DSP BlackRock Micro Cap Fund & DSP BlackRock Small & Mid Cap Fund

DSP BlackRock Micro Cap Fund / DSP BlackRock  Small & Mid Cap Fund



Sensex for past few months has been moving in a very narrow range. Small/Mid Cap and Micro caps is the area where we are seeing growth.


Its hard to cherry pick individual stock in this area. Also it is sometime subject to manipulation so swings are high.



For Small and Micro cap stocks I think its better to invest through mutual funds where they are focussed on it and manage the chrun properly.



MicroCap Fund was started as Closed Ended Fund but now has been made open ended fund and is open to subscription.



Till it was closed ended I was investing in Small and Mid Cap Fund but now I am also going to invest in MicroCap fund.



The investment objective of the scheme is to seek to generate long-term capital appreciation from a portfolio that is substantially constituted of equity and equity-related securities, which are not part of the top 300 companies by market capitalisation.



It is high risk fund for people for higher apetite for returns. There is only growth option in this fund.


In the YOD( 16th July), the BSE mid-cap and small-cap indices have outperformed the Sensex. The BSE mid-cap and small-cap grew 10.12% and 12.99%, respectively while the Sensex delivered returns of just 2.81%.



Investor should have basket of funds some from largecaps, some diversified and some from small and mid/micro cap category to not miss any rally in one category.




DSP Black Rock Micro Cap Fund, a new entrant has also claimed CRISIL Fund Rank 1, in the Small & Midcap category.




Diversified funds have given returns in the range of 5-10% but micro cap funds recently have given returns in the range of 30%


The highest return of 34% has been generated by DSP BlackRock Micro Cap Fund.The fund has invested around 94% in mid- and small-cap stocks and less than 1% into large-caps.

Investors can subscribed some amount in this fund

Good Mutual Funds to buy now.

Here are few funds I like and I have invested

Large Cap Fund
DSP BR TIGER Fund
Reliance RSF Equity/Reliance Growth

MidCap fund
DSP BR Small & Mid Cap Fund
Sundaram SMILE Fund

Sectoral Fund
Reliance Natural Resources Fund
Reliance Diversified Power Sector Fund

I usually go for dividend fund nowadays because it is one way of profit booking when market has gained a lot. I do make sure that those dividends are reinvested at appropriate times so that I don't fall behind growth.

SIP is also a good option to invest. I usually invest regularly on my own across different funds which I think is good at a particular time instead of putting money in same fund every month. This is required for sectoral funds because sectorals funds can be volatile and the given sector wont be in flavour for all the time so need to switch between sectors one in a year.

What do you think are good sectors to bet on in 2010? For diversification you can buy sectoral fund from that sector so that you have various stocks of that sector in your basket.

Mutual Funds : Acronym Funds

Mutual Funds are now a days coming up with catchy names. These can be expanded to see elaborate names of these funds.

Here are few.

ICICI Prudential R.I.G.H.T. Fund ( Closed Ended ELSS scheme)
RIGHT -->Rewards of Investing and Generation of Healthy Tax Savings

DSP BlackRock India T.I.G.E.R Fund ( Open Ended diversified scheme)
TIGER --> The infrastructure Growth and Economic Reforms

Canara Robeco F.O.R.C.E Fund (Open Ended sectoral scheme)
FORCE -->Financial. Opportunities, Retail Consumption & Entertainment Fund

Sundaram BNP Paribas S.M.I.L.E Fund ( Open Ended Midcap small cap fund)
SMILE --> Small & Medium Indian Leading Equities

SBI Magnum COMMA fund
COMMA --> Commodities of Oil& Gas, Metals, Materials & Agriculture .

We have to see how catchy their returns are as their names :-)

Bottom fishing in MFs

In the recent market turmoil MFs have not been spared. In absence of FIIs buying, MFs and local institution has tried their bit.

