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  • May 11, 2017
    Quantum Equity Team

    In the month of April 2017, BSE Sensex gained 1.01% on total return basis. In the first 4 months of calendar 2017, Sensex has gained 12.6%. However, it was midcap and smallcap stocks which stood out during the month. BSE Midcap index was up 5% during the month whereas BSE Smallcap index appreciated by 6.5%. In the first 4 months, midcap and smallcap index returns are 23.5% and 27.8% respectively. Among sectors, cyclicals such as real estate, capital goods and oil & gas stood out with highest returns. IT, telecom and metal sectors were the ones that ended in negative territory as far as returns are concerned. Reliance industries stock gained 5.6% during the month of April.



    After a heavy downpour of money in March, FIIs sold USD 345 million (around INR 22,18,350 crores) worth stocks in April. Domestic institutions on the other hand bought stocks worth USD 1.4 billion (around INR 9,002 crores). Among DIIs, mutual funds bought USD 1.5 billion (around INR 9,645 crores) worth stocks whereas insurers were sellers for USD 100 million (around INR 6,43,000 crores). Indian rupee maintained appreciating trend, rose 1.04% against the US dollar in April.

    On the global front, growth remains subdued in developed markets except US. The US has hiked interest rates once in 2017 so far and has indicated that they will increase rates twice in the remaining part of the year. Japan and Eurozone so far have been following a loose monetary policy. There is a possibility of Eurozone stopping its expansionary monetary policy in the coming months. Another awaited event for the month was the result of French presidential elections. One of the candidates has vowed to take France out of European Union (similar to Brexit), which could potentially break EU. Now it looks that the said candidate is unlikely to win, giving a breather to financial markets around the globe.

    Rise in US interest rates can be damaging to equity and financial markets. This may hurt equity prices in emerging markets including India (at least in the short run). A lot of FII money chasing returns could go back as cost of capital increases in their home market.

    On the domestic front, many companies are reporting their fourth quarter earnings. The results have been a mixed bag, with some companies doing well while others performing lower than market expectations. GST rollout seems to be on track to meet its deadline of rollout from 1st July 2017. Rates of various goods/services are still to be decided under the 4 tier GST structure.

    The Met department has predicted a normal monsoon for this year. If it doesn't turn out to be so, there could be inflationary pressures on the economy. RBI also announced its monetary policy in the month of April. While there was a status quo on interest rates, the central bank remains concerned on inflation picking up. Core inflation has remained sticky in recent times, even though there has been benefit of falling food prices.

    Fund Outlook:

    We remain optimistic about Indian equities in the long run. India is unlikely to be impacted much economically from the unfavourable situation in other parts of the globe. In fact, it has been a beneficiary of fall in commodity and energy prices. India is a bright spot in world equities, given high GDP growth which can continue. Demonetization so far hasn't had a big impact on listed companies, though it needs to be watched in the coming months. India is also relatively less impacted from global protectionist measures as consumption is 65% of GDP. We are less reliant on exports for economic growth. With the recent run up in equity markets, the valuations look stretched. Investors should add moderately to equity at this point of time.

    Data Source: Bloomberg


    Disclaimer, Statutory Details & Risk Factors:

    The views expressed here in this article are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments.

    Mutual fund investments are subject to market risks read all scheme related documents carefully.

    Please visit – www.QuantumMF.com to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme(s) may go up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment risk such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.

  • May 11, 2017
    Quantum Fixed Income Team

    Indian Bond markets renewed its bearish upward movement in yields (downward move in prices) in April with the outgoing benchmark 10 year government bond paper bearing the brunt with an increase of 27 bps (100 basis points = 1%) in its yield to end the month at 6.96%. On an average across the curve, the yields have risen by about 15 bps. Initially, the rise in yields was triggered post the RBI monetary policy in which they retained their neutral outlook and also indicated steps to suck out the excess liquidity.

