What is an Indexed Mutual Fund and when should you buy it?

Shubhojit Chatterjee asks “Can you please help us to know how to trade in Sensex as we are trading through ICICI Direct and they don’t have access to NSE”.

First lets review what an indexed mutual fund is. Indexed funds are an investment vehicle that aims to replicate movements of an index of a financial market such as NSE or BSE. For Indian investors that means a fund that will do as well or as poorly as the SENSEX or Nifty. These indexed funds will own all the securities of that index. So, for SENSEX index fund that means owning shares in all 30 companies that make up the index. Its usually a computer model that drives this fund not human stock picking. This also means lower management costs and fees because its mostly automated.

For the Indian market however the indices are fairly narrow so you dont actually get to capture the broad market, but a basket of stocks. (Editorial note: you would have done well though in the last 9 months!).

 Here is a list of (maybe not complete) of Index funds that track the SENSEX:

1. HDFC funds

2. Franklin India BSE Sensex Fund & Nifty fund

3. Tata SENSEX fund

4. LIC MF Index Fund SENSEX & Nifty

5. UTI Master Index plan

Over the past few years funds that tracked Nifty have had a better risk / reward return (beta) than those that tracked SENSEX, since the Sensex is more volatile, and most funds that track the Sensex dont do as good a job as those that do Nifty.

Relevant stock investor statistics for investing in India

1. Trading Volume:

1984: US $3M / daily,

1994: US$100 Million,

2007: 8 Billion / daily ($6B in derivatives)

2. Assset Management Companies:

1994: 10, Total Funds ~ 100

2007: 32, Total Funds ~1000

3. Best Mutual fund companies in India

DSP Merrill Lynch

Fidelity Mutual Funds

Frankling Templeton Funds

HDFC Mutual Funds

Sundaram BNP Paribas Mutual Funds

Source: Personalfn.com

List of News Resources for Indian Market

1. Yahoo Finance India

2. ANI

3. Business Week India

4. Business Wire India

5. CNBC TV 18 Live

6. Financial Express

7. Hindustan Times

8. Rediff Business News

9. CNN IBN Live (Live Streaming of IBN)

10. India Times Economic Times

11. Personal FN

12. Equity Master

13. Reuters News India

Hedge Funds Focused on India

1. Avatar

2. Hudson Fairfax Group

3. India Deep Value Fund

4. Fair Value Capital

5. Indea Capital

6. India Capital Fund

7. Monsoon Capital

8. Karma Capital Management

9. Atlantis Investment Management

10. Naissance Jaipur (India) Fund

11. Quantum Asset Fund

List of Equity Research firms in India

1. Almondz

2. Emkay Research

3. India Infoline

4. PINC Research

5. Motilal Oswal

6. Prabhudas Liladhar

7. Citigroup India

8. DSP Merrill Lynch

9. JP Morgan Equity

10. CLSA

11. Morgan Stanley

 12. IL&FS Investsmart

13. Religare, Religare Securities and Religare Online

14. HDFC Securities

15. SSKI

16. ENAM Edelweiss Research

17. ICICI Securities

18. Pranav Securities

19. Sharekhan

20. KJMC

21. Karvy

22. Deutsche Bank

23. Prime Broking

24. Goldman Sachs

25. P-Securities

26. Angel Broking, Angel Trading

27. SSKI

28. Ambit Capital

29. Finquest Securities

30. UBS Investment

31. IDBI Capital

32. Macquarie Research

33. Asit C. Mehta Research

34. Bajaj Capital

35. Kotak Securities

36. Dolat Capital

37. UTI Securities

38. IL&FS Investsmart

39. Enam Securities

40. ABN Amro

41. ASK Securities

42. Networth

43. Khandwala Securities

44. ASK Raymond James

45. HSBC

46. Anand Rathi

47. Ventura Securities

48. Niche Research

49. Antique Stock Broking

50. Asian Market Securities

51. Man Financial

52. KR Choksey Research

53. Indiabulls Research

54. SPA Research

55. SKP Securities

56. Keynote Capitals

57. Brics Securities