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| Transcript of Chat with Mr. Sarvana Kumar, Head - Fixed Income, SBI Mutual Fund.- Debt funds - An over view (11/03/2002) |
[04:35:37 PM] => Myiris: Welcome to the live chat session
[04:35:46 PM] => Myiris: Our guest today is Mr. Sarvana Kumar, Head - Fixed Income, SBI Mutual Fund.
[04:36:13 PM] => Mr. Sarvana Kumar is Head - Fixed Income, SBI Mutual Fund. At the time of this conversation / chat, Mr. Sarvana Kumar may or may not have positions in the stocks mentioned below, although holdings may change at any time. The views expressed by Mr. Sarvana Kumar is based upon information that he considers reliable, but does not represent that it is accurate or complete, and it should not be relied upon as such. Mr. Sarvana Kumar, his company and its affiliates, officers, directors, partners, and employees may, from time to time, have long or short positions in, buy or sell and deal as principal in the securities, or derivatives thereof, of companies mentioned herein and may take positions inconsistent with the views expressed.
[04:36:26 PM] => None of the information contained herein constitutes, or is intended to constitute a recommendation of any particular security or trading strategy or a determination that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. You should consult with and rely upon your own advisors whether and how to use such information in making any investment decision.
[04:36:35 PM] => Lastly the views expressed by Mr. Sarvana Kumar have no bearing whatsoever with that of IRIS Ltd. IRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. IRIS especially states that it has no financial liability whatsoever to any user on account of the use of information provided on its website www.myiris.com.
[04:36:44 PM] => Myiris: Welcome to the chat session Mr. Sarvana Kumar.
[04:39:30 PM] => Raouliyar : What is your view on the G-Sec. market two months down the line? Whether Indian Gilt market has any impact on the Greenspan's statement?
[04:43:51 PM] => SK : Till March 31, the G-sec market is going to be volatile. The reason could be advance tax payment, closer t o10,000 crores by 15th March,02. The liquidity may dry down. Secondly, profit booking may come in mainly from the state owned bank as well as the other traders and there could be an event risk on March 15 due to the Ayodhya issue. So I am expecting the 10-year benchmark G-sec rate which is currently 7.51% semi annual yield may trade between 7.30% to 7.80 %. But I am positive on G-sec market right from April 1st, mainly due to the expectation on reduction on CRR as well as bank rates.
[04:46:10 PM] => To the second part of your question - it is expected that US economy is recovering. I am forecasting Mr. Greenspan may increase the Fed rate by 50 to 75 bps (1.75% to 2.25-2.5%) before December 31. 2002, due to recovery in US economy.
[04:48:21 PM] => BehlR: How can investors identify good performing debt funds?
[04:48:29 PM] => SK : The track record of the funds performance is the main indicator of better performing debt funds. Secondly the risk adjusted returns also plays a major role. Third, even the sponsor of the AMC, Trustee, Board of Directors of the AMC also plays a major role.
[04:50:17 PM] => Shubhasinha : Shall I keep my stocks of VSNL or sell them at current levels?
[04:50:29 PM] => SK : Since Tatas has taken over VSNL, and it has gateway licence for more than 100 nations, it looks attractive to hold VSNL.
[04:50:48 PM] => Vpillai : What is your immediate target for Telco, Zee Tele, Wipro & Nelco
[04:50:57 PM] => SK : No comments.
[04:56:57 PM] => Manu : What would be an ideal asset allocation for a debt investor?
[04:57:07 PM] => SK : Its a question of risk tolerance level of each investor. Investors, who are in the age group of 25-40, can take a higher risk. So they can invest more on equity and balanced products. So the ideal asset allocation would be, say 25-40 % in debt for the above age group. If the investor is in the age group of, say 41-55, the debt allocation would be 50-75%. Above 55 age group cannot take higher risk. So I recommend they should invest more on pure debt investment products.
[05:06:47 PM] => Gopinath : Could you elaborate on your investment philosophy?