    The RBI monetary policy minutes released later in the month saw one RBI-Monetary Policy Committee member indicating a pre-emptive rate hike. This did take the markets by surprise as at a time of current headline CPI inflation around 4%, benign commodity prices and a stronger rupee. Even the thought of a rate hike sounds extremely hawkish. The 10 year bond yield almost touched the 7% mark post the release of the minutes.

    This shows the RBI's intention to achieve the 4% inflation target on a durable basis and that the RBI will not shy away from non-consensus actions to contain inflationary expectations. This should put off whatever little expectations markets had on possibilities of rate cuts. Infact, if monsoons indeed turn out to be poor with a resultant increase in food prices, India could well be seeing a reversal in the rate cycle as early as October - December 2017.

    Our base view remains of a long pause but our portfolio positioning is already biased towards low duration. The fund has raised its cash levels in the end of March taking advantage of the year end valuation driven rally. We deployed the cash post sell-off in yields in some illiquid sovereign spread papers in the 10-12 year segment as it was available at very attractive spreads over the equivalent liquid papers. This had led to overall fund duration being slightly higher than last month. We would look to increase portfolio accrual by adding more AAA PSU papers instead of short end government securities.

    As highlighted earlier, the fund is also likely to see an increase in allocation to the AAA PSU papers in the 3-5 year category away from low maturity sovereign papers. We are awaiting further increase in spreads which is likely as corporate bond supply increases in the next two months.

    Although, the US FED is unlikely to move in May, but we feel it is about time the US FED begins to lead than follow the market in its rate normalization process. Post the September German election, one should also expect a combined action of US Fed start reducing its balance sheet and European Central Bank reducing its bond buying program. President Trump's one pager tax reform seems will take a long time to fructify into a legislative action but whenever the US Congress acts on it, we do think US fiscal deficit will increase.

    Fund Outlook:

    With these risks on the horizon, we expect the RBI to remain conservative and focused on domestic inflation and stability. We think there has been some change in the RBIs Foreign exchange management policy. They don't seem as intent in buying FX reserves and arresting INR appreciation. The INR thus remains one of the best performing EM currencies. Macro indicators (CAD, Inflation and politics) support the positive sentiment towards India and is reflected in the continued inflows by foreign portfolio investors into Indian Equity and Debt. We expect foreign investors to continue to invest/add on to India debt on the stable outlook on INR and higher nominal rates and spreads available in the bond market which will continue to enthuse the overseas investors.

    Data Source: Bloomberg


    Disclaimer, Statutory Details & Risk Factors:

    The views expressed here in this article are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments.

    Mutual fund investments are subject to market risks read all scheme related documents carefully.

    Please visit – www.QuantumMF.com to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme(s) may go up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment risk such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.

  • May 11, 2017
    Quantum Alternative Investments Team

    Gold took a spin on the upside over the first half of the month as geopolitical worries took center stage. Trump's stand off against Syria, Afghanistan and North Korea bolstered apprehensions about further escalation of tensions. Unless geopolitical events have immediate economic or financial consequences, their impact on gold is minimal and brief. And so it was. On the other hand, concerns over the Euro receded with the favorable election outcome in France. The fading signs of Trump supremacy to drive the economy were swept away by his one-pager bullet point plan for a massive tax overhaul. Although several doubts over the plan and its passage in current form prevail, the announcement was enough to drive further the euphoria in equity markets and uplifting the dollar, subsequently causing gold prices to plummet. Although, gold prices ended the month with a gain of 1.5% but continued correcting lower in the early part of May.

    The sharp decline in gold prices can be partially attributed to the forecast of a stronger second-quarter GDP of the US. After experiencing one of the weakest quarters in the last three years, the Atlanta Fed tracker release numbers suggest an extremely robust second-quarter. The US GDPNow model forecasts 4.3% growth. That would be the strongest growth since the third quarter of 2014. This notion was further supported by Yellen indicating slower growth in the first quarter as transitory. According to the BLS, real GDP has only increased by 1.6% for all of last year and was up just 0.7% during Q1 of this year. Despite the optimism on GDP growth, the fact remains that corporate tax receipts have fallen by 18% in the past 6 months compared to the same period a year ago. This calls into question Wall Street's contention that record high stock valuations are being supported by a significant rebound in corporate profit growth. Despite these facts, EPS growth estimates for all of 2017 are up above 10%. But how it is possible to grow S&P 500 earnings anywhere near double digits when the economy is so weak? - That is a question requiring careful consideration.

