RupeeManager is a easy-to-use personal finance software to manage your money. It primarily helps organize one’s finances and keeps track of where, when and how the money goes and comes.

Measuring something has an uncanny tendency to improve it. And that’s what RupeeManager helps you to get started with.

Other than tracking your earnings and your expenses, it is important to see if your money is working for your future. We have a feature where you can allocate your income among fixed expenses, discretionary expenses, short term savings and long term investments. It’s like assigning goals for your money.

Also, you will get an idea how to balance your portfolio according to your risk profile. You will match the portfolio with your risk appetite and see if you can take more risk or go more conservative. In other words, you get to decide your asset allocation strategy.

It is always good to remember that the software can only be as good as the data it has to process. Garbage In Garbage Out. But if you have started thinking of even using a Personal finance software you are well on your way to making every Rupee count

The guiding principles behind the RupeeManager has been posted before. Link

You may like to see the Manual before you want to participate in the private beta.

I have some of my friends participating in the private beta. Would you like to participate too? Please visit this post

The economic survey has called for increasing the participation of retail investors in the mutual fund industry while stating that there is scope for expansion of the industry from the present levels.

The report has pointed out that in 2007-08 only 7.7 per cent of the country’s total savings was allocated to mutual funds, thus leaving scope for growth of the industry.

Besides, it also said that the retail participation in mutual funds, which stands at 15 per cent at present, is expected to increase in the years to come as availability of products and investor education improve and the industry takes steps towards transparency and sound corporate governance practices to generate investor confidence.

The report has specially mentioned the turnaround witnessed in the performance of mutual fund industry, which had remained subdued in 2008. The report said mutual fund investments (net) in equity markets turned positive in March 2009 and were Rs 2,320 crore during April-May 2009, while they invested Rs 36,791 crore in debt instruments during the same period.

Mr Sandeep Sikka, CEO of Reliance Mutual Fund, said mutual fund penetration in India is just around 3 per cent and there indeed is a lot of scope to improve that figure. On increasing retail participation, he said it is a slow process and mutual fund houses need to increase their focus on investors’ education.

THE long-standing claim by fund managers that actively-managed equity schemes tend to outperform index funds over a longer period, may no longer hold water. The performance data of these schemes over the past three years show that index schemes have performed better than equity diversified peers.

In fact, mutual fund industry managers and watchers expect the superior performance of index funds to continue, going ahead, as the stock market turns more efficient and funds grow big enough to identify sufficient
‘multi-baggers’.

Index funds are passively managed and comprises a portfolio, which tracks and mirrors the components of an index. Diversified equity schemes are actively managed by fund managers. They argued that active fund management had the scope for outperformance because the relatively inefficient market gave them enough opportunities to gain from aberrations. In the bull market, the identification of a ‘multi-bagger’ — mostly a mid-cap stock, which doubled or trebled over a period — usually gave them that edge to perform better. But as recent market conditions were not conducive for picking a multibagger, returns from diversified equity funds lagged the index schemes.

An analysis by Benchmark Asset Management of 60 large-cap diversified schemes shows only 5-7 schemes have been able to perform better than index or exchange-traded funds. According to Value Research, a New Delhi-based mutual fund tracker, equity diversified schemes returned 9.19% over the past three years, while the Sensex and Nifty returned 11.71% and 12.25% in the period.

“This trend will continue because even as market evolves the skills of fund managers, relatives to markets are deteriorating,” said Benchmark AMC ED Sanjiv Shah.

The outperformance of index funds vis-à-vis actively-managed funds is a global trend, especially in developed markets like the US. In fact, several investors there are shifting a chunk of their money to passively-managed funds.

Domestic fund managers said the constant churn in equity schemes by investors is one of the constraining factor for the performance of actively-managed funds.

“If we were to follow the Warren Buffet style of investing (sell at higher levels, hold cash and invest at lower levels), then there is scope,” said a fund manager with a leading private mutual fund.
Benchmark believes controlling of costs (index funds — 0.5% a year and active fund — 2.5%) can partly reduce the level of underperformance of equity schemes.

