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  • April 7, 2017
    Quantum Equity Team

    In the month of March 2017, S&P BSE Sensex gained 3.19% on total return basis. It has appreciated 11.5% in the first 3 months of 2017. Mid cap and small cap indices continue to fare better than Sensex. S&P BSE Midcap rose 4.31% for the month whereas S&P BSE Smallcap index gained 5.45%.


    For one year period ending 31st March, Midcap and Smallcap indices had stellar returns of 34.27% and 37.83% respectively. This compares to 18.46% gain of Sensex for the same period. Consumer durables, capital goods and real estate were among the sectors that performed best for March. Telecom, healthcare and IT were laggard sectors.

    FIIs invested USD 5.14 billion in Indian stocks in March, buoyed by recent state election results. In the first three months of 2017, FIIs have invested USD 6.7 billion. Domestic institutions (DIIs) were net sellers during the month, pulling out USD 653 million. The Indian Rupee appreciated during the month by 2.76% against the US dollar.

    On the global front, economic growth remains anemic in the developed world with the exception of US. Eurozone and Japan have injected massive liquidity in the economy in hope of growth. That, however, continues to remain elusive. There are elections scheduled in France in the coming months, adverse results could lead to possibility of France exiting Eurozone. This could be destabilizing for Eurozone on the back of UK's decision to leave last year.

    Trump's proposal to make changes to US healthcare reforms passed during his predecessor tenure was another important event for the month. His own party didn't support the move and its rejection was a big setback for the US President. This puts a question mark to his many future plans such as big infrastructure investments and tax reforms. US currency weakened in the aftermath. A big global commodity rally riding on US infra spend could also end unfavourably.

    US interest rates may go up further in future as the economy has achieved low unemployment and is operating close to optimal output. This may hurt equities prices in emerging markets including India (at least in the short run).

    On domestic front, four GST bills were passed by Parliament. This clears the path for GST to be implemented from 1st July 2017. On the political front, the past month was good for BJP led NDA. A clear win in the decisive UP state is being seen as support for policies of the Government and give them headway for the next Lok Sabha elections. India's macroeconomic situation remains quite stable with inflation, oil prices and external trade deficit under control. Lack of pick up in corporate investments remains one missing factor to drive GDP growth of the country.

    There was a lot of activity in the corporate sector in March.. Automobile firms were restricted to sell non emission compliant vehicles from 1st April. This came after a Supreme Court judgment which forced many two wheeler and commercial vehicle players to offer massive discount in the last two days of March. There were also rumors of further consolidation in the Indian banking sector, after SBI merged with its 5 associates.

    Fund Outlook:

    We remain optimistic about Indian equities in the long run. India is unlikely to be impacted economically much 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 didn't have a big impact on the 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. Investors can add to their position in equity to benefit from higher corporate earning growth expected. Valuation of equities also appears to be fair, not excessive, at the moment.

    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.

  • April 7, 2017
    Quantum Fixed Income Team

    With February ending on a deeply negative note, the Indian bond markets and the Indian Rupee bounced back sharply to register a month of strong performance. The Indian 10 year bond yield reversed its losses by rallying more than 20 bps in March to end the month at 6.65%. The Indian currency posted its strongest monthly rally since March of last year, ending the month @ INR 65/USD mark.

    We had mentioned in our February commentary that although best of the bond market rally is behind us, in the short term, we see the 10 year government bond yield at 6.90% to be oversold. We expected value buying to emerge at that level and for yields to move lower in the short term.

    The sell-off (yields rising) in February was, of course, triggered by RBI's decision to not only leave interest rates unchanged but also to change its stance (outlook) from Accommodative (rate cuts) to Neutral. This suggested that the RBI will likely remain in a long pause and put paid to market expectations of further rate cuts. The bond yields rose from 6.25% to 6.90% in February on heavy selling. The rally in March (yields falling) to 6.65% has retraced some of the losses in bond portfolios.

    March was an eventful month with many factors combining to drive Indian asset prices up - key Indian state election results, a restrained US Federal Reserve, a weaker US dollar and renewed buying in emerging markets resulted in inflows into Indian Bonds and Equity markets.