    The US Fed's rhetoric on balance sheet contraction, together with a stronger dollar, and declining credit growth and inflation expectations has furthered the decline in gold prices. The US Fed kept rates unchanged at the monetary policy meeting in May but furthered its cause of preparing the markets for rate hikes down the year. The Fed still expects 2 to 3 rate hikes this year. Markets believe that there's definitely 1 but there are many in the camp expecting 2 or even 3 rate increases. To the contrary, Fed might just wait to see GDP numbers for the second quarter given that the numbers were truly disappointing for last year and the first quarter of 2017 as well which, for now, the Fed has branded as transitory. If the Fed keeps rates unchanged in June, and the next rate hike is pushed back to September, which seems quite likely, the dollar could weaken in the coming months, and gold prices could continue to trend higher as in 2016.

    Fund Outlook:

    Markets still seem to think that the Trump presidency will produce aggressive tax cuts and infrastructure spending. But the fact is, the impatience over Trump's fiscal stimulus is growing, which may hamper the bullish trend in risky assets and strengthen gold. Although the reflation trade may stay in place, the enthusiasm for the Trump's economic agenda should decline. Trump has managed to boost confidence in the U.S. economy. However, if he does not translate it into real action and stronger hard data, the market sentiment may reverse, driving risky asset prices down - while supporting gold.

    There's still a high degree of uncertainty and lack of clarity about what Trump might do, and also what extent he's going to be able to do what he has said he wants to do. The current tax changes being proposed by the US President will probably morph over time and will be significantly watered down if it is ever to become law. Therefore, since the final plan will be significantly diluted from the proposed form, its effect on the economy and for equity prices will be extremely attenuated. Since last November, we have cautioned against such euphoria and we continue to believe that the stock market will break down once it is clear that these expectations will not be met.

    In the short term though, gold remains vulnerable to the downside as Fed monetary tightening gains pace. We believe that the fundamental outlook for the gold market may not be so encouraging until people expect Trumps reflationary forces to mend the economy. But, as markets lose their faith in the pro-growth policies of Trump or if there is a financial turmoil given the stretched equity valuations; it will force the Fed to adopt a more dovish stance and gold should start moving northwards. What could prepone gold's ascent would be aggressive Trump policies that cause turmoil in currency and asset markets and this uncertainty would drive people to assets like gold.

    The world is in great disequilibrium, both with respect to the global economy and geopolitics as well. There exist more uncertainties than certainties in the global macroeconomic environment of which Trump's presidency is a big unknown. We believe that barring the near term, gold prices should start moving gradually upwards in 2017.

    Source: The World Gold Council, Bloomberg


    Disclaimer, Statutory Details & Risk Factors:

    The views expressed here in this article are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments.

    Mutual fund investments are subject to market risks read all scheme related documents carefully.

    Please visit – www.QuantumMF.com to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme(s) may go up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment risk such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.

  • May 18, 2017

    The Quantum Advantage

    The Securities and Exchange Commission of the US has charged a large multinational British bank requiring the bank to refund advisory fees or mutual fund sales charges to clients who were overcharged. The amount that needs to be paid out - a whopping US $97 million.

    The order finds the bank guilty of 3 violations - one of which was that the bank has "also collected excess mutual fund sales charges or fees from XX brokerage clients by recommending more expensive share classes when less expensive share classes were available. Another XX accounts paid excess fees to the bank due to miscalculations and billing errors by the firm...."

    That bank isn't the only one. Another financial services firm in the US was also similarly fined for overcharging customers and creating fake accounts to soak up balance sheet pressures...