“This difference of 2% per annum can balloon into huge difference over a number of years because of compounding. In the moderate return environment, it becomes a significant portion of your returns,” the Benchmark analysis said.

After the capital market regulator’s decision to abolish entry load for mutual fund schemes, it’s now time for the insurance regulator to usher in reforms, says Monika Halan.

There shall be no entry load for the schemes, existing or new, of a mutual fund. The upfront commission to distributors shall be paid by the investor to the distributor directly. The distributors shall disclose the commission, trail or otherwise, received by them for different schemes/mutual funds which they are distributing or advising the investors (on).”

The short 55-word decision from the capital market regulator, the Securities and Exchange Board of India (Sebi), that abolished the upfront agent commission (currently you pay up to Rs2.25 on every Rs100 invested in a mutual fund) has created havoc in the market. Breast beating or the clink of bubbly glasses depends on who you are—a mutual fund or an insurance agent

Commission bearing financial products, such as mutual fund schemes and insurance policies, run the risk of misselling by vendors who push products that maximise their incomes, rather than client welfare.

By taking away the incentive to push the fund that gives the most commission, Sebi’s decision will nudge the market to eventually split into chemists and doctors. The chemist will simply vend mutual fund schemes and offer no opinion on what you should buy. You will probably come to him for ease of transaction and for that, not unlike the payment to your stock broker, you will pay anything between 20 paise and 40 paise on every Rs100 of transaction

Undiverted by the din of the new fund offer sales spiel that threw money at distributors to sell their new fund offers (there are stories of large distribution houses not even taking calls from new fund houses unless a 4% commission was on the table), you will now look very carefully at past performance, track records and annual fund management fees before you buy

And no, you will not cut a cheque for 20 bucks each month you buy, as some fear, you will probably pay for this through an annual cheque for the service or an on-line payas-you-go system, not unlike the stock broking model that you are used to

What if you don’t want to do the homework and would rather have advice from a professional? To get this, you will not go to a chemist (like you do currently) but to an entity that has the ability to offer financial advice. Which means, the adviser has a set of attributes in terms of a basic level of education and certification and is in a regulatory framework that allows you to trust his credentials. For this, you must be willing to pay an annual fee to the financial adviser, who may also vend the products himself or have tieups with pure vendors.

The adviser will be a tracked entity with a paper trail on the advice he gives, and will not be able to suggest a unit-linked insurance policy to a person seeking a pension product and get away with it.

He will run the risk of his livelihood—his licence— being cancelled
With this 55-word decision, we are closer to this superior way of managing the retail flow of money into the markets

A key reason that India remains stuck at low levels of household participation in financial instruments and invests still in low real return bank deposits, is the lack of trust in the product vendor – and rightly so
You make smart choices—if you can’t trust the guy selling, you simply don’t buy the product.

For this market to work, there is yet a couple of missing links. The separation of advice from vending or of a doctor from a chemist is yet to happen. Given the fact that any product bearing a load (cost or commission) has advice embedded in it, the surgery to separate the two must happen. Sebi has done it

But one part of the market is so much in the dark ages that unless the winds of reform blow in Hyderabad (where the insurance regulator resides), you will continue to be mis-sold products and the retail market will remain small, under-developed and inefficient. The insurance regulator, compared with its capital market counterpart, is still grappling with the past. Not only are commissions embedded in the product, but are actually pushed together and collected from you in the first three years, on a product that is supposed to live for at least 15

Some of these agent com- missions are hidden away in a head called “administrative costs” that you don’t even see

So, you pay for the joy of buying a 15-year product (that you may be encouraged to churn after three years) and pay up to Rs40 on Rs100 invested, (remember we are now talking of 20-40 paise in funds for the same investment!) and worse, you continue to pay the agent a commission over the life of the product that is unlinked to the service you get. In the new post-Sebi no-load decision that is asking you to evaluate the service and pay for it, the contrast seems even starker