[05:07:20 PM] => SK : Safety is the main theme of SBI Mutual Fund's philosophy. Whenever we invest in any corporate credit (debentures or bonds) we study in detail about the companies management capability, track record in interest servicing, principal repayment. We also see the asset cover in detail apart from other financial rations like interest cover, debt-equity ratio etc. This is one of the prime reasons, our funds have invested mainly in AAA manufacturing bonds like Hindalco, BHEL etc.
[05:07:48 PM] => We have a small exposure in AAA NBFC companies investments even though they give higher accruals. We observe, the risk level in the NBFC is higher compared to AAA manufacturing companies.
[05:07:53 PM] => At the same time, our Fund House is aggressive in the G-Sec (since it is zero credit risk). We actively manage the duration management to capture the price appreciation in the G-sec market.
[05:16:48 PM] => Mohammed Ali : How has been the performance of SBI MF debt funds?
[05:16:56 PM] => SK : Our flagship fund, Magnum Income Fund (fund size Rs 1,020 crore), which has given 1-year return of 16.03% is ranked No1 for 1-month return and No 2 for 3-months return and No 3 for 6-months return in a ranking done by Value Research. This ranking is based on a sample of 37 Income funds. Our Magnum Gilt Fund (Fund size Rs 651 crore) has given 1-year return of 25.08 % and is ranked No 7 for 1-month return, No 8 for 3-month return and No 9 for 6-month return. The ranking is based on a sample size of 27 Gilt Funds.
[05:17:47 PM] => wantsomefriends : Advice on Pritish, Adhikari, Polaris and Satyam. Pls
[05:17:56 PM] => SK : No comments.
[05:25:11 PM] => Sandeep Nigam : Do you expect the interest rates to go down even further?
[05:26:01 PM] => SK : I do anticipate a cut in CRR as well as bank rate at the beginning of FY 2002-03, mainly as a boost for industrial recovery. Secondly, Govt of India has to do a gross borrowing of Rs 1,45,000 crore in the FY 2002-03. Govt of India saves its interest costs, say Rs 100 crore by reduction of interest rate by 1 bps. So I do anticipate 10-year benchmark G-sec rate currently trading at 7.51% semi annual yield may come down to 6.75 % semi annual yield after the cut in CRR as well as bank rate. But once the corporate industrial recovery picks up, say 10 months later, then the interest rate may start hardening.
[05:27:25 PM] => Reddy G: How would you compare the performance of your funds?
[05:27:33 PM] => SK : Please refer to my earlier answer.
[05:27:41 PM] => Sanjeev_K: What do you think for the market in a one-month horizon?
[05:27:49 PM] => SK : Please refer to my earlier answer.
[05:33:50 PM] => Manish90 : When do you feel the current down turn would change?
[05:33:59 PM] => SK : New economy stocks have a weightage of 45 % plus in the BSE Sensex. With the US economic recovery already on, it is expected that our new economy stocks should do well in the year 2002. Due to major infrastructure projects like the Golden Quadrilateral Highway projects coming up, there is a good demand for steel as well as cement. So it is expected the old economy sectors like auto, cement, steel, engineering are likely to do well. So I am expecting BSE Sensex to move up by 25% in an year's time from the current levels.
[05:38:12 PM] => Nag-A : Please enlighten me on your portfolio allocation?
[05:38:30 PM] => SK : As on today (March 11, 2002) our Magnum Income Fund (Fund size Rs 1030 crore) has a 30% weightage in G-Sec, 45% in AAA, 10% in AA+ and AA and balance 15% is in cash.
[05:42:30 PM] => Kanariya : Has the Finance Minister left anything for MF investors like me? Equity funds are down. I'll be taxed if I put my money in Debt. Where do we go?
[05:42:41 PM] => SK : As far as equity funds are concerned I think they are likely to do well this year as I mentioned in an earlier answer.
[05:42:52 PM] => If you are a debt fund investor, you can switch from the dividend option to growth option of the debt fund and stay there for more than a year and pay only long-term capital gain tax of 10%, which is lower than dividend distribution tax of 10.2%.