    I read this news with a smile - not because of someone else's misfortune but because I think of the small or aam investor, and the fact that this small investor, who was duped will stand to benefit. The faith of that small investor will be restored in full vigour - that the Regulator does bat for him/her too and has forced a behemoth like that bank to pay back, to return to the investors what was unfairly taken from them.

    I also smiled for another reason that I know full well that such a thing shall NEVER happen to us in Quantum, as we will ensure - thanks to our principles of being low cost and more importantly extremely transparent with our investors - that the question of overcharging our investors, due to 'oversight' or intentionally shall not arise at all at Quantum.

    The Advantages of Being Transparent

    When I have the privilege of meeting some of you investors at meets or people who know me, they are often amazed at the disclosures we make in our annual reports and even our fund factsheets tend to be above and beyond what the Regulator has specified. There is a reason for this, we want our investors to be our biggest evangelists, we would want you to have such a wonderful experience in Quantum, not only in terms of the facilities of investing online "paperlessly" or our Customer Service department answering your queries promptly and with the right data; but by being extremely transparent with you.

    Only if you know us, our philosophy, our DNA, the way we pick stocks etc. will you feel confident enough to invest in our funds and recommend us to your circle of friends, relatives, neighbours etc. Hence when it comes to revealing what our commission structure of the newly launched regular plan is or whether it comes to revealing the brokerage we pay, or the reason for the underperformance of our funds (if any ☺) we are extremely open and transparent with our investors, again so that they have the confidence that there is a fund house that does work solely for their best interests.

    The Advantage of Being Low Cost

    Since Quantum Mutual Fund came into being in 2006, we have always focussed on keeping costs low for our investors. Why? The answer is simple. Lower cost means more of your money gets invested in the market and when you're invested for the long term that small difference in the expense ratio becomes to a surprisingly large amount. You can read this article to know more about what difference a lower expense ratio can make.

    Since being low cost is a part and parcel of our DNA, there is no question of Quantum ever overcharging customers. In fact in April of 2017, when we launched regular plans, expense ratio of the Regular Plan of the Quantum Long Term Equity Fund is at 1.43%, which is lower than the expense ratios of some of our peers' Direct plans! You may read more on that here.

    Since inception there are 3 main pillars that your fund house has stood on and which we will never comprise on even by an inch. Those pillars are Honesty, Transparency and the predictability of our Performance. When we talk about predictability, you can be sure that when equity markets run up without any solid fundamentals like sustained GDP growth or growth in industrial spends etc. as value investors we will be sellers in such a market. The result could be that the fund will be high on cash and therefore 'underperform' its peers. But when the market euphoria dies down and the market settles at the lower level, where it should have been in the first place, then Quantum will surely be buyers in such a scenario, enhancing fund performance.

    Given the fact that these virtues are our founding base, there is no chance of us ever overcharging you. Plus all the numbers we have, all the costs, profits etc. are uploaded on our website in the financials, including our remuneration and all details that you as an investor need to choose the right fund house. As our Vision Statement clearly says, we don't want to be the largest fund house, but be India's most respected fund house for catering to you and investors like you, with utmost honesty, integrity and to the best of our ability.

    Thank you, once again for choosing to park your savings with Quantum Mutual Fund.

    Product Label

    Name of the SchemeThis product is suitable for investors who are seeking*Riskometer
    Quantum Long Term Equity Fund
    (An open-ended equity scheme)
    • Long term capital appreciation

    • Investments in equity and equity related securities of companies in S&P BSE 200 index

    Investors understand that their principal will be at Moderately High Risk


    * Investors should consult their financial advisers if in doubt about whether the product is suitable for them.


    Disclaimer, Statutory Details & Risk Factors:

    The views expressed here in this article are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments.

    Mutual fund investments are subject to market risks read all scheme related documents carefully.

    Please visit – www.QuantumMF.com to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme(s) may go up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment risk such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.

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