Funds who were top performer for past few years have taken quite a beating. Most of them are some where close to 15-20%.

Here is the list of few funds for your shopping list. If you missed the train earlier here is the chance to catch it from long term perspective.

MF NAVs	52-wk	Current	% Change
Rel NRI Eq	40.1	33.8	-15.7107
Kotak Opp	56.3	48.09	-14.5826
DSP ML Tiger	62.4	52.38	-16.0577
Rel Growth	491	401.79	-18.169
ING Dom Opp	44.9	38.24	-14.833
UTI Infra	50.7	42.8	-15.5819
Sundaram Mid	155.4	125.38	-19.3179
Magnum Contra	64	53.63	-16.2031
Magnum Global	70.4	57.52	-18.2955
JM Basic	40.8	34.08	-16.4706
JM Emerging	20.7	16.93	-18.2126
Rel Diver	87.7	74.84	-14.6636

Mutual Fund Investment Options

In the previous article we discussed about the basics of mutual fund and the types of mutual fund available.


Here we will discuss about the investment options available while buying a particular mutual funds.

Once you have decided on which fund to buy, you may have the option to choose between the following options

• Growth
• Dividend
• Dividend Reinvestment.

Sometimes people ignore the importance of choosing right kind of option and choose arbitrarily any one of them.

So now question comes as to which options is best to invest in...Frankly there is no fixed answer. Because choosing the correct option is based on the individual needs and also on the prevailing tax laws in the country.

Growth Option -Under this option no dividend is declared and your investment change according to the change in NAV. You will be taxed on the gain based on when you sell your units. If you sell your units after 1 year no tax is cut. Otherwise you have to pay short term capital gains tax.

Dividend Option- Under this option fund sometime declare dividend when they have surplus money.
This dividend is totally tax free whether given after 1 year or within 1 year. So returns on your investment within 1 year also becomes totally tax free. When dividend is provided NAV of the fund falls in equivalent amount.
Since there is regular payout, it can be considered as regular profit booking to reduce impact of market fluctuations.

Dividend Reinvestment Option - Tax free dividend declared by the fund is reinvested in the same fund or different fund of same AMC on a particular day set. Timing of the market may not be always favorable.


Current Scenario ..
-->Debt Funds currently attracts Dividend Distribution tax and Equity Funds are exempted currently.
-->Long term capital gain(Sale after 1 year) is fully exempted for growth schemes.
-->Short term capital gain is taxed.
--> Currently in absence of dividend distribution tax on equity-based funds and no long-term capital gains tax, there is absolutely no difference between the Growth option and the Dividend Reinvestment option

Impact of Tax Changes ...
--> If dividend distribution tax is reintroduced then growth option would be better than dividend reinvestment.
--> If Long term capital gain tax is introduced then dividend reinvestment would prove better than growth option.

Hope after reading this you will have better understanding of which option to choose according to your needs and prevailing tax laws.

This article was part II of the previous article posted on mutual fund...Read previous article here....

To know more in details about these options read the following 2 articles which explains in detail about these options.

Growth or Dividend - How to make the right choice?

Dividend Reinvestment v/s Growth – Let your taxes decide

Mutual Funds Demystified...

A mutual fund is a professionally-managed form of collective investments that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities. In a mutual fund, the fund manager, who is also known as the portfolio manager, trades the fund's underlying securities, realizing capital gains or losses, and collects the dividend or interest income.

The investment proceeds are then passed along to the individual investors. The value of a share of the mutual fund, known as the net asset value per share (NAV), is calculated daily based on the total value of the fund divided by the number of shares currently issued and outstanding.
[source: wikipedia]


Mutual Funds come in various hues and colors. They can be catorized on various basis.

Mutual Funds can be categorized by their structure.

• Open Ended
• Closed Ended
• Interval

They can be categorized by their investment objective.

