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Pramerica Mutual Fund Introduces Pramerica Power SIP


Pramerica Mutual Fund has announced to introduce Pramerica Power SIP under Pramerica Ultra Short Term Fund & Pramerica Equity Fund, with effect from December 01, 2011. It will calculate the monthly SIP amount for Equity Fund based on the current BSE Sensex PE ratio compared to historical BSE Sensex PE ratio levels.
Initially, Investors have to first invest lump sum amount in Pramerica Ultra Short Term Fund and then can start the SIP in the same fund for further investments. Now, on 2nd business day of every month, a specific amount calculated through Pramerica Multiplier (a model based on BSE Sensex PE ratio) will be invested in Pramerica Equity Fund.

How will this model work:
This model will ensure the investments to be made when markets are cheap in terms of lower Price to Earnings ratio (PE) and simultaneously, no investments will be made when they are trading at higher PE ratio.
Through this model, the PE (Price to Earning) mean would be calculated by taking a weighted average of the average PE of BSE Sensex over the last 5 years and long term average PE of BSE Sensex since 1991. Then, the calculated PE mean would be compared with the current BSE Sensex PE and based on the variation between the two, Pramerica Multiplier is determined.
Suppose, if the PE variation is less than -40%, the SIP amount for equity fund will be 4 times the amount of monthly SIP amount in Debt Fund and so on & so forth as mentioned in the table.

PE Variations   Pramerica Multiplier
Less than -40% 4
-40% to -30% 3
-30% to -20% 2
-20% to -10% 1.5
-10% to -01% 1.2
0% to 10% 1
11% to 20% 0.8
21% to 30% 0.5
31% to 40% 0.2
41% and above 0

Conditions:
For availing this plan, the minimum initial investment (lump sum) must be 12 times the monthly SIP installment for debt fund. Similarly, after this lump sum investment, the minimum SIP amount in debt fund must be Rs.1000 per month and in multiples of Rs.500 thereafter. The Minimum SIP tenure would be 36 months.