The Rs7.2 trillion Indian mutual fund industry is revisiting its business model to be in sync with the new norms put in place by the capital market regulator, the Securities and Exchange Board of India, or Sebi.
India has 36 asset management companies (AMCs) and at least some of them are planning to start their own distribution business instead of selling funds through third-party distributors. Among other things, they plan to cut distributors' commission by 25-30 basis points (bps) and shift their focus from frequent churning of funds to managing money for the longer term.
One basis point is one-hundredth of a percentage point.
Sebi banned fund houses from charging investors an upfront fee of up to 2.25%, known as entry load, from 1 August.
That encouraged fund houses to fine-tune the exit load, or the penalty they charge investors on premature redemptions, from six months to three years. In other words, fund houses have forced the investor to lock in their investment for three years if they do not want to pay the exit load.
The exit load is currently capped at 1% of investment.
However, only retail investors are subjected to this and fund houses do not charge the exit load on any investment of Rs5 crore and above.
The plan was to use the exit load to take care of the commission paid to the distributors. The fund houses also announced a new incentive structure for distributors ranging between 0.5% and 1.25%.
JM financial Asset Management Pvt. Ltd is offering 1.25%, UTI Asset Management Ltd 1% and HDFC Asset Management Ltd 70 bps, one of the lowest in the industry.
However, this move has not gone down well with the market regulator. It has directed fund houses to bring parity in the exit load for all class of investors, irrespective of the amount of investment.
It also said fund houses should follow a uniform exit load structure for all plans within a scheme. Normally each mutual fund scheme has different plans catering to different classes of investors.
Finally, on Tuesday, Sebi asked the fund houses to limit the lock-in period to one year.
The three-year lock-in, planned by AMCs, would have covered a major portion of equity fund investments in the industry.
According to the industry lobby Association of Mutual Funds in India (Amfi), 57.23% of all the equity investments as of 31 March were less than two years old. The rest of the corpus was more than two years old, but Amfi does not specify the maturity profile.
According to Rajesh Krishnamoorthy, managing director of iFast Financial India Pvt. Ltd, a transaction intermediary, "a minuscule portion of assets would be more than three years old".
This means that had the lock-in period been kept at three years, almost the entire assets under management would have been subjected to the exit penalty. Only 20.33% of the equity assets managed by the industry were less than one-year-old on 31 March.
A majority of the sales in mutual funds come from thirdparty distributors. Some fund houses say the dependence on third-party distributors may decline gradually following the regulatory changes.
"The brokerage structure has to come down to adopt the new changes. The impact of the recent changes on distributors' commission could be 25-30 basis points across the industry," said Suresh Soni, chief investment officer at Deutsche Asset Management (India) Pvt. Ltd.
Waqar Naqvi, CEO, Taurus Asset Management Co. Ltd, said "Incentives for distributors will have to come down.
Each AMC will take a call based on its subscription-redemption ratio. It varies between 35% and 50%. This means roughly between 35% and 50% of the subscriptions into mutual funds get redeemed within the first one year." Subscription-redemption ratio is the proportion of investors withdrawing their investments. If the ratio is high, funds will pay a lower upfront commission.
Loyalty bonus Some fund houses say while reducing the incentives for distributors, a separate loyaltybased bonus programme could be started by the AMCs in order to encourage the distributors.
"The entire business model needs to be reworked to encourage the distributors, as their commissions are reduced by 25-30 bps. We may have to start loyalty-based bonus programmes for the distributors to encourage them to continue with fund distribution business and add more long-term investors to our customer base," said the chief marketing officer at an AMC, controlled by a large bank, who didn't want to be named.
As a part of the loyalty programme, a distributor will be paid a fixed commission every year as long as the investor stays invested in a scheme.
This could happen as early as next month.
"One way out could be (to) progressively increase the trail commission earned by the distributors--the longer the investor remains the higher trail the agent gets," said an executive whose fund house is currently offering a new fund.
The trail commission is paid to agents by fund houses at the end of the year based on the assets they helped bring in.
For instance, if the first year trail is 50 bps, it could be raised to 60 bps in the second year and 75 bps in the third.
"Although we cannot comment on specific changes that will be made in distributors' commission, we believe that even if margins fall, the volume is poised to increase as mutual fund loads have been relaxed for investors. We believe that margins will be compensated by volumes," said Sundeep Sikka, CEO, Reliance Capital Asset Management Ltd, which manages at least Rs1.08 trillion in assets.
"The trail commission is essential if the distributors need to be encouraged to sell. But if there is no penalty on exit, it makes more sense for the distributor to encourage the investor to sell the units and enter a new scheme," said Sanjay Sinha, CEO, DBS Chola Asset Management Ltd.
Others agree. "If something becomes cheaper the demand goes up," Soni of Deutsche Asset Management said. According to him, fund houses will revise their business model and work more on volumes rather than on margins.
"Some fund houses may shift their focus from thirdparty distribution channel and start their own distribution services and strengthen their physical and Internet banking channels," he added.
As of June, there were 91,671 agent distributors registered with Amfi. Most banks and 20-25 large national and regional distributors also sell MFs.
Monday, August 24, 2009
Saturday, August 22, 2009
Asset allocation for disciplined investing
There are no short cuts to investing and more often than not investors burn their fingers in trying to time the market. My advice therefore to all investors with long-term investment goals is to follow disciplined investing with a risk reward balance. It definitely pays.
We all know of the proverb "Don't put all your eggs in one basket", similarly investors should diversify investments across asset classes, markets, managers, tenor, etc. to achieve desired returns with lower risk at the portfolio level.
Diversification involves dividing an investment portfolio among different asset categories, such as equities, fixed income and alternate investments. The process of determining which mix of assets to hold in a portfolio varies from investor to investor and also on the investment objectives.
If the portfolio has the right allocation, it will be well on its way to deliver the investment goals (with an acceptable amount of risk factored in).
Therefore, before making any investments, investors should define an investment philosophy and assess their investment objective, risk profile and suitability.
Your investment objectives need to be set, based on factors such as personal wealth level, age, family circumstances, investment/financial goals, need for regular income streams, understanding of asset classes and risk reward payoffs, conventional versus alternate assets such as art, commodities, real estate.
Some other factors include loss bearing ability, past investment experience time horizon of the investment, liquidity needs, proportion of liquid net worth in a high risk/locked-in product, tax status, inflation and market outlook.
The asset allocation that works best for an investor will depend largely on the time horizon and his/her ability to tolerate risk. Investors should pay attention to structural considerations such as financial planning, trusts, insurance and annuities, and tax and liability management.
Once an investor has decided on the investment objective and risk profile, asset allocation would include all or most of the following considerations/steps:
• Document all the assumptions made
• Calculate rates of return, standard deviation and correlation between different asset classes
• Check for consistency of returns across economic cycles & time periods
• Select the asset mix that would optimize the risk reward payoff – minimum risk for the desired return
• Agree on the benchmarks to be used for comparing performance results and degree of tracking vs. benchmarks
• Decide if the investments are to be made on a staggered manner (in 3 to 4 installments), recommended in volatile markets
• Implement the desired asset allocation through best in class products based on net of tax expected returns
• Evaluate portfolio hedging options and cost
• Active versus Passive management
• Periodic review and rebalancing
Asset allocation has evolved over time. In its initial stages of evolution, this was a simple philosophy of spreading eggs across baskets to spread losses. It then moved to a more complicated mathematical model where the amount of allocation to be made to each asset class was made based on the risk-return framework and correlation between asset classes.
In its more modern form, asset allocation is a more forward looking exercise which lays significant importance to qualitative overlay. This qualitative overlay is derived from experts and it makes asset allocation a more relevant exercise in today’s time, than a traditional quant-based asset allocation.
This overlay can be in terms of analysis of geo-political events, macro economic indictors, market sentiment, or any other factor that cannot be captured by standard risk metrics such as standard deviation of an asset class.
With this evolution in the area of asset allocation, comes into play the role of Tactical Asset Allocation. Tactical Asset Allocation, to some, is essentially about market timing. To my mind, however, it is not market timing but is a dynamic strategy that actively adjusts a portfolio’s asset allocation by taking an informed call on the portfolio in reaction to or in anticipation of the certain trends.
While the importance of long term investments and therefore strategic asset allocation cannot be undermined, in today’s markets, tactical asset allocation, if followed with rigor can certainly deliver alpha (incremental returns) to an investor’s portfolio.
Once invested, one should periodically review and rebalance investments if required. Investors should have pre-defined Profit & Loss booking levels based on their profiles. These levels should be periodically reviewed and reset based on market outlook.
Investors should also maintain certain liquidity in the portfolio to take advantage of sudden opportunities. In addition, investors could consider maintaining separate trading and investment portfolios with different investment objectives.
With increasing globalization, complexity, volatility and lack of time and/or expertise, smart investors always engage professional investment advisors to manage their portfolios. Good Investment Advisors have developed the skill, insight, perspective, and common sense needed to recognize when assets and/or markets may be entering cyclical and secular turning point.
Finally the most crucial factor of disciplined investing - never get emotionally attached to your investments. There is no harm in booking profits and staying liquid. Markets will always give opportunities to make returns from investments in the future.
David M. Darst, Chief Investment Strategist at Morgan Stanley Smith Barney says, "Rather than attempting to time the market in a limited number of asset classes, asset allocation seeks, through diversification, to provide higher returns with lower risk over a sufficiently long time frame and to appropriately compensate the investor for bearing non-diversifiable volatility."