• Equity Scheme
• Debt Schemes
• Growth Scheme
• Balanced Scheme
• Income Scheme
• Money Market Scheme
• Tax-Saving Scheme
• Sectoral(Industry Specific) or Thematic Scheme
• Index Scheme
• and so on to list a few.......

and they can also be categorized into investment options

• Growth
• Bonus
• Dividend
• Dividend Reinvestment

We will discuss each one of them so that it helps you in choosing and picking right fund according to your investment objective.
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1. By Structure

Open Ended Scheme doesn't have a fixed maturity and are available for sale and repurchase on any business day. These schemes are highly liquid and have become very popular.

Closed Ended Schemes comes with a fixed maturity period and are launched with an Initial Pulbic Offer(or New Fund Offer), Investor can buy and sell once they are listed.
Closed-ended schemes are usually more illiquid as compared to open-ended schemes and hence trade at a discount to the NAV. This discount tends towards the NAV closer to the maturity date of the scheme.

Interval Schemes are combination of open and closed schemes, they can be traded or might be open for sale or repurchase.
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So now we can discuss the schemes with their
2. Investment objectives

Equity Schemes are also known as growth schemes and aims to provide capital appreciation over a period of time. These schemes invest majority of their funds in Equity and small portion in debt or money market instruments. These schemes are not for investor seeking regular income.
They are ideal for investors who have a long-term investment horizon.


Balanced Schemes are for the investor seeking both income and moderate growth. They invest both in shares and fixed income securities. They regularly distribute part of their income and capital gains. They are safe from huge market fluctuation because part money is invested in fixed income, so when market rise they don't rise as much, but when market fall it protects you from steep fall.

Tax Saving Schemes also known ELSS ( Equity Linked Saving Schemes) comes with a lock in period of 3 years where units purchased cannot be assigned / transferred/ pledged / redeemed / switched. These schemes are promoted to encourage individuals to save and invest in equities. They offer tax rebates and are good for investor seeking tax exemption under section 88.


Sectoral or thematic funds invest in a particular sector as defined in their investment objective. They tend to outperform if the sector is showing relative growth than the overall market. But these products are also risky because they are not diversified and weightage is given on a particular sector or industry. Recently Infrastructure, power and real estate funds have become very popular.

Index Schemes are schemes which aims to provide the returns equivalent of a particular index of an exchange. Some investors are interested in getting returns equivalent of the market and not of an particular sectors.
Index schemes are some times unmanaged schemes as they don't churn their portfolio and just try to perform equivalent to the index.

Money Market Schemes are for investors who wants to park their surplus money for a short period of time. These schemes provide moderate income with safety of invested capital. These schemes invest in gilts, inter bank call money, deposit certificate, commercial papers etc...
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Next we need to discuss the schemes based on investment options. This can be a bit interesting topic because investor normally spend lot of time selecting a particular fund house and then a particular scheme in it, but once they have decided on the fund, they tend to ignore the investment option or sometime it is totally arbitrary or on the whims of the agent.

So I will take up the discussion on the mutual fund investment option in the part II of this article which will be published soon.

Infrastructure Funds and Sector Overview

Equity markets are on high for past few years and this has woken up the mutual fund industry which was in lull.
Because of stunning stock market performance, returns on lackluster mutual funds is also glittering.
This has prompted various AMC (Asset Management company) to mop up new money through various New Fund Offers.
Sectorial Funds can outperform the market if the particular sector is of current fancy.
Same is the case with Infrastructure.


Infrastructure in general has tremendous scope for growth as our country needs huge developments in that area.
Fund houses are trying to cash in on this boom.

Following list shows various sectorial/thematic infrastructure fund from various fund houses.