Where we go from here will depend on what the insurance regulator does now. The need is for drastic reform and to separate advice from product vending, and of course, to not fall back on either the limitations of Insurance Act or the global precedents of the life insurance industry

And also throw out the glib story that some smart insurance chief executive officer gave it eight years ago that the industry needs leg room to innovate hence the non-standardization of costs, lack of benchmarks and lack of control of the customer to evaluate and pay for the service of the agent
If freedom was what it took, then surely after more than 50 years of insurance vending in the country, penetration would be higher than the current under 5%. The move is now from Hyderabad and the Indian retail investor is hoping that it plays ball

Investors can consider buying into units of Magnum Contra. The fund’s consistency in containing losses in tougher periods and ability to beat the benchmark by a good margin over a longer time frame buttress the case for investment.

Over a five-year period, the fund has generated a compounded annualised return of 27.4 per cent and outpaced benchmark BSE 100 by 15 percentage points. This performance places the fund in the top of diversified equity funds over the same period.

Over a three-year period the fund generated a compounded annualised return of minus 1.5 per cent but declined 1.1 percentage points lower than its benchmark. During the above time period, on a monthly return basis, too, the fund contained losses better than the benchmark in nine out of a total of 12 months in which the benchmark posted negative returns.

Performance: Over a one-year period the fund’s NAV declined 30 per cent but the fund contained downside better than the benchmark. It achieved this by moving one-fourth of the assets into cash and debt over the past few months. However, the fund trailed its peers such as UTI Contra and Kotak Contra by a good margin in the above period, perhaps due to the high cash holding.

That the fund prefers to adopt a buy and hold strategy is reflected in its portfolio turnover and SIP returns over the past seven years. SIP returns were always half of lumpsum investments and this implies that the stocks in the portfolio have undergone lesser volatility.

Portfolio Overview: The portfolio as well as the fund’s performance the last year suggests that it behaves like any other diversified equity scheme, perhaps with a less contrarian approach.

Contrarian funds invests in undervalued stocks that are out of flavour but have the ability to achieve good returns once they are sighted favourably by the market. Its only contrarian strategy currently is an average holding of 8 per cent in the auto sector for over a year.

The fund sports a well diversified portfolio. As per the March fact sheet it had 73 stocks in its portfolio. A good number of these stocks in the portfolio participated in the recent rally. The top ten preferred stocks accounted for 34 per cent of the assets and mid and small cap cornered 20 per cent of the portfolio

While equity markets gained 32.39 per cent between March 9 and April 9, average return of diversified equity fund in the same period has been 24.3 per cent.

The worst performing fund in the diversified equity fund category has managed to give a paltry of 2.28 per cent return during the period under review. Significantly, of the 221 schemes under the category, 208 failed to outperform the BSE Sensex.

The benchmark index had closed on 10,803.86 points on April 9, registering a rise of 2,643.46 point since March 9, 2009, when it had sunken to its threeyear low of 8,160.40.

However, there are some funds that have managed to outperform the Sensex during the 30-day period under consideration. The best scheme in the diversified equity fund category, Taurus Infrastructure, has managed to given a return of 41.85 per cent in the same period. Other schemes, such as JM Basic, Magnum Emerging Businesses, DBS Chola Opportunities managed to outperform the market barometer.

The story is similar in sector-specific funds. While the Bankex has gone up by 38.86 per cent between March 9 and April 9, none of the schemes catering to the banking sector has been able match the performance of the Bankex. The best return of 32.56 per cent has been given by Sundaram BNP Paribas Financial Services Opportunities. The worst fund in the category, JM Financial Services, has managed only 16.88 per cent. Of the two funds meant for the auto sector, JM Auto Sector outstripped BSE Auto index, providing gains of 29.12 per cent. BSE Auto index rose 26.74 per cent during the period. UTI Transportation and Logistics, the other scheme dedicated to Auto sector, has given a return of 17.71 per cent.