We all know of the proverb "Don't put all your eggs in one basket", similarly investors should diversify investments across asset classes, markets, managers, tenor, etc. to achieve desired returns with lower risk at the portfolio level.
Diversification involves dividing an investment portfolio among different asset categories, such as equities, fixed income and alternate investments. The process of determining which mix of assets to hold in a portfolio varies from investor to investor and also on the investment objectives.
If the portfolio has the right allocation, it will be well on its way to deliver the investment goals (with an acceptable amount of risk factored in).
Therefore, before making any investments, investors should define an investment philosophy and assess their investment objective, risk profile and suitability.
Your investment objectives need to be set, based on factors such as personal wealth level, age, family circumstances, investment/financial goals, need for regular income streams, understanding of asset classes and risk reward payoffs, conventional versus alternate assets such as art, commodities, real estate.
Some other factors include loss bearing ability, past investment experience time horizon of the investment, liquidity needs, proportion of liquid net worth in a high risk/locked-in product, tax status, inflation and market outlook.
The asset allocation that works best for an investor will depend largely on the time horizon and his/her ability to tolerate risk. Investors should pay attention to structural considerations such as financial planning, trusts, insurance and annuities, and tax and liability management.
Once an investor has decided on the investment objective and risk profile, asset allocation would include all or most of the following considerations/steps:
• Document all the assumptions made
• Calculate rates of return, standard deviation and correlation between different asset classes
• Check for consistency of returns across economic cycles & time periods
• Select the asset mix that would optimize the risk reward payoff – minimum risk for the desired return
• Agree on the benchmarks to be used for comparing performance results and degree of tracking vs. benchmarks
• Decide if the investments are to be made on a staggered manner (in 3 to 4 installments), recommended in volatile markets
• Implement the desired asset allocation through best in class products based on net of tax expected returns
• Evaluate portfolio hedging options and cost
• Active versus Passive management
• Periodic review and rebalancing
Asset allocation has evolved over time. In its initial stages of evolution, this was a simple philosophy of spreading eggs across baskets to spread losses. It then moved to a more complicated mathematical model where the amount of allocation to be made to each asset class was made based on the risk-return framework and correlation between asset classes.
In its more modern form, asset allocation is a more forward looking exercise which lays significant importance to qualitative overlay. This qualitative overlay is derived from experts and it makes asset allocation a more relevant exercise in today’s time, than a traditional quant-based asset allocation.
This overlay can be in terms of analysis of geo-political events, macro economic indictors, market sentiment, or any other factor that cannot be captured by standard risk metrics such as standard deviation of an asset class.
With this evolution in the area of asset allocation, comes into play the role of Tactical Asset Allocation. Tactical Asset Allocation, to some, is essentially about market timing. To my mind, however, it is not market timing but is a dynamic strategy that actively adjusts a portfolio’s asset allocation by taking an informed call on the portfolio in reaction to or in anticipation of the certain trends.
While the importance of long term investments and therefore strategic asset allocation cannot be undermined, in today’s markets, tactical asset allocation, if followed with rigor can certainly deliver alpha (incremental returns) to an investor’s portfolio.
Once invested, one should periodically review and rebalance investments if required. Investors should have pre-defined Profit & Loss booking levels based on their profiles. These levels should be periodically reviewed and reset based on market outlook.
Investors should also maintain certain liquidity in the portfolio to take advantage of sudden opportunities. In addition, investors could consider maintaining separate trading and investment portfolios with different investment objectives.
With increasing globalization, complexity, volatility and lack of time and/or expertise, smart investors always engage professional investment advisors to manage their portfolios. Good Investment Advisors have developed the skill, insight, perspective, and common sense needed to recognize when assets and/or markets may be entering cyclical and secular turning point.
Finally the most crucial factor of disciplined investing - never get emotionally attached to your investments. There is no harm in booking profits and staying liquid. Markets will always give opportunities to make returns from investments in the future.
David M. Darst, Chief Investment Strategist at Morgan Stanley Smith Barney says, "Rather than attempting to time the market in a limited number of asset classes, asset allocation seeks, through diversification, to provide higher returns with lower risk over a sufficiently long time frame and to appropriately compensate the investor for bearing non-diversifiable volatility."
NRI Keen To Invest In Indian MF
Many non-resident Indians are keen to keep their Indian ties intact and invest in various avenues like mutual funds (MFs), fixed deposits, real estate and so on.One Of Well Known Financial advisories says, "Most of these people look to return to India finally. That is one of the reasons why they are keen to invest here."
Apart of emotional reasons, it also makes sense as the economy of India is growing at better rate than other countries in the current situation. A wealth manager with a bank says, "The chances of getting double digit returns abroad are limited. In India, you can always hope to get 8-10 percent returns. For example, Indian stock market has given even 100 percent returns till a few years ago, something one can never dream of in a developed country."
However, financial advisors caution NRIs that they have to be careful while listing the details at the time of investment. They should clearly mention their status, complete with relevant documents and details. Advisor offers an example of investing in MFs, "They should clearly mention in the application form that they are NRIs. They should also provide their overseas address. In case of fixed deposits, they should know the difference between various deposits like NRE account and NRO account. This is crucial because you can repatriate the income under NRO, while you can't do the same in NRE account."
The issue of relevant papers and documents is something that creeps up regularly in conversations with financial experts. They all insist that having relevant documents is a key factor. "Some investments may require the investor's status card abroad. If they are going for insurance cover, the company may ask for details like work permit in some cases. It can vary from company to company," says Financial Planner
Apart of emotional reasons, it also makes sense as the economy of India is growing at better rate than other countries in the current situation. A wealth manager with a bank says, "The chances of getting double digit returns abroad are limited. In India, you can always hope to get 8-10 percent returns. For example, Indian stock market has given even 100 percent returns till a few years ago, something one can never dream of in a developed country."
However, financial advisors caution NRIs that they have to be careful while listing the details at the time of investment. They should clearly mention their status, complete with relevant documents and details. Advisor offers an example of investing in MFs, "They should clearly mention in the application form that they are NRIs. They should also provide their overseas address. In case of fixed deposits, they should know the difference between various deposits like NRE account and NRO account. This is crucial because you can repatriate the income under NRO, while you can't do the same in NRE account."
The issue of relevant papers and documents is something that creeps up regularly in conversations with financial experts. They all insist that having relevant documents is a key factor. "Some investments may require the investor's status card abroad. If they are going for insurance cover, the company may ask for details like work permit in some cases. It can vary from company to company," says Financial Planner
ICICI Bank to come out with IPO in 4 units, insurance stake sale possible
Keen to revive its plans to unlock values in its four units, in line with the revival in the stock markets, ICICI Bank Ltd Friday said it could make initial public offerings in four subsidiaries or sell stake in its insurance ventures, as soon as the government raises sectoral foreign direct investment (FDI) limit.
The bank would take a call on the subject once the laws are amended to hike foreign direct investment in insurance sector to 49% from 26%, ICICI Bank chief executive and managing director Chanda Kochhar told reporters.
Earlier, in 2007, the bank was contemplating to list its three units—ICICI Securities, ICICI Prudential Life Insurance and ICICI Lombard General Insurance.
The bank had also announced its intention to transfer its entire holdings in ICICI Prudential Life Insurance, ICICI Lombard General Insurance Co, Prudential ICICI Asset Management Co and Prudential ICICI Trust to ICICI Holdings. At that moment, Reserve Bank of India had said it preferred to avoid an intermediate holding company structure, under which a bank is owned by a holding company that conducts non-banking businesses, because it would raise problems with regulation.
While pointing out that ICICI Bank's share price had increased three times in the last six months to about Rs750 per share, Kochar clarified that the listing of its unit would help in creating values for the stake holders. At this price, ICICI's market capitalisation is about Rs800 billion compared to market leader SBI's about Rs1.2 trillion.
"Still we are way off from the peak of over Rs1,450," she rued but said that she would strive to do everything to add value in the group for the shareholders.
"In all these four units, ICICI Prudential Life Ltd, ICICI Lombard Ltd, ICICI Securities Ltd and ICICI Home Finance Ltd possibility exists, but nothing that we have finalised currently. Hence, nothing you would see immediately," she said, when asked about the time frame she envisaged in terms of monetising investment in these entities.
She, however, was non-committal on any preferential treatment for its existing shareholders in the IPOs, saying they would anyway share the value unlocked from this exercise.
"As far as subsidiaries are concerned, over a period, we (will) clearly monetise some investment made in our subsidiaries. This means we would either do IPO or watch what happens on the insurance side that is clearance of government's norms to raise FDI cap for selling stake in the venture," Kochhar said.
A bill to increase FDI cap to 49% from 26 is awaiting the nod from the parliament. Currently, ICICI Bank holds 74% stake in both life and non-life venture insurance companies.
"In terms of IPO, we should wait for how the FDI cap issue turns out and then decide what percentage foreign partners will hold and so on. We will take a decision after that," she elaborated, but made it clear that time and market was not opportune for IPO in the life or general insurance ventures.
Pointing out that there was no need to take a decision on IPO in a hurry, she said the bank had enough capital and also the requirement of investible funds in these subsidiaries was very small this year.
"As I said we have enough capital to fund our growth but to fund growth of subsidiaries as well. And I think in the current market, it's not the best value and the right optimum value that they are going to get. I would rather wait for the market to reach a position where we get most optimum value and then look at," she added. – Yogesh Sapkale
source:-ww.suchetadalal.com
The bank would take a call on the subject once the laws are amended to hike foreign direct investment in insurance sector to 49% from 26%, ICICI Bank chief executive and managing director Chanda Kochhar told reporters.