    A key sentiment booster was the huge win for Modi and the BJP in the key state of Uttar Pradesh (winning close to 80% of the seats) and its neighboring state (Uttarakhand). This was the biggest election and for many it was a sort of referendum on Modi's popularity post the demonetization move of November. Thus despite BJP losing in Punjab (BJP's ally lost to Congress) and finishing second in Goa and Manipur (BJP still formed the government with support from other parties in both states), the scale of its victory in the largest state suggests that Modi's popularity remains intact. It bodes well for BJP and Modi as they fight for a second term in May 2019.

    Although, investor expectations from BJP have moderated, but the prospect of political stability seems to have boosted investor sentiment. Also, a more restrained commentary from the US Federal Reserve on its rate hike trajectory seems to have emboldened global investors. ‘Trump trade’ (stronger US growth, stronger US dollar and higher US bond yields) also seems to be fading with investors not seeing concrete actions and thus emerging market currencies, stocks and bonds have rallied.

    Foreigners have bought more than USD 4 billion each in Indian Equity and Indian bond markets in March alone. The renewed interest in Indian bonds is encouraging as foreigners sold USD 4 billion worth of Indian bonds in 2016. The Indian Rupee has been a key beneficiary of a global emerging market rally and positive investment sentiments in India.

    Despite high tax payments during the month, banking system liquidity remained in huge surplus with average net repo lending of over INR 4 lakh crore. Government is in consultation with the RBI to set up a Standing Deposit Facility under which the RBI can absorb excess liquidity without providing collateral and with the discretion to set the interest rate without any reference to the policy target rate. Rate and structure of the proposed facility will decide the direction of yield movement in the near term.

    Fund Outlook:
    We expect the RBI to retain its neutral stance and thus expect them to remain on hold for a long time. They might soften their tone as some key risks which they had highlighted (global oil & commodity prices, faster US Fed hikes) have moderated. At 6.25% Repo rate, with the 10 year bond yield already at 6.65%, we believe the market is fairly priced and do not see much scope for yields to fall lower. Our portfolio positioning of lower than normal duration is thus signifying that we do not expect capital gains to be a driver of bond returns. On 6th April 2017, the RBI has announced its policy statements with no change in the key rate (Repo rate) of interest. The policy decision is in line with our expectations. The Monetary Policy Committee, however, raised the reverse repo rate by 0.25 basis points to 6.0%, and cut the marginal standing facility (MSF) rate to 6.50%.

    We do see some opportunities in the corporate bond space where the spreads have widened due to higher supply and we have increased our allocations to AAA rated PSU bonds. We expect an increase in our allocation to AAA rated PSU bonds as we reposition our portfolio to earn accruals from shorter tenure maturities and shift away from longer tenure government bonds.

    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.

  • April 7, 2017
    Quantum Alternative Investments Team

    Although gold prices ended on a flatter note, it was indeed highly volatile. Amidst expectations of a hawkish Fed, gold prices were set in a free fall dipping to test the $1200 an ounce levels. However, the Fed appeared more accommodative and less aggressive in their posture leading to “V-shaped” recovery in prices. What also helped gold was the inability of the Trump administration to get approval on the health care bill casting doubts on his various other ‘meaningful’ campaign promises. This has been the basis of the sound rally in equity markets over the past few months. The evidence of first cracks in the armor led to some sell off in equities and bids under gold. All in all, gold prices ended the month with an insignificant gain of +0.08%. Although the first quarter performance is dwarfed when we compare it to the first quarter performance of last year, the 8.4% gain is absolutely respectable.

    Statements made by Fed Chairperson Mrs. Janet Yellen following the monetary policy meeting alleviated fears that the Fed might set a more hawkish and aggressive stance that accelerates the pace of rate hikes this year. On the contrary, Fed sounded more dovish and that took the pressure off from gold prices. Following the Fed's anticipated 25 basis point rate hike at the March meeting, gold immediately rose by over $20, reflecting that the decision was already built into the price.

