -0.3% 5.8% Franklin India Short Term Income Retail -4.4% 0.3% 6.2% Source: Kuvera.in

 

What Investors Bought We saw the most inflows in these 5 Funds – Name 1W 1Y 3Y Axis Bluechip 1.6% 23.3% 21.5% ICICI Prudential Balanced Advantage 0.7% 12.8% 11.4% Parag Parikh Long Term Equity 1.6% 17.4% 15.0% Axis Mid Cap 2.8% 19.8% 19.5% Axis Long Term Equity 1.5% 22.7% 18.8% Source: Kuvera.in

 

What Investors Sold We saw the most outflows in these 5 Funds – Name 1W 1Y 3Y SBI Consumption Opportunities 3.9% 5.8% 16.2% Aditya Birla Sun Life Small Cap 3.8% -1.8% 4.2% HDFC Small Cap 3.7% -3.1% 12.2% ICICI Prudential Value Discovery 2.3% 4.8% 7.1% Tata India Consumer 3.5% 6.8% 20.5% Source: Kuvera.in

 

Most Watchlisted Fund Top 5 funds added to watchlist by Kuverians Name 1W 1Y 3Y Axis Bluechip 1.6% 23.3% 21.5% SBI Banking & Financial Services 0.7% 24.0% 22.9% Mirae Asset Emerging Bluechip 2.1% 20.7% 18.1% Tata Banking & Financial Services 0.3% 27.2% 22.2% Axis Focused 25 1.8% 24.0% 20.4% Source: Kuvera.in

 

Top ELSS funds Name 1W 1Y 3Y HSBC Tax Saver Equity 2.2% 12.7% 11.6% LIC MF Tax 2.2% 18.9% 15.8% L&T Tax Advantage 2.1% 10.3% 11.7% IDBI Equity Advantage 2.1% 14.3% 13.7% BOI AXA Tax Advantage 2.1% 20.6% 15.3% Source: Kuvera.in

Movers & Shakers

1/ Union Mutual Fund has announced that Anshul Mishra, Co-fund Manager of Union Long Term Equity Fund & Union Largecap Fund and Key Personnel of Union Asset Management Company Private Limited has resigned from the AMC. Vinay Paharia will take on sole managerial responsibility of the schemes.

2/ JM Mutual Fund has announced that Dhaval Vussonji has been appointed as an Independent Director and Dipti Neelakantan has been appointed as an Associate Director of JM Financial Trustee Company Private Limited.

 

Quote of the week:

 

No man’s credit is as good as his money. 

: John Dewey

 

 

Interested in how we think about the markets?

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