Earlier, in 2007, the bank was contemplating to list its three units—ICICI Securities, ICICI Prudential Life Insurance and ICICI Lombard General Insurance.
The bank had also announced its intention to transfer its entire holdings in ICICI Prudential Life Insurance, ICICI Lombard General Insurance Co, Prudential ICICI Asset Management Co and Prudential ICICI Trust to ICICI Holdings. At that moment, Reserve Bank of India had said it preferred to avoid an intermediate holding company structure, under which a bank is owned by a holding company that conducts non-banking businesses, because it would raise problems with regulation.
While pointing out that ICICI Bank's share price had increased three times in the last six months to about Rs750 per share, Kochar clarified that the listing of its unit would help in creating values for the stake holders. At this price, ICICI's market capitalisation is about Rs800 billion compared to market leader SBI's about Rs1.2 trillion.
"Still we are way off from the peak of over Rs1,450," she rued but said that she would strive to do everything to add value in the group for the shareholders.
"In all these four units, ICICI Prudential Life Ltd, ICICI Lombard Ltd, ICICI Securities Ltd and ICICI Home Finance Ltd possibility exists, but nothing that we have finalised currently. Hence, nothing you would see immediately," she said, when asked about the time frame she envisaged in terms of monetising investment in these entities.
She, however, was non-committal on any preferential treatment for its existing shareholders in the IPOs, saying they would anyway share the value unlocked from this exercise.
"As far as subsidiaries are concerned, over a period, we (will) clearly monetise some investment made in our subsidiaries. This means we would either do IPO or watch what happens on the insurance side that is clearance of government's norms to raise FDI cap for selling stake in the venture," Kochhar said.
A bill to increase FDI cap to 49% from 26 is awaiting the nod from the parliament. Currently, ICICI Bank holds 74% stake in both life and non-life venture insurance companies.
"In terms of IPO, we should wait for how the FDI cap issue turns out and then decide what percentage foreign partners will hold and so on. We will take a decision after that," she elaborated, but made it clear that time and market was not opportune for IPO in the life or general insurance ventures.
Pointing out that there was no need to take a decision on IPO in a hurry, she said the bank had enough capital and also the requirement of investible funds in these subsidiaries was very small this year.
"As I said we have enough capital to fund our growth but to fund growth of subsidiaries as well. And I think in the current market, it's not the best value and the right optimum value that they are going to get. I would rather wait for the market to reach a position where we get most optimum value and then look at," she added. – Yogesh Sapkale
source:-ww.suchetadalal.com
Reliance, HDFC MFs top Crisil ranking
Crisil's composite performance rankings (Crisl-CPR) saw Reliance Mutual Fund emerging as the most successful fund house for the first quarter, with their funds getting the maximum number of ranks (ten) in the top category of CPR 1.
HDFC Mutual Fund and ICICI (ICICIBANK.NS : 745.4 +25.85) Prudential Mutual Fund came up next with six CPR 1 ranks each, closely followed by Birla Sun Life Mutual Fund, DSP BlackRock Mutual Fund and UTI Mutual Fund with five CPR 1 ranks each.
For the quarter, Reliance MF showed a sharp improvement compared to the previous quarter ended March 2009, where the fund house received only four CPR 1 ranks.
According to Krishnan Sitaraman, director, Crisil FundServices, "Reliance Mutual Fund's strong performance was driven by its superior performance on risk adjusted returns as well as on portfolio related parameters in the equity, liquid and ultra short term debt categories."
For ICICI Prudential Mutual Fund, ICICI Prudential Income Plan and ICICI Prudential Short Term Plan came out strong on risk adjusted returns while ICICI Prudential Flexible Income Plan Premium performed well on portfolio based parameters like liquidity and company concentration.
For HDFC Mutual Fund, its HDFC Top 200 Fund came on top based on risk adjusted returns, while the HDFC Cash Management Fund Savings Plan revealed consistent CPR performance and returns. HDFC Cash Management Fund Treasury Advantage Plan was another CPR 1 ranker which did well on risk based parameters like volatility, company concentration and asset size
HDFC Mutual Fund and ICICI (ICICIBANK.NS : 745.4 +25.85) Prudential Mutual Fund came up next with six CPR 1 ranks each, closely followed by Birla Sun Life Mutual Fund, DSP BlackRock Mutual Fund and UTI Mutual Fund with five CPR 1 ranks each.
For the quarter, Reliance MF showed a sharp improvement compared to the previous quarter ended March 2009, where the fund house received only four CPR 1 ranks.
According to Krishnan Sitaraman, director, Crisil FundServices, "Reliance Mutual Fund's strong performance was driven by its superior performance on risk adjusted returns as well as on portfolio related parameters in the equity, liquid and ultra short term debt categories."
For ICICI Prudential Mutual Fund, ICICI Prudential Income Plan and ICICI Prudential Short Term Plan came out strong on risk adjusted returns while ICICI Prudential Flexible Income Plan Premium performed well on portfolio based parameters like liquidity and company concentration.
For HDFC Mutual Fund, its HDFC Top 200 Fund came on top based on risk adjusted returns, while the HDFC Cash Management Fund Savings Plan revealed consistent CPR performance and returns. HDFC Cash Management Fund Treasury Advantage Plan was another CPR 1 ranker which did well on risk based parameters like volatility, company concentration and asset size
Tuesday, August 18, 2009
Draft tax code – how does it affect you?
Last Week, The Finance Minister announced the draft tax code. In his budget announcement on July 6 he had promised to follow up with the draft code. Well its here, and some of the changes, as you might have already seen in the press, are the most substantial that have been suggested in over a generation. So how do these affect you?
Well, the simple answer is that right now these changes don’t affect you. Why?
First of all, this is a draft code and contains proposals. Different interested parties have been invited to give their views, comments and feedback on the draft. You can too offer your feedback.
Secondly, if at all these proposals do pass muster, they will need to be drafted into a Parliamentary bill likely by end 2009 and be taken through legislative procedure. That itself could take time, and the Minister has suggested a start date of 2011 for when the code might actually be enforced, if it is a law by then.
So at the earliest, the impact of this tax code is likely two years away. So what should you be doing right now?
For starters just wait and watch. If you have strong views on some of the radical changes proposed, you should give your feedback here
Talk to your HR and payroll department to understand the impact of some of the proposed changes regarding how perquisites and benefits will be taxed. Ask them to explain to you how your take home pay might change and what they can do to mitigate the impact of any higher tax burden on you.
Sources:-www.reuters.in
Well, the simple answer is that right now these changes don’t affect you. Why?
First of all, this is a draft code and contains proposals. Different interested parties have been invited to give their views, comments and feedback on the draft. You can too offer your feedback.
Secondly, if at all these proposals do pass muster, they will need to be drafted into a Parliamentary bill likely by end 2009 and be taken through legislative procedure. That itself could take time, and the Minister has suggested a start date of 2011 for when the code might actually be enforced, if it is a law by then.
So at the earliest, the impact of this tax code is likely two years away. So what should you be doing right now?
For starters just wait and watch. If you have strong views on some of the radical changes proposed, you should give your feedback here
Talk to your HR and payroll department to understand the impact of some of the proposed changes regarding how perquisites and benefits will be taxed. Ask them to explain to you how your take home pay might change and what they can do to mitigate the impact of any higher tax burden on you.
Sources:-www.reuters.in
Monday, August 17, 2009
L&T Finance NCD Issue open on August 18
NCD issue opens on L&T Finance open on August 18.
L&T Finance Ltd., promoted by engineering and construction giant Larsen & Toubro Ltd. and L&T Capital Holdings Ltd., will open on August 18, its first-ever public offer of 50,00,000 Secured Redeemable Non-Convertible Debentures (NCDs) of Rs.1,000 each. The NCD issue aggregates to Rs5bn, with an option to retain over-subscription up to Rs5bn for issuance of additional NCDs, aggregating up to a total of Rs10bn. The NCD issue with various investment options and yield on Redemption of up to 10.5% (per annum) opens on August 18, and closes on September 4.
TheNCDs offered through the prospectus are proposed to be listed on National Stock Exchange of India (NSE). The face value of Rs1,000 per NCD and tradable lot size of 1 NCD is expected to enhance liquidity and trading in the secondary market.
The NCDs have been rated ‘CARE AA+’ by CARE and ‘LAA+’ by ICRA. Instruments with a rating of ‘CARE AA+’ by CARE are considered to offer high safety for timely servicing of debt obligations. Such instruments carry very low credit risk. The rating of ‘LAA+’ by ICRA indicates high-credit-quality and the rated instrument carries low credit risk.
There are four investment options:
Option 1 (Quarterly interest payment): The face value is Rs. 1,000 and the minimum application is Rs. 10,000 (Retail) and Rs. 1,01,000 (NIIs and QIBs) and in multiples of Rs. 1,000 therein. The redemption date or maturity period is 60 months. from the deemed date of allotment. The coupon rate is 9.51% p.a. and the annualized yield is 9.85%. The interest payment is quarterly and the face value plus any interest that may have accrued is payable on redemption.
Option 1I (Semi-annual interest payment): The face value is Rs. 1,000 and the minimum application is Rs. 10,000 (Retail) and Rs. 1,01,000 (NIIs and QIBs) and in multiples of Rs. 1,000 therein. The redemption date or maturity period is 60 months from the deemed date of allotment. The coupon rate is 9.62% p.a. and the annualized yield is 9.85%. The interest payment is semi-annual and the face value plus any interest that may have accrued is payable on redemption.