    The business and consumer confidence numbers in the US have surged to multi-year highs. These numbers suggest that businessmen, manufacturers and consumers are extremely gung-ho on economic prospects and thereby on the GDP growth. This apparent bullishness on the economy stems from their bets that Trump promised tax cuts, infrastructure spending and rationalization of regulations that will hopefully help businesses grow and thereby make America great again.

    However, data on the ground is not so encouraging and provides a strong reality check regarding the current state of economic activity. The US economy slowed down more than expected in the fourth quarter of 2016. Gross domestic product increased at a lackluster 2.1 % annual rate at the end of last year. For all of 2016, the economy grew only 1.6 %, which was the weakest since 2011. And despite all the zooming confidence levels, forecast from the Atlanta Fed's GDP Now model is poised for just 0.9 % growth for the first quarter of 2017.

    That's not all. Look at the January Durable Goods Report, which met expectations at 1.8 %. However, excluding aircraft, transportation equipment fell by 0.2 %, well below the estimate of a 0.2 % gain. Core capital goods showed a 0.4 % decline in orders. After showing growth for the last 3 months, current reading ends of much envisaged business investment boom as suggested by the business confidence readings. Construction spending fell by a sharp 1.0 % in January compared to expectations of 0.6 % increase. Personal spending increased by only 0.1 % in February below consensus estimates of 0.2 %. Also, Industrial Production for the month of February didn't show any growth at all. Retail sales increased by just 0.1 % in February marking the smallest gain in the past 6 months. Looking at economic data, it seems that the main reason for Fed's reluctance stems from the real state of the economy.

    Fund Outlook:
    “Trump trade” is primarily based upon unrealized promises and commitments. The Republicans in Congress are in a deadlock with Democrats and Libertarians over raising the debt ceiling; and they can't seem to get out of their own way on health care and tax reform. The stock market has priced in perfection coming from the new Administration. Unless Donald Trump can quickly convert some of his promises on tax and regulatory front, U.S equities look ripe for a meaningful correction.

    Since the US election, the price of gold was under pressure from rising real interest rates as inflation expectations didn't keep pace with the sudden increase in bond yields. It was natural that this euphoria will cede to realism, the US Fed won't be aggressive enough until they see runaway inflation. We also suggested that any fiscal stimulus on the backdrop of low employment may be inflationary. That is to say that expectation of higher real rates may soon fizzle out. However, we may end up having a scenario of higher nominal rates accompanied with runaway inflation; the price of gold may rise well in that environment. The Fed will only raise rates if the market delivers a rate hike on a silver platter. We have argued that the Fed is and continues to be 'behind the curve' i.e. is raising rates more slowly than building inflationary pressures.

    In the short term though, gold remains vulnerable to the downside as hopes surrounding the Fed reflationary policies continue to thrive. This promotes the case for expectations on further monetary tightening from the Fed. 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 its inability to get consensus on its side, it could lead to turmoil in financial markets given that equity markets are priced to that perfection; it will force the Fed to adopt a more dovish stance and gold should start moving northwards. What could prepone golds ascent would be Trump's aggressive foreign and protectionist policies that can cause turmoil in currency and asset markets and this uncertainty would drive people to assets like gold.

    Geopolitical risk prospects, which have escalated this year due to the unconventional and protectionist policies that Donald Trump's administration may undertake, combined with uncertainty surrounding Brexit and rise of populist politics in Europe, all these would be supportive for gold this year and limit any downsides we see in the near term. 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.

  • 16th March, 2017
    Dear Investor,

    In the month of February we made two major announcements - our roadmap for reducing Expense Ratios and the introduction of Regular Plans for all our funds. it is the latter annoucement that has gathered some attention, which I would like to expand upon.

    Why Regular Plans?