[05:58:41 PM] => Kanariya : Would be pleased to know your reading of the budget as a fixed income manager.
[05:58:49 PM] => SK : I think it is a growth oriented budget. Even the FM has increased the tax on LPG as well as kerosene, which were highly subsidised earlier.
[05:59:01 PM] => Since the other investment avenues are capped for e.g., RBI Relief Bond investment ceiling is restricted to Rs 2 lakhs as of now which did not have any ceiling earlier, tax rebate will be zero for the salaried class (earnings of above Rs 5 lakhs). Since 20 % to 10% are the salaried class between 1.5 lakh to Rs 5 lakhs, who cannot avail of these facilities, who also have to pay service tax of 5% for all the life insurance premiums. Due to above factors plus, MF industry's good servicing, expectation of better performance and the launch of innovative products should pull in more money in to the MF industry. Since bank deposit rate is likely to be reduced by April-May, which is mainly due to removal of administered interest rate regime, the mutual funds are likely to give better returns.
[06:03:01 PM] => NRI : Can we believe Mr. Greenspan? Are they through with their recession?
[06:03:14 PM] => SK : The US employment figures are improving. The core US economic sectors are also picking up. Plus the fact that retail spending has gone up over last quarter we can believe Mr. Greenspan says.
[06:06:03 PM] => Manohar : Can you tell me the current cash levels in each of your funds?
[06:06:16 PM] => SK : In Magnum Income Fund (Fund size Rs 1030 crore), the cash level is closer to 15 per cent and in Magnum Gilt Fund(Fund size Rs 651 crore), the cash level is closer to 20 per cent.
[06:06:41 PM] => Gopal : How would you rate the performance of your funds?
[06:06:53 PM] => SK : Please refer to my earlier answer.
[06:08:38 PM] => Rafeeque : Does SBI has any gilt funds? Will gilts be able to perform as last year?
[06:09:24 PM] => Rafeeque : Does SBI has any gilt funds? Will gilts be able to perform as last year?
[06:09:39 PM] => SK : Yes, we have. For details please refer to the earlier chat transcript.
[06:13:32 PM] => Investor : What are your fav sectors for the next quarter?
[06:13:40 PM] => SK : Auto, frontline tech stocks and pharma
[06:13:48 PM] => Irfan : Should I buy Mastek?
[06:14:01 PM] => SK : Not at current levels. May be at lower levels.
[06:15:38 PM] => N. Menon : How do you see the Indian economy over the next quarter?
[06:17:34 PM] => SK : I have answered the question to some extent earlier. Service sector, which constitutes 52% of the GDP, is likely to do well. Industrial sectors will have a growth rate of closer to 4.2%, which is lower as compared to last 6 years' data. Industrial recovery may slow down for some more time.
[06:18:24 PM] => Raghu : What's the implication on Income funds after the budget? Do I have to pay more tax?
[06:20:43 PM] => SK : Please refer to my earlier answer.
[06:21:00 PM] => Parekh : Can you tell me about the Children's benefit plan?
[06:21:12 PM] => SK : Magnum Children's Benefit Plan is a debt oriented fund. To boost the fund performance the plan can invest in quality, high dividend paying equity shares for a maximum up to 25%. Min. Investment is Rs 2000. Age group is 1 month-18 years.
[06:21:24 PM] => Surendra : Do you expect to maintain the returns?
[06:21:31 PM] => SK : The income funds are expected to give a return of say 8-10 per cent. Gilt Funds between 7.5 to 9.5%. This is my perception on an average basis.
[06:23:15 PM] => Myiris : Thats the end of the chat session.
[06:24:48 PM] => Myiris : We thank you all for logging on
[06:36:04 PM] => Myiris : Our thanks to Mr. Sarvana Kumar, Head- Fixed Income, SBI Mutual Fund for sparing time to come and answer all the queries.
[06:36:13 PM] => Myiris : We'll be back with more on Friday, March 15.
[06:36:20 PM] => Myiris : Till then its bye from us...
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