Option I1I (Cumulative interest payment): The face value is Rs. 1,000 and the minimum application is Rs. 10,000 (Retail) and Rs. 1,01,000 (NIIs and QIBs) and in multiples of Rs. 1,000 therein. The redemption date or maturity period is 88 months from the deemed date of allotment. The coupon rate is 9.95% compounded annually and the annualized yield is 9.95%. The interest payment is cumulative and Rs. 2,005 per NCD is payable on redemption.
Option IV (Semi-annual interest payment): The face value is Rs. 1,000 and the minimum application is Rs. 10,000 (Retail) and Rs. 1,01,000 (NIIs and QIBs) and in multiples of Rs. 1,000 therein. The redemption date or maturity period is 120 months from the deemed date of allotment. The coupon rate is 10.24% p.a. and the annualized yield is 10.50%. The interest payment is semi-annual and the face value plus any interest that may have accrued is payable on redemption.
Senior citizens, who are 65 or more years of age at any time during the financial year (FY) 2009-10, enjoy the special privilege to submit a self declaration in the prescribed Form 15H for non-deduction of tax at source in accordance with the provisions of section 197A (1C) of the I.T. Act even if the aggregate income credited or paid or likely to be credited or paid does not exceed the maximum amount not chargeable to tax; i.e., Rs. 225,000 for FY 2008-09 (proposed Rs. 240,000 from FY 2009-10).
L&T Finance was promoted by L&T and L&T Capital Holdings. The company was incorporated on November 22, 1994, as a public limited company under the Companies Act, 1956, to provide a range of financial services. L&T Finance began by financing the small and medium enterprises and later synergized with the opportunities provided by L&T ecosystem consisting of its subsidiaries and associates along with its large network of dealers, vendors, suppliers, clients, etc.
L&T Finance has now evolved into a multi-product asset backed finance company with a diversified corporate and retail portfolio. As on March 31, 2009, the company had an asset base of Rs521,864 lakhs. It has consistently made profits with its revenues for the year ending March 31, 2009, standing at Rs83,028 lakhs.
The funds raised through this issue will be used by the company for its various financing activities including lending and investments and for its business operations, including capital expenditure and working capital requirements.
L&T Finance Ltd., promoted by engineering and construction giant Larsen & Toubro Ltd. and L&T Capital Holdings Ltd., will open on August 18, its first-ever public offer of 50,00,000 Secured Redeemable Non-Convertible Debentures (NCDs) of Rs.1,000 each. The NCD issue aggregates to Rs5bn, with an option to retain over-subscription up to Rs5bn for issuance of additional NCDs, aggregating up to a total of Rs10bn. The NCD issue with various investment options and yield on Redemption of up to 10.5% (per annum) opens on August 18, and closes on September 4.
TheNCDs offered through the prospectus are proposed to be listed on National Stock Exchange of India (NSE). The face value of Rs1,000 per NCD and tradable lot size of 1 NCD is expected to enhance liquidity and trading in the secondary market.
The NCDs have been rated ‘CARE AA+’ by CARE and ‘LAA+’ by ICRA. Instruments with a rating of ‘CARE AA+’ by CARE are considered to offer high safety for timely servicing of debt obligations. Such instruments carry very low credit risk. The rating of ‘LAA+’ by ICRA indicates high-credit-quality and the rated instrument carries low credit risk.
There are four investment options:
Option 1 (Quarterly interest payment): The face value is Rs. 1,000 and the minimum application is Rs. 10,000 (Retail) and Rs. 1,01,000 (NIIs and QIBs) and in multiples of Rs. 1,000 therein. The redemption date or maturity period is 60 months. from the deemed date of allotment. The coupon rate is 9.51% p.a. and the annualized yield is 9.85%. The interest payment is quarterly and the face value plus any interest that may have accrued is payable on redemption.
Option 1I (Semi-annual interest payment): The face value is Rs. 1,000 and the minimum application is Rs. 10,000 (Retail) and Rs. 1,01,000 (NIIs and QIBs) and in multiples of Rs. 1,000 therein. The redemption date or maturity period is 60 months from the deemed date of allotment. The coupon rate is 9.62% p.a. and the annualized yield is 9.85%. The interest payment is semi-annual and the face value plus any interest that may have accrued is payable on redemption.
Option I1I (Cumulative interest payment): The face value is Rs. 1,000 and the minimum application is Rs. 10,000 (Retail) and Rs. 1,01,000 (NIIs and QIBs) and in multiples of Rs. 1,000 therein. The redemption date or maturity period is 88 months from the deemed date of allotment. The coupon rate is 9.95% compounded annually and the annualized yield is 9.95%. The interest payment is cumulative and Rs. 2,005 per NCD is payable on redemption.
Option IV (Semi-annual interest payment): The face value is Rs. 1,000 and the minimum application is Rs. 10,000 (Retail) and Rs. 1,01,000 (NIIs and QIBs) and in multiples of Rs. 1,000 therein. The redemption date or maturity period is 120 months from the deemed date of allotment. The coupon rate is 10.24% p.a. and the annualized yield is 10.50%. The interest payment is semi-annual and the face value plus any interest that may have accrued is payable on redemption.
Senior citizens, who are 65 or more years of age at any time during the financial year (FY) 2009-10, enjoy the special privilege to submit a self declaration in the prescribed Form 15H for non-deduction of tax at source in accordance with the provisions of section 197A (1C) of the I.T. Act even if the aggregate income credited or paid or likely to be credited or paid does not exceed the maximum amount not chargeable to tax; i.e., Rs. 225,000 for FY 2008-09 (proposed Rs. 240,000 from FY 2009-10).
L&T Finance was promoted by L&T and L&T Capital Holdings. The company was incorporated on November 22, 1994, as a public limited company under the Companies Act, 1956, to provide a range of financial services. L&T Finance began by financing the small and medium enterprises and later synergized with the opportunities provided by L&T ecosystem consisting of its subsidiaries and associates along with its large network of dealers, vendors, suppliers, clients, etc.
L&T Finance has now evolved into a multi-product asset backed finance company with a diversified corporate and retail portfolio. As on March 31, 2009, the company had an asset base of Rs521,864 lakhs. It has consistently made profits with its revenues for the year ending March 31, 2009, standing at Rs83,028 lakhs.
The funds raised through this issue will be used by the company for its various financing activities including lending and investments and for its business operations, including capital expenditure and working capital requirements.
Hang Seng Benchmark Exchange Traded Scheme Files Offer Document With SEBI
Benchmark Mutual Fund has filed an offer document with Securities and Exchange Board of India (SEBI) to launch Hang Seng Benchmark Exchange Traded Scheme (Hang Seng BeES), an open-ended, exchange listed, index scheme tracking Hang Seng Index. The new fund offer (NFO) price for the scheme is Rs 10 per unit.
The investment objective of the scheme is to provide returns that, before expenses, closely correspond to the total returns of securities as represented by Hang Seng Index of Hang Seng Data Services Limited, by investing in the securities in the same proportion as in the Index.
The scheme offers only growth option.
The scheme will invest 90-100% in securities constituting Hang Seng Index and 0-10% in money market instruments, g-secs, bonds, debentures and cash at call. The exposure to the derivatives would be undertaken, when no equity shares of the constituents of the Index are available or equity shares are insufficient to take exposure in the constituents of the Index and would be restricted to 10% of the net assets of the scheme. The scheme shall also invest in derivatives traded on overseas exchanges only for hedging and portfolio balancing. The scheme shall invest in units of mutual fund scheme / overseas exchange traded funds based on Hang Seng Index upto 10% of the net assets of the Scheme. The margin paid for the derivative instruments will form part of the “Money Market Instruments, G-Secs, Bonds, Debentures, Debt instruments and cash at call” as mentioned in the asset allocation pattern.
The scheme will charge neither entry nor exit load.
Investors can invest under the scheme with a minimum investment amount of Rs. 10,000 (Rupees Ten Thousand only) and in multiples of Re.1 thereafter.
The scheme seeks to collect a minimum target amount of Rs. 1 crore during the NFO period.
The scheme's performance will be benchmarked against Hang Seng Index.
Vishal Jain will be the fund managers for Hang Seng Benchmark Exchange Traded Scheme
The investment objective of the scheme is to provide returns that, before expenses, closely correspond to the total returns of securities as represented by Hang Seng Index of Hang Seng Data Services Limited, by investing in the securities in the same proportion as in the Index.
The scheme offers only growth option.
The scheme will invest 90-100% in securities constituting Hang Seng Index and 0-10% in money market instruments, g-secs, bonds, debentures and cash at call. The exposure to the derivatives would be undertaken, when no equity shares of the constituents of the Index are available or equity shares are insufficient to take exposure in the constituents of the Index and would be restricted to 10% of the net assets of the scheme. The scheme shall also invest in derivatives traded on overseas exchanges only for hedging and portfolio balancing. The scheme shall invest in units of mutual fund scheme / overseas exchange traded funds based on Hang Seng Index upto 10% of the net assets of the Scheme. The margin paid for the derivative instruments will form part of the “Money Market Instruments, G-Secs, Bonds, Debentures, Debt instruments and cash at call” as mentioned in the asset allocation pattern.
The scheme will charge neither entry nor exit load.
Investors can invest under the scheme with a minimum investment amount of Rs. 10,000 (Rupees Ten Thousand only) and in multiples of Re.1 thereafter.
The scheme seeks to collect a minimum target amount of Rs. 1 crore during the NFO period.