    Our stance, as we have always said in the past in multiple interviews, is that we were NEVER against distributors. What we have been fighting for, since 2006, is the fact that all costs that an investor has to bear are disclosed to him, except the fees that fund houses pay distributors. Due to this lack of transparency, investors were unable to decide, or question whether the hard bargain that the distributor is driving to switch funds is genuinely for the better of the portfolio or the distributor's pocket. We were and are very happy to work with those distributors who keep the best interests of their clients at the forefront rather than their commissions. 300+ such distributors are working with us despite us not paying them a single rupee in commissions.

    The fight for greater transparency received a massive boost due to a rule change in March, with a final update in September 2016 with SEBI announcing that fund houses have to disclose the commission paid to distributors in their Common Account Statement (CAS). With this rule change, we believe that the transparency that we have been championing has come to fruition; therefore as a result of this transparency coming into the system we have decided to launch Regular Plans.

    We recognize the fact that mutual funds in India are underpenetrated and that a transparent distribution system can surely help bring more people into the fold of utilizing their savings in the right manner. Such distributors need to receive some sort of fees as compensation for what they spend in order to spread the good word, hence the introduction of Regular Plans.

    There will be no change in the way we manage your savings. No change whatsoever in our investment philosophy or our focus on doing what's best for you or our emphasis on complete transparency at all times. The Direct Plans you have invested in will continue as is.

    Is our focus going to be on gathering more AUM?

    This is something that Quantum will never do. Our first and only focus is doing what is right for our investors; growth will automatically happen when investors realize that a Quantum fund should form part of their portfolio.

    Let's look at the commission structure we are planning to offer for the Quantum Long Term Equity Fund (QLTEF):

    ExpensesUpfront CommissionTrail Commission
    Year 1 Year 2 Year 3 Year 4 onwards
    Total Commission Paid00.15%0.20%0.25%0.15%
    Borne by      
     - Regular Plan Investors00.15%0.15%0.15%0.15%
     - Quantum AMC00.00%0.05%0.10%0.00%

    Commissions stated are excluding service tax and any other statutory levies, which will be borne by investors of the Regular Plan and Quantum AMC as per the table above For Regular Plan investors, any payouts above 0.15% will be borne by Quantum AMC.

    Speaking of the Quantum Long Term Equity Fund (QLTEF), our flagship product, the expense ratio of that fund is 1.25% in the Direct Plan and is all inclusive, including statutory taxes (1.09% net of taxes). The commission we are going to pay are 15 bps, 20 bps, 25 bps and 15 bps from the fourth year onwards.

    This effectively means that our Regular Plan expense ratio (Year 1) would be in the range of 1.40% to 1.43% or 1.24% net of tax. Even if we were to include taxes as per the current rate, a 1.43% expense ratio for a Regular Plan is even lower than the expense ratio of Direct Plans of a few peers.

    Our aim is not to earn higher AUM but to offer fair reimbursement to distributors for their efforts. We have never been and will never be in a mad scramble for more AuM. We want the investor to buy our product only after understanding whether the product meets the investor's investment objective, risk appetite, etc. We don't want to force any product onto our investors. Thus the commission to the distributor will not be to induce him to push our product but it will be to compensate him for the efforts he has made and for mobilising the money.

    So to summarize, I would like to reiterate that:

    We have not changed our stance on working with distributors. The change in SEBI regulations, bringing in more transparency that we were fighting for, has allowed us to start Regular Plans.
    Our commission structures are one of the lowest and are recognition of the effort that the distributor has to put in while servicing you.
    You can still invest in Quantum Mutual Fund via the Direct Plan - there is absolutely no change in that respect at all, in fact as per our roadmap, the expense ratios will only go lower.
    As we grow - irrespective of whether money flows in via the new Regular Plan or the old Direct Plan - our costs will reduce and you will benefit thanks to more of your money getting invested as a result of that lower cost.
    There is no change whatsoever in the investment processes of the Funds: our team-based - no star fund manager approach backed by disciplined research will continue as it always has.

    Product Label

    Name of the SchemeThis product is suitable for investors who are seeking*Riskometer

    Investors understand that their principal will be at Moderately High Risk
    Quantum Long Term Equity Fund
    (An open-ended equity scheme)
    • Long term capital appreciation and current income

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


    * 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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