In the past one year, most fund schemes have underperformed the Sensex, marginally though. While, the Sensex gave a return of -31.58 per cent, diversified fund gave a return -34.24 per cent. Similarly, the Bankex fell 32.91 per cent against 34.24 per cent drop of bank funds. Auto specific funds have given an average negative return of 25.16 per cent against Auto index

U K Sinha, CMD, UTI Asset Management Company, feels the rules need to change vis-à-vis the insurance industry.

There is a regulatory bias against the MF industry vis-à-vis its closest competitor — the insurance sector. While regulations are becoming far more strict for MFs, they are far more liberal in case of the insurance sector. MFs are mandated to comply with the knowyour-customer (KYC) norms, PAN requirements and are even subject to annual information return (AIR) disclosures in the tax returns.

However, no such regulations have been mandated for the insurance sector. Besides, in contrast to the MF industry where not only the distribution but also the management charges are capped by the regulator, the insurance industry has a far more liberal regime for charges, allowing it aggressively market its products and have a better distribution network.

Sebi, for instance, doesn’t allow mutual funds to advertise in the media with celebrities. The insurance industry doesn’t have a similar restriction.

Buoyed by significant growth in debt funds, the mutual fund industry’s total asset under management (AUM) in January rose 9.4 per cent, the highest monthly growth in 15 months.

According to the fund evaluation and risk solutions provider Crisil FundServices, the assets of mutual funds increased significantly in debt funds. The various categories including bonds, gilts and liquid funds, collectively witnessed their net inflows surging to Rs 67,000 crore in January from Rs 1,150 crore in December.

“The growth in AUM was despite weak equity markets, and on account of strong inflows in debt funds. The current outlook of declining interest rates makes debt funds a popular investment option,” the report stated.

The total AUM of the country’s 35 mutual fund houses have risen to Rs 4,60,949 crore, following an increase of Rs 39,833 crore, or 9.4 per cent, at the end of January, according to the data of the Association of Mutual Funds in India. “This is the second consecutive month of growth after the industry witnessed steady de-growth from September 2008 to November 2008,” Crisil FundServices said.

Of all the fund categories, the bond funds witnessed the highest inflow of Rs 39,100 crore in January, from Rs 4,500 crore in December. Liquid or money market funds saw net inflows of Rs 27,100 crore against net outflows of Rs 4,300 crore in December.

According to Crisil, on an aggregate while the equity funds witnessed marginal net outflows, the Equity-Linked Savings Schemes (ELSS) saw net inflows owing to increased investments driven by tax planning requirements.

Also net inflows from all categories for the industry as a whole increased to Rs 66,800 crore in January 2009, from negligible levels in December 2008.

Although the overall MF industry saw an increase in AUMs, 22 of the 35 fund houses reported growth in average AUM.

Country’s top house Reliance Mutual Fund saw its AUM rise by Rs 5,960 crore in January to Rs 76,168 core. HDFC MF remained the second big fund house with an addition of Rs 4,663 crore in its AUM at Rs 51,421 crore at January end.

ICICI Prudential Mutual Fund toppled state-run UTI MF as the third largest fund house of the country with an AUM of Rs 47,515.51 crore, after adding Rs 5,638 crore in a month.

The Securities and Exchange Board of India, or SEBI, is drafting new norms that would offer mutual fund investors a band or range of entry loads to pick from while purchasing units of a mutual fund, said a senior official at the market regulator.

An entry load is the commission that an investor has to pay a distributor while purchasing units. Currently, investors pay an average 2.25% of the sum invested as entry load if they buy the units from a distributor, who is a third party, but they pay nothing if they buy directly from the fund house.

The new norms are likely to be announced in a month, the official said requesting anonymity as details of the plan have not yet been finalized.

According to the Association of Mutual Funds in India a 13-year old industry lobby, there were about 47 million mutual fund account holders in India at the end of 2008.