Fund
AIG Infrastructure & Economic Reform Fund
Birla Infrastructure Fund
Canara Robeco Infrastructure
DBS Chola Infrastructure Fund
Escorts Infrastructure Fund
HDFC Infrastructure Fund
ICICI Prudential Infrastructure Fund
Kotak Indo World Infrastructure Fund
Lotus India Infrastructure Fund
Principal Infrastructure & Services Industries Fund
Sahara Infrastructure Fund - Fixed Pricing
SBI Magnum Infrastructure Fund - Series 1
Tata Indo-Global Infrastructure Fund
UTI Infrastructure Advantage Fund
UTI Infrastructure Fund

Investors has lot of options to choose from. He/She needs to be prudent in making choosing the right fund of his choice.
Lot of money is coming to this sector and fundamentally this is good investment.
It can give sustained growth for few years to come.

As we have discussed about the rewards from this sector, we also need to address the risk.

Risks
High growth may not be sustainable and may slowdown.
Competition is increasing because of lot of interest.
Many Indian companies are in fray with multinational joining too in the race.
Margins are under pressure because of fight to bag the project under their banner.
This poses execution risks. Bidding lowest [sometime unreasonable low] poses high implementation risk.

Stocks
GMR Infra
Punj LLoyd
JP Associate
Bhel
L&T
RIL
Few Power Generation and Utility companies.


You can check the order book, execution capability and funding ability of the company before zeroing or finalizing any particular stock.

Hope now after reading this post you will be more informed about investing/diversifying into infrastructure stocks/funds

ULIP Vs Mutual Fund

If you thought Unit Linked Insurance Policies are similar to Mutual Funds and are alternative investment oppurtunities. You may be wrong.

Mutual Fund : - Pure investment.

ULIP :- Investment + Insurance.

Investors in ULIPs are allotted units by the insurance company and a net asset value (NAV) is declared for the same on a daily basis.

ULIPs are good only for people ready to invest for a longer period of time.

Normally mutual funds have 2.5% entry load, but fund charges are huge in case of ULIPs in initial years.

Eg :- LIC Money PLus takes 25-26% as expenses in the first year. This percentage starts reducing as years passes.

Note also that ULIPs generally remove your units as their Annual management charge and monthly charges. Mutual funds account for those in the NAV itself. Therefore, for the same dates, your real return on the ULIP would be lower than the figures mentioned, but on the Mutual funds would be the same

Personally I feel that if someone needs both insurance and investment.

Then he/she should take the combination of Term Insurance(pure insurance) + Mutual Funds instead of going through ULIP route.

Term insurance are quite cheap compared to other insurance in terms of benefit amount.
The money saved on premium can be invested in high growth mutual fund.

Similar post : FMP Vs FD

Good Telecom Bet : JM Telecom Sector Fund

Are you confused whether to buy Reliance Comm or Bharti Airtel.
Do you want to be part of telecom growth story.

Here is a mutual fund which can help you do the same with not putting all eggs in one basket.

I came across with Mutual Fund few days back which I found interesting.

It has both bharti and reliance Comm as 30% each in its portfolio.

Other telecom and telecom related IT stocks are

JM Telecom Sector Fund

Company Percentage

Bharti Airtel 33.9

RelianceCommu.Ltd 29.61

Tulip IT Services Lt 10.29

Tanla Solutions 8.64

Geodesic Infor.Syst. 6.18

Tech Mahindra Ltd. 5.52

MTNL 3.98

Sasken Comm.Tech. 2.14

All stocks are good in their space and expected to give good returns. Good fund to keep for 2-3 years expecting good returns.

Sectorial Mutual Funds

Some Sectoral Mutual Fund Pics for 2-3 years

• BIRLA GEN NEXT FUND GROWTH
• Canara Robeco Infrastructure
• Birla Infrastructure Fund
• Reliance Media & Entertainment Fund Growth Plan
• UTI Banking Sector Fund
• Reliance Power Sector Fund
• SBI Magnum Tax Gain
• Tata Infrastructure Fund - Growth
• UTI Energy Fund
• UTI Infrastructure Fund
• UTI-India Lifestyle Fund

Note :- Funds are not in order of preference.