The scheme's performance will be benchmarked against Hang Seng Index.
Vishal Jain will be the fund managers for Hang Seng Benchmark Exchange Traded Scheme
Friday, August 14, 2009
JP Morgan AMC Launches Investment Confidence Index
The J P Morgan Asset Managament-Valuenotes Investment Confidence Index, which will be published on a quarterly basis, captures the confidence of retail investors.
JPMorgan Asset Management India Pvt. Ltd. (JPMAMIPL) today announced the launch of the first Investment Confidence Index in India in association with ValueNotes. The J.P. Morgan Asset Management – ValueNotes Investment Confidence Index (ICI), which will be published on a quarterly basis, captures the confidence of retail investors, corporate investors and financial advisors on the Indian economic and investment environment. The findings of the inaugural survey show that the Indian financial community currently holds a cautiously optimistic view towards their local market.
ValueNotes, an independent market research company, was commissioned by J.P. Morgan Asset Management to conduct the survey. The ICI was developed by interviewing a random sample of retail investors (with a wallet size in excess of Rs 200,000), corporate investors and financial advisors. The survey took place in July 2009 in eight cities across India: Delhi/NCR, Mumbai, Kolkata, Chennai, Ahmedabad, Bengaluru, Hyderabad and Pune.
The key objective of the ICI is to quantify confidence in the investment environment among investors and advisors. The survey also attempts to study investment behaviour and sentiment based on key factors such as the improvement in the Indian and global economic environment, general investment atmosphere, expectation of growth in investment portfolios and others. Going forward, the ICI will map and analyse the short term and long term changes in investment behaviour and outlook every quarter, from an investor and distributor standpoint.
The J.P. Morgan Asset Management – Valuenotes Investment Confidence Index score is derived from responses to the following questions posed to all target segments:
1)The likelihood of the Indian economic situation improving from current levels in the next six months.
2)The likelihood of an improvement in the general investment market environment and atmosphere from current levels in the coming six months.
3)The possibility of the global economic environment improving from current levels in the coming six months.
4)The likelihood of the BSE Sensex increasing in the next six months.
5)The prospect of your / your clients’ investment portfolio appreciating in the coming six months.
6)Expected increase or decrease in the amount of investment and/or increase in mutual fund inflows in the coming six months.
Responses to these 6 questions also form the basis for arriving at the Retail Investor Confidence Index, Corporate Confidence Index and the Advisor Confidence Index which are sub-indices of the Investment Confidence Index. At any given point, the indices can move from ‘0’ to ‘200’, with ‘0’ depicting the most negative outlook; ‘200’ depicting full and absolute confidence and ‘100’ showing a neutral position.
Krishnamurthy Vijayan, Executive Chairman of J.P. Morgan Asset Management said, “We are extremely proud to present the J.P. Morgan Asset Management – ValueNotes Investment Confidence Index to the Indian investment community. Investment sentiment has always been a key focus in our business strategy across the globe. We have been monitoring retail investor sentiment closely within the major markets of Europe and Asia for some time by conducting investor confidence surveys since the early 1990s. The inaugural investor confidence index was launched in the UK, followed by Germany, France and other European countries. In Asia, a similar Investor Confidence Index has been launched by the firm in markets like Hong Kong, Japan and Taiwan and has been well received.”
Arun Jethmalani, Managing Director, ValueNotes commented, “The Indian economic prospects drive confidence across the board. A Government with a strong majority was viewed as the most positive economic signal. The Investment Confidence Index at the end of July 2009 stands at 135.9, arrived by taking an average of the Investor Confidence Index (highest at 138.3), Corporate Confidence Index (136.0) and the Advisor Confidence Index (133.5). A deeper study of the indices throws up a recurring theme across all three categories – consistently high levels of optimism on an improvement in the Indian economic situation. This is contrasted by a marked pessimism or significantly lower confidence on a global economic recovery.”
Key findings:
The recent election results have influenced investment confidence favourably, as investors and advisors alike have voted for a government mandated with a strong majority as the single most positive signal for the Indian economy today.
•48% of retail investors expect their income will increase and they will make additional investments over the next six months.
•Retail investors are more confident about making additional investments (136.4) than their advisors (132.1) expect them to.
•Advisors are significantly more optimistic about portfolio appreciation (146.8) than their retail clients (138.2).
•Among cities – Retail and IFA confidence in Chennai is the highest at 160.2 and 147.3 respectively. In contrast, retail confidence in Hyderabad is lowest at 98.1 and IFA confidence is the lowest in Kolkata at 125.7.
•Retail investor confidence declines as age increases, with the age group 22 to 25 most confident (142.7) and investors aged 55 to 60 the least confident (131.3).
•By occupational status, the salaried employees from the private sector have the maximum confidence at 140.8.
•Retail investor responses indicate that investments in stocks and mutual funds increase with an increase in wallet size. While 37% of retail investors with wallet size between Rs 2 and 5 lakhs invested in stocks and mutual funds over the past 12 months, the figure increased to 79% for investors with wallet size Rs 50 lakhs and above.
•Both investors and advisors expect Sensex to be at 16,000 – 17,000 levels by December 2009. 76% of retail and 88% of advisors expect Sensex to rise from current (survey) levels.
•70% of corporates expect improvement in profits and employment opportunities.
•Half the corporates surveyed believe that the Indian rupee is likely to appreciate in the next six months while 76% of respondents expect interest rates to move upwards.
•36% of corporate respondents expect RBI to intervene in the medium term to reduce liquidity in 6-12 months while 44% believe that the NPAs can be expected to increase.
JPMorgan Asset Management India Pvt. Ltd. (JPMAMIPL) today announced the launch of the first Investment Confidence Index in India in association with ValueNotes. The J.P. Morgan Asset Management – ValueNotes Investment Confidence Index (ICI), which will be published on a quarterly basis, captures the confidence of retail investors, corporate investors and financial advisors on the Indian economic and investment environment. The findings of the inaugural survey show that the Indian financial community currently holds a cautiously optimistic view towards their local market.
ValueNotes, an independent market research company, was commissioned by J.P. Morgan Asset Management to conduct the survey. The ICI was developed by interviewing a random sample of retail investors (with a wallet size in excess of Rs 200,000), corporate investors and financial advisors. The survey took place in July 2009 in eight cities across India: Delhi/NCR, Mumbai, Kolkata, Chennai, Ahmedabad, Bengaluru, Hyderabad and Pune.
The key objective of the ICI is to quantify confidence in the investment environment among investors and advisors. The survey also attempts to study investment behaviour and sentiment based on key factors such as the improvement in the Indian and global economic environment, general investment atmosphere, expectation of growth in investment portfolios and others. Going forward, the ICI will map and analyse the short term and long term changes in investment behaviour and outlook every quarter, from an investor and distributor standpoint.
The J.P. Morgan Asset Management – Valuenotes Investment Confidence Index score is derived from responses to the following questions posed to all target segments:
1)The likelihood of the Indian economic situation improving from current levels in the next six months.
2)The likelihood of an improvement in the general investment market environment and atmosphere from current levels in the coming six months.
3)The possibility of the global economic environment improving from current levels in the coming six months.
4)The likelihood of the BSE Sensex increasing in the next six months.
5)The prospect of your / your clients’ investment portfolio appreciating in the coming six months.
6)Expected increase or decrease in the amount of investment and/or increase in mutual fund inflows in the coming six months.
Responses to these 6 questions also form the basis for arriving at the Retail Investor Confidence Index, Corporate Confidence Index and the Advisor Confidence Index which are sub-indices of the Investment Confidence Index. At any given point, the indices can move from ‘0’ to ‘200’, with ‘0’ depicting the most negative outlook; ‘200’ depicting full and absolute confidence and ‘100’ showing a neutral position.
Krishnamurthy Vijayan, Executive Chairman of J.P. Morgan Asset Management said, “We are extremely proud to present the J.P. Morgan Asset Management – ValueNotes Investment Confidence Index to the Indian investment community. Investment sentiment has always been a key focus in our business strategy across the globe. We have been monitoring retail investor sentiment closely within the major markets of Europe and Asia for some time by conducting investor confidence surveys since the early 1990s. The inaugural investor confidence index was launched in the UK, followed by Germany, France and other European countries. In Asia, a similar Investor Confidence Index has been launched by the firm in markets like Hong Kong, Japan and Taiwan and has been well received.”
Arun Jethmalani, Managing Director, ValueNotes commented, “The Indian economic prospects drive confidence across the board. A Government with a strong majority was viewed as the most positive economic signal. The Investment Confidence Index at the end of July 2009 stands at 135.9, arrived by taking an average of the Investor Confidence Index (highest at 138.3), Corporate Confidence Index (136.0) and the Advisor Confidence Index (133.5). A deeper study of the indices throws up a recurring theme across all three categories – consistently high levels of optimism on an improvement in the Indian economic situation. This is contrasted by a marked pessimism or significantly lower confidence on a global economic recovery.”
Key findings:
The recent election results have influenced investment confidence favourably, as investors and advisors alike have voted for a government mandated with a strong majority as the single most positive signal for the Indian economy today.
•48% of retail investors expect their income will increase and they will make additional investments over the next six months.
•Retail investors are more confident about making additional investments (136.4) than their advisors (132.1) expect them to.
•Advisors are significantly more optimistic about portfolio appreciation (146.8) than their retail clients (138.2).
•Among cities – Retail and IFA confidence in Chennai is the highest at 160.2 and 147.3 respectively. In contrast, retail confidence in Hyderabad is lowest at 98.1 and IFA confidence is the lowest in Kolkata at 125.7.