There were some 35 mutual fund houses with net assets under management of about Rs4.6 trillion, at the end of January. The bulk of mutual fund unit sales in the country, however, are conducted through a large, unorganized network of distributors, which also include a few large players that have their own fund offerings.

The largest third party distributors of mutual fund products in India are banks such as ICICI Bank Ltd and HDFC Bank Ltd. Several brokerages and non-banking finance companies also have large mutual fund products distribution businesses.

“This (move) will hugely empower mutual fund investors,” said the Sebi official, adding that it would force “distributors to stay competent to justify their role”.

The move could also help increase the current investor base, this official said.

“Penetration of mutual funds can be much more (but) .. without distributors, it would have been even less,” said Uttam Aggarwal, who heads the mutual fund distribution business of Bajaj Capital Ltd, which is present in 90 towns and manages about one million investors.

“Look at Quantum (Quantum Asset Management Co. Pvt. Ltd), its asset under manage ment is in double digit crore,” said Aggarwal. Quantum does not have a distribution model and does not charge entry load from investors.

At the same time, financial services firms with established distribution capabilities have now expanded to included funds management business to leverage their strength.

“We are in this business to leverage our strong distribution capabilities,” says Nitin Rakesh, chief executive of asset management with domestic retail brokerage Motilal Oswal Financial Services Ltd, one of the latest players in the funds business.

In fact, fund houses recognize the grip that distributors have over access in both directions. The penetration of mutual funds in India, have been “severely limited” by distributors, Ashu Sayash, managing director and country head (India) of Fidelity Advisors International, had said in June last year. He was speaking at the launch of FundsNetwork, an online fund distribution portal that Fidelity International, the world’s largest mutual fund manager, had launched.

“The existing mutual fund business model is also not as profitable as insurance,” said Aggarwal. “Insurance allows you to reach the smallest towns but mutual funds have regulatory issues (such as daily net asset value, or NAV, disclosures and cap on marketing expenses).” Unlike the third party distributors of, say, insurance products, who can only sell policies of one firm, mutual fund distributors are free to sell schemes from any fund house. Not surprisingly, fund houses often fall over each other to woo distributors so they will push their products.

Sebi currently allows mutual funds to spend up to 6% of a scheme as marketing expense, and fund houses typically spend part of this allocation on distributors.

Mutual funds (MFs) are showing more confidence in banks and continue to increase their exposure to their stocks. Public and private sectorbanks have attracted the largest exposure from MFs in December, analysis shows. The move has been triggered by better earnings outlook and bond yield movements, according to observers.

Fund houses’ exposure to banking stocks stood at over Rs 17,541 crore in the month with market value growing by 15.4% over the previous month. State Bank of India, ICICI Bank and Axis Bank were among those that witnessed the largest change in market value, growing 29%, 30% and 28% respectively during the period, data compiled by HDFC Securities shows.

The third quarter would see strong earnings growth and “windfall gains’’ for banks driven by bond yield movements, according to Ajay Parmar, head, research, Emkay Global Financial Services. As interest rates continue to fall, bond yields have moved down by 280 bps during the quarter across maturities.

“Earnings of PSU banks could outperform estimates driven by mark-to-market and actual treasury gains,’’ Parmar noted. The volume growth also has remained strong with bank credit for the quarter up to December 19 growing 24.5% on a yearon-year (y-o-y) basis. The credit-deposit ratio too remained stable during the quarter at 74.5% compared to 73% achieved during the second quarter.

However, PSU banks are seeing pressure on net interest margins (NIMs) as they have reduced lending rates by 150 bps while deposit rates have come down only by 50-75 bps. NIMs and asset quality continue to remain key concerns.

“We have to ensure that the quality of assets doesn’t deteriorate. We are focusing on accessing low cost deposits and improving lending,’’ said V A Joseph, MD and CEO of the South Indian Bank.
“The difference in e pace of cut in lending and deposit rates and camouflaging of asset quality behind restructuring are the key problems facing banks,’’ Parmar said in his research note