•Retail investor confidence declines as age increases, with the age group 22 to 25 most confident (142.7) and investors aged 55 to 60 the least confident (131.3).
•By occupational status, the salaried employees from the private sector have the maximum confidence at 140.8.
•Retail investor responses indicate that investments in stocks and mutual funds increase with an increase in wallet size. While 37% of retail investors with wallet size between Rs 2 and 5 lakhs invested in stocks and mutual funds over the past 12 months, the figure increased to 79% for investors with wallet size Rs 50 lakhs and above.
•Both investors and advisors expect Sensex to be at 16,000 – 17,000 levels by December 2009. 76% of retail and 88% of advisors expect Sensex to rise from current (survey) levels.
•70% of corporates expect improvement in profits and employment opportunities.
•Half the corporates surveyed believe that the Indian rupee is likely to appreciate in the next six months while 76% of respondents expect interest rates to move upwards.
•36% of corporate respondents expect RBI to intervene in the medium term to reduce liquidity in 6-12 months while 44% believe that the NPAs can be expected to increase.
Bharti topples Reliance Ind as top fund bet
Leading mobile operator Bharti Airtel replaced Reliance Industries as the most preferred stock of domestic fund managers in July, becoming the only company to topple the dominance of the country's most valuable firm since at least December 2006.
"Bharti, as a consumption play, appears to be far more attractive to funds than a commodity play," said Sanjay Sinha, chief executive of DBS Cholamandalam Asset Management.
Bharti has a market value of about $33 billion, making it India's fourth-most valuable firm. Reliance is worth $66 billion, making it the country's largest firm by market cap.
As many as 273 funds collectively held 116 million shares of the cellular operator at July-end and 15 funds introduced the stock in their portfolios during the month, according to data from fund tracker ICRA Online.
By comparison, 270 funds held stakes in Reliance Industries, controlled by billionaire Mukesh Ambani, with at least seven dumping the firm -- which posted a larger-than-expected drop in June quarter net profit and is locked in a legal battle with Reliance Natural Resources, run by estranged younger brother Anil Ambani, over a gas-sales pact.
Bharti unseated Reliance Industries even though its shares have fallen 3.8 percent since it announced in May that it had renewed merger talks with South African peer MTN, nearly a year after the companies' prior talks fell through.
Bharti -- more than 30 percent owned by Southeast Asia's top phone firm Singapore Telecommunications -- has consistently added about 2.8 million subscribers a month, leading growth in an increasingly competitive space where rivals such as Vodafone have expanded networks rapidly.
Firms such as ICICI Prudential Asset Management, IDFC Mutual Fund, ING Investment Management and Principal Pnb Asset Management added Bharti stock to their portfolios, while Canara Robeco and DSP BlackRock dumped Reliance Industries from at least one of their fund's portfolios.
Bharti shares rose 2.4 percent in July, compared with an 8 percent rise in the broader market, while Reliance shares lost 3.3 percent.
"Bharti, as a consumption play, appears to be far more attractive to funds than a commodity play," said Sanjay Sinha, chief executive of DBS Cholamandalam Asset Management.
Bharti has a market value of about $33 billion, making it India's fourth-most valuable firm. Reliance is worth $66 billion, making it the country's largest firm by market cap.
As many as 273 funds collectively held 116 million shares of the cellular operator at July-end and 15 funds introduced the stock in their portfolios during the month, according to data from fund tracker ICRA Online.
By comparison, 270 funds held stakes in Reliance Industries, controlled by billionaire Mukesh Ambani, with at least seven dumping the firm -- which posted a larger-than-expected drop in June quarter net profit and is locked in a legal battle with Reliance Natural Resources, run by estranged younger brother Anil Ambani, over a gas-sales pact.
Bharti unseated Reliance Industries even though its shares have fallen 3.8 percent since it announced in May that it had renewed merger talks with South African peer MTN, nearly a year after the companies' prior talks fell through.
Bharti -- more than 30 percent owned by Southeast Asia's top phone firm Singapore Telecommunications -- has consistently added about 2.8 million subscribers a month, leading growth in an increasingly competitive space where rivals such as Vodafone have expanded networks rapidly.
Firms such as ICICI Prudential Asset Management, IDFC Mutual Fund, ING Investment Management and Principal Pnb Asset Management added Bharti stock to their portfolios, while Canara Robeco and DSP BlackRock dumped Reliance Industries from at least one of their fund's portfolios.
Bharti shares rose 2.4 percent in July, compared with an 8 percent rise in the broader market, while Reliance shares lost 3.3 percent.
Tough times ahead for mutual funds
India's mutual fund industry has been the cynosure of all eyes for the past several weeks. After capital market regulator Securities and Exchange Board of India (Sebi) announced a ban on entry load from August 1 and declared parity among all classes of unit-holders while charging exit load, experts believe mutual fund sales in the Indian market will not be the same as before. Several asset management companies, which run mutual funds, are slowing new fund offers (NFOs) following the ban on entry load.
Before the ban on entry load, investors paid an entry load of 2 to 2.25% at the time of investing which covered the asset management companies' selling and distribution expenses, commission to distributors. Now, an investor will receive units for the entire amount invested in schemes. They can now decide the commission payable to distributors in accordance with the level of service. Earlier, several fund houses paid an upfront commission to distributors to sell their products. Sebi's new proposals allow investors to directly make payments to distributors for their services, instead of mutual fund houses deducting them from the investment amount.
Post October crises many fund houses stayed away from launching the fund. However, Reliance Mutual Fund mobbed up around Rs 2,350 crore in their Reliance Infrastructure fund, which was launched in the month of May, 2009. While ICICI (ICICIBANK.NS : 748.25 -8.95) Prudential target fund collected Rs 800 crore, which was started on April, 2009.
Dhirendra Kumar, chief executive officer of Valueresearch Online, said, "Earlier, fund houses used to pass the entry load to the distributor, but now with ban we will see less number of NFOs. Not that there will be no NFOs, but the number will certainly come down in the next few months which will in turn hit the profitability of fund houses."
Sebi in its release also said, "The upfront commission to distributors shall be paid by the investor to the distributor directly. The distributors shall disclose the commission, trail or otherwise, received by them for different schemes which they are distributing or advising the investors."
Some market players feel that in the beginning the profitability of the fund houses is likely to take a hit, not only due to the ban on entry load, but also due to the increased spend on marketing, distribution and administrative expenses. Sundeep Sikka, CEO of Reliance Mutual Fund, says, "In the initial period, there are likely to be some problems (for the fund houses). But the regulator's move will certainly empower the investors and in the long run we can certainly make good amounts of profit."
Sebi earlier had mandated zero entry load in cases where investors apply directly for the schemes of mutual funds with effect from January 4, 2008, which received moderately good response with about 4%-5% mutual fund applications being made in this mode.
But with ban on entry load, distributions houses are likely to take a hit as some of the players believe that it will be very difficult to convince investor to pay a fee for the service given.
Sabapathy Iyer, CEO of JR Laddha Financial, a Mumbai-based distribution firm, says, "In a bull market there are chances that people will pay us but during a bear run, we fear the advisory fee will take a huge hit. It will take some more time for everything to settle down."
After the ban on entry load, several strategies were taken by different fund houses such as giving upfront commission to the distributors from their own pocket and increasing the exit load from one-three years from the earlier six months to one year. An exit load is a fee collected at the time an investor withdraws money from a fund.
According to one of the senior official from the leading fund house, "The main aim to increase the exit load was only to make up for losses from the ban on entry load. But now with Sebi bring the parity among all the classes of unit holders, we can't do much at that end." Until now, these firms typically charged up to 1% exit load for retail investors for premature redemption and big ticket investors who invested above Rs 5 crore did not have to pay any exit load.
Sebi in its circular dated August 7 said, "It is observed that mutual funds are making distinctions between the unit holders by charging differentials exit load based on amount of subscription. In order to have parity among all the classes of unit holder, it has now been decided that no distinction among unit holders should be made based on amount of subscription while charging the exit loads."
Market participants believe that this move will have more impact on the big ticket investors rather than retail investors. In fact now we might witness a separate new scheme floated for the institutional investors by the fund house.
"If a fund house come out with a scheme stating that, no entry load or exit load will be charged for the investors investing minimum Rs 2 crore or above that, then Sebi will not have any problem with that and fund houses can also save their clients," added Kumar.
He further states that, apart from that, some fund houses will reduce the existing load structure. While some might roll back the current lock-in period of three years. With the steps taken by the market regulator, the fund industry is likely to grow in the long term believes some of the players. Currently asset under management of fund houses stand at Rs 689,946 crore for the month of July, according to the association of mutual funds in India.
Before the ban on entry load, investors paid an entry load of 2 to 2.25% at the time of investing which covered the asset management companies' selling and distribution expenses, commission to distributors. Now, an investor will receive units for the entire amount invested in schemes. They can now decide the commission payable to distributors in accordance with the level of service. Earlier, several fund houses paid an upfront commission to distributors to sell their products. Sebi's new proposals allow investors to directly make payments to distributors for their services, instead of mutual fund houses deducting them from the investment amount.
Post October crises many fund houses stayed away from launching the fund. However, Reliance Mutual Fund mobbed up around Rs 2,350 crore in their Reliance Infrastructure fund, which was launched in the month of May, 2009. While ICICI (ICICIBANK.NS : 748.25 -8.95) Prudential target fund collected Rs 800 crore, which was started on April, 2009.
Dhirendra Kumar, chief executive officer of Valueresearch Online, said, "Earlier, fund houses used to pass the entry load to the distributor, but now with ban we will see less number of NFOs. Not that there will be no NFOs, but the number will certainly come down in the next few months which will in turn hit the profitability of fund houses."
Sebi in its release also said, "The upfront commission to distributors shall be paid by the investor to the distributor directly. The distributors shall disclose the commission, trail or otherwise, received by them for different schemes which they are distributing or advising the investors."
Some market players feel that in the beginning the profitability of the fund houses is likely to take a hit, not only due to the ban on entry load, but also due to the increased spend on marketing, distribution and administrative expenses. Sundeep Sikka, CEO of Reliance Mutual Fund, says, "In the initial period, there are likely to be some problems (for the fund houses). But the regulator's move will certainly empower the investors and in the long run we can certainly make good amounts of profit."
Sebi earlier had mandated zero entry load in cases where investors apply directly for the schemes of mutual funds with effect from January 4, 2008, which received moderately good response with about 4%-5% mutual fund applications being made in this mode.
But with ban on entry load, distributions houses are likely to take a hit as some of the players believe that it will be very difficult to convince investor to pay a fee for the service given.
Sabapathy Iyer, CEO of JR Laddha Financial, a Mumbai-based distribution firm, says, "In a bull market there are chances that people will pay us but during a bear run, we fear the advisory fee will take a huge hit. It will take some more time for everything to settle down."
After the ban on entry load, several strategies were taken by different fund houses such as giving upfront commission to the distributors from their own pocket and increasing the exit load from one-three years from the earlier six months to one year. An exit load is a fee collected at the time an investor withdraws money from a fund.
According to one of the senior official from the leading fund house, "The main aim to increase the exit load was only to make up for losses from the ban on entry load. But now with Sebi bring the parity among all the classes of unit holders, we can't do much at that end." Until now, these firms typically charged up to 1% exit load for retail investors for premature redemption and big ticket investors who invested above Rs 5 crore did not have to pay any exit load.
Sebi in its circular dated August 7 said, "It is observed that mutual funds are making distinctions between the unit holders by charging differentials exit load based on amount of subscription. In order to have parity among all the classes of unit holder, it has now been decided that no distinction among unit holders should be made based on amount of subscription while charging the exit loads."
Market participants believe that this move will have more impact on the big ticket investors rather than retail investors. In fact now we might witness a separate new scheme floated for the institutional investors by the fund house.
"If a fund house come out with a scheme stating that, no entry load or exit load will be charged for the investors investing minimum Rs 2 crore or above that, then Sebi will not have any problem with that and fund houses can also save their clients," added Kumar.
He further states that, apart from that, some fund houses will reduce the existing load structure. While some might roll back the current lock-in period of three years. With the steps taken by the market regulator, the fund industry is likely to grow in the long term believes some of the players. Currently asset under management of fund houses stand at Rs 689,946 crore for the month of July, according to the association of mutual funds in India.
Thursday, August 13, 2009
Online mutual funds to gain from no-entry load norm
The no-entry load regime of Securities and Exchange Board of India (SEBI) has left mutual fund distributors with little choice but to increase their online presence. The immediate gainers from such a move would be the online platforms that provide mutual fund (MF) distribution services.
As Kanwar Vivek, CEO of Birla Sun Life Distribution Company put it, "Online platforms are likely to find favour with people looking at mutual fund route for investment." Such platforms have existed for some time, though their reach has been limited.
"At present, 90 per cent investors use distributor services to invest in mutual funds. Only 10 per cent use online services to invest directly," said Rajesh Krishnamoorthy, MD of iFAST Financial India.
"Servicing clients offline is an expensive proposition. Fund houses and distributors are showing interest in online platforms," said Bikramjit Sen, CEO of TechProcess Solutions, which makes online solutions for MFs.
The Association of Mutual Funds in India (AMFI) is planning a common industry platform, said Jaideep Bhattacharya, Chief Marketing Officer of UTI Mutual Fund and chairman of the AMFI panel on the Common Industry Platform
As Kanwar Vivek, CEO of Birla Sun Life Distribution Company put it, "Online platforms are likely to find favour with people looking at mutual fund route for investment." Such platforms have existed for some time, though their reach has been limited.
"At present, 90 per cent investors use distributor services to invest in mutual funds. Only 10 per cent use online services to invest directly," said Rajesh Krishnamoorthy, MD of iFAST Financial India.
"Servicing clients offline is an expensive proposition. Fund houses and distributors are showing interest in online platforms," said Bikramjit Sen, CEO of TechProcess Solutions, which makes online solutions for MFs.
The Association of Mutual Funds in India (AMFI) is planning a common industry platform, said Jaideep Bhattacharya, Chief Marketing Officer of UTI Mutual Fund and chairman of the AMFI panel on the Common Industry Platform
Wednesday, August 12, 2009
Protect your investment and enter the market on Dip
GAUTAM PRASAD
During the month of March when I recommended my readers to enter the share market and buy large cap Mutual funds under SIP a few old friend of mine called me up and told me that they did not want to invest in such a dull and depressed market. I told advised them that the basic principal of investment is that when market was depressed get in so that you would be the first person to reap the benefit when market turns around. My friends were not convinced. They laughed at me and hung up.
However a few young readers thought what I did say was sensible and they mustered enough courage to enter the market when the Sensex was around 10,500 only. Today with in 120 days market has turn around and those who laughed at me called me up and again asked whether they can enter the market now. The sensex at present is flat at 15,500 . My old friends lost the opportunity but young readers gain handsomely.This has happened always. I replied to them to hold on to their money. There would be correction after some time It would be prudent to enter the market then. They asked me when the correction would start? I replied that it is impossible to pin point a date but it would be soon.
The most important trait is that investor must have patience accompanied by his risk taking capacity. Those investors who entered the market in the Month of March made 30% profit already. My advice to them was if you are chicken hearted then book the profit. If you are bold and brave then hold on. There would be correction soon but that would be followed by a gradual upturn and Sensex may go up to 17000 points by April 2010. At this point of time I would like to remind my readers that by 2010 June the Sensex would see a new high. So on every dip in the share market try to buy some share or the units of large cap mutual funds. Younger persons can buy 60% equity whereas Mid aged person should by 40% if they have risk taking capcity for longer years (atleast for five years)
One thing must be kept in mind that these are only calculated guess work. Nobody in the world , not even Warren Buffet , can predict exactly the behavior of Share market and consequently of the Mutual funds. The advisors and experts can hopefully wish but cannot predict. No science have been perfectly developed so far which can forecast the behavior of the share market. If such predications could have been possible there would not have been great depression in the world. During 2008 world was engulfed with recession despite the fact that this world have got highest number noble laureates in Economics and very large numbers of financial honchos who are rich and proud..
The Reserve Bank Governor conceded recently that Indian economy will revive faster than other countries of the world but it was not possible to predict a date. It is a fact that India would be the growth engine of the world economy sooner or later. So we need to keep patience and move ahead and invest in a determined manner. We need to ensure safety but agree to take a little calculated risk should money be made for future .However safety and prudence should be the watchword for economy would take time to revive.
It is absolutely necessary to switch investment in order to earn better returns. Some Mutual funds provides better return for a year or so and later fails to earn better returns. Once Magnum Global Fund and Prima Fund were darling of investors’ .Today, these are tired funds. Switching of fund provided better earning scope always. The investor must try to protect his investment all the time. Investor must reshuffle his investment from time to time periodically, in case he wants to maximize his return. Investing money is only first step in financial planning. The second step is the most important step and that is protection of invested money.
Investor must redeem his units in mutual fund as soon as he makes 30% return. The Golden rule of investment is that do not invest all your money in Share market or in Mutual fund. Any person desirous of investing money (other than in saving bank account) should invest adhering to the formula of “100 minus his age = % in equity.” So what should be done by small investors? The small investor must buy mutual fund only through Systematic investment plan for long term.. No investment should be done in lump sum. Another important thing before investment is done investors should consult a qualified investment advisor. Thirdly, investor should set an investment goal for himself and put in place an asset allocation strategy depending on the risk bearing capacity. You must invest in equity or equity link instrument if you are young. The older persons should be more cautious while investing in equity. No investment needs to be done in equity after seventy five.
Is this the time for investment? This is a million dollar question. I feel that there could be correction soon and our investors should not miss the opportunity to enter the market then. If some of the investors are seating now they can enter the market but through systematic investment plan in diversified mutual fund in the opportunity and infrastructure sectors. Do consult your advisor but decision needs to be taken by individually always.
During the month of March when I recommended my readers to enter the share market and buy large cap Mutual funds under SIP a few old friend of mine called me up and told me that they did not want to invest in such a dull and depressed market. I told advised them that the basic principal of investment is that when market was depressed get in so that you would be the first person to reap the benefit when market turns around. My friends were not convinced. They laughed at me and hung up.
However a few young readers thought what I did say was sensible and they mustered enough courage to enter the market when the Sensex was around 10,500 only. Today with in 120 days market has turn around and those who laughed at me called me up and again asked whether they can enter the market now. The sensex at present is flat at 15,500 . My old friends lost the opportunity but young readers gain handsomely.This has happened always. I replied to them to hold on to their money. There would be correction after some time It would be prudent to enter the market then. They asked me when the correction would start? I replied that it is impossible to pin point a date but it would be soon.
The most important trait is that investor must have patience accompanied by his risk taking capacity. Those investors who entered the market in the Month of March made 30% profit already. My advice to them was if you are chicken hearted then book the profit. If you are bold and brave then hold on. There would be correction soon but that would be followed by a gradual upturn and Sensex may go up to 17000 points by April 2010. At this point of time I would like to remind my readers that by 2010 June the Sensex would see a new high. So on every dip in the share market try to buy some share or the units of large cap mutual funds. Younger persons can buy 60% equity whereas Mid aged person should by 40% if they have risk taking capcity for longer years (atleast for five years)
One thing must be kept in mind that these are only calculated guess work. Nobody in the world , not even Warren Buffet , can predict exactly the behavior of Share market and consequently of the Mutual funds. The advisors and experts can hopefully wish but cannot predict. No science have been perfectly developed so far which can forecast the behavior of the share market. If such predications could have been possible there would not have been great depression in the world. During 2008 world was engulfed with recession despite the fact that this world have got highest number noble laureates in Economics and very large numbers of financial honchos who are rich and proud..
The Reserve Bank Governor conceded recently that Indian economy will revive faster than other countries of the world but it was not possible to predict a date. It is a fact that India would be the growth engine of the world economy sooner or later. So we need to keep patience and move ahead and invest in a determined manner. We need to ensure safety but agree to take a little calculated risk should money be made for future .However safety and prudence should be the watchword for economy would take time to revive.
It is absolutely necessary to switch investment in order to earn better returns. Some Mutual funds provides better return for a year or so and later fails to earn better returns. Once Magnum Global Fund and Prima Fund were darling of investors’ .Today, these are tired funds. Switching of fund provided better earning scope always. The investor must try to protect his investment all the time. Investor must reshuffle his investment from time to time periodically, in case he wants to maximize his return. Investing money is only first step in financial planning. The second step is the most important step and that is protection of invested money.
Investor must redeem his units in mutual fund as soon as he makes 30% return. The Golden rule of investment is that do not invest all your money in Share market or in Mutual fund. Any person desirous of investing money (other than in saving bank account) should invest adhering to the formula of “100 minus his age = % in equity.” So what should be done by small investors? The small investor must buy mutual fund only through Systematic investment plan for long term.. No investment should be done in lump sum. Another important thing before investment is done investors should consult a qualified investment advisor. Thirdly, investor should set an investment goal for himself and put in place an asset allocation strategy depending on the risk bearing capacity. You must invest in equity or equity link instrument if you are young. The older persons should be more cautious while investing in equity. No investment needs to be done in equity after seventy five.
Is this the time for investment? This is a million dollar question. I feel that there could be correction soon and our investors should not miss the opportunity to enter the market then. If some of the investors are seating now they can enter the market but through systematic investment plan in diversified mutual fund in the opportunity and infrastructure sectors. Do consult your advisor but decision needs to be taken by individually always.
Celent sees mutual fund assets at $500 bln by 2014
MUMBAI (Reuters) - Assets of mutual fund industry could surge to more than $500 billion by 2014 from about $150 billion now, helped by faster growth in profitable retail segment, consultant Celent said in a report on Wednesday.
Retail investors account for about 37 percent of the industry assets, while institutional investors contribute 56 percent. By comparison, retail contribution to fund assets in markets such as China is 70 percent and US is 86 percent.
Focus on institutional investors has led to poor distribution in smaller cities and rural India, but Celent forecasts retail segment to grow 35 percent annually for the next five years, driven by rising income and awareness of mutual fund products.
The institutional segment will grow by a quarter annually, driven mainly by the lack of alternative liquidity management instruments for corporates.
"The institutional segment will be the volume driver for the industry, while the retail segment drives profitability," Sreekrishna Sankar and Arin Ray said in the report.
They said profits as a percentage of assets under management for the industry dropped to 16.5 basis points in 2008 from 23 basis points in 2006 as the growth during the period was mainly led by relatively less profitable fixed income funds.
Even as assets surge, profits will remain at its present level mainly due to increasing cost on development of distribution channels and falling margins due to greater competition among the money managers, Celent said.
India's 36-member mutual funds industry has attracted the likes of Shinsei's, Italian bank UniCredit's Pioneer Global arm, France's Axa and South Korea's Mirae Asset in the last two years.
Allianz, UBS, Sanlam and Credit Agricole are among global firms looking to set up shop.
Retail investors account for about 37 percent of the industry assets, while institutional investors contribute 56 percent. By comparison, retail contribution to fund assets in markets such as China is 70 percent and US is 86 percent.
Focus on institutional investors has led to poor distribution in smaller cities and rural India, but Celent forecasts retail segment to grow 35 percent annually for the next five years, driven by rising income and awareness of mutual fund products.
The institutional segment will grow by a quarter annually, driven mainly by the lack of alternative liquidity management instruments for corporates.
"The institutional segment will be the volume driver for the industry, while the retail segment drives profitability," Sreekrishna Sankar and Arin Ray said in the report.
They said profits as a percentage of assets under management for the industry dropped to 16.5 basis points in 2008 from 23 basis points in 2006 as the growth during the period was mainly led by relatively less profitable fixed income funds.
Even as assets surge, profits will remain at its present level mainly due to increasing cost on development of distribution channels and falling margins due to greater competition among the money managers, Celent said.
India's 36-member mutual funds industry has attracted the likes of Shinsei's, Italian bank UniCredit's Pioneer Global arm, France's Axa and South Korea's Mirae Asset in the last two years.
Allianz, UBS, Sanlam and Credit Agricole are among global firms looking to set up shop.
Tuesday, August 11, 2009
Drought Risk Looms But GDP To Grow At 6% : FM
Mukherjee said the government was ready to manage a drought and a contingency plan was also in place.
More than a quarter of India's districts are facing the threat of drought and the sowing of crops nationally is 20 percent lower than in the previous year, Finance Minister Pranab Mukherjee said on Tuesday.
While many of these districts are not major crop producers, the minister's statement underscored growing government concern that a weak monsoon could reduce output of crops like rice and dampen economic growth already hit by a global recession.
After the driest June in 83 years, the annual rains have been more than a quarter below below normal this season.
The minister said he expected the economy to expand more than 6 percent in 2009/10, in line with the central bank's outlook, although some private economists have warned that the risk is to the downside given the poor monsoon performance.
"Monsoon situation is still erratic," Mukherjee told reporters. "One hundred and sixty one districts have been declared drought prone. So far as sowing is concerned, 20 percent would be down," he said. India has 604 districts. He did not specify the drought-prone districts.
The rain deficit since June 1 worsened to 28 percent at the weekend, raising fears that the season may turn out to be as bad as 2004 when summer crop output fell 12 percent after a drought. GDP fell to 7.5 percent that fiscal year from 8.5 percent in the previous year.
The rains are vital for sugarcane, oilseeds and other crops, although the impact has been more severe for certain crops -- particularly rice -- than for many others. A feared shortfall in the sugar harvest has lifted global prices to near record highs.
Mukherjee said the government was ready to manage a drought and a contingency plan was also in place.
"Of course, always there is a contingency plan," the minister said. "There is no point of pressing the panic button because you will go and start chanting drought, drought, drought and it will have an adverse impact," he said.
Among measures the government could take to mitigate the situation are to raise imports and curtail exports. It has already stepped up efforts to buy more sugar and has banned wheat exports and restricted rice shipments.
"Fortunately, Punjab and Haryana have extensively used the ground water. Bihar and certain other states, there are shortfalls," Mukherjee said.
Mukherjee was also confident that targets for direct tax receipts for the 2009/10 fiscal year would be surpassed.
GROWTH THREATENED
Asia's third largest economy expanded 6.7 percent in the last fiscal year, sharply lower than the 9 percent or more it grew in the previous three years, as the global economic crisis took a toll.
"It's still a budding recovery so the deficient monsoon has overshadowed the recovery process," said Rupa Rege Nitsure, chief economist at Bank of Baroda in Mumbai.
"Growth of around 6 percent is feasible despite the fact that monsoon has so far been deficient, but it being above 6.5 percent or in the range of 6.5 to 7 percent looks impossible," she said.
Last month, farm minister Sharad Pawar told the parliament that four states -- Manipur, Jharkahand, Assam and Uttar Pradesh -- declared drought in certain pockets. On Monday, the eastern state of Bihar also declared drought in 26 of 38 districts.
Other than Uttar Pradesh, which accounts of almost half of the country's sugarcane production, other drought-hit states do not make a significant contribution
www.reuters.in
More than a quarter of India's districts are facing the threat of drought and the sowing of crops nationally is 20 percent lower than in the previous year, Finance Minister Pranab Mukherjee said on Tuesday.
While many of these districts are not major crop producers, the minister's statement underscored growing government concern that a weak monsoon could reduce output of crops like rice and dampen economic growth already hit by a global recession.
After the driest June in 83 years, the annual rains have been more than a quarter below below normal this season.
The minister said he expected the economy to expand more than 6 percent in 2009/10, in line with the central bank's outlook, although some private economists have warned that the risk is to the downside given the poor monsoon performance.
"Monsoon situation is still erratic," Mukherjee told reporters. "One hundred and sixty one districts have been declared drought prone. So far as sowing is concerned, 20 percent would be down," he said. India has 604 districts. He did not specify the drought-prone districts.
The rain deficit since June 1 worsened to 28 percent at the weekend, raising fears that the season may turn out to be as bad as 2004 when summer crop output fell 12 percent after a drought. GDP fell to 7.5 percent that fiscal year from 8.5 percent in the previous year.
The rains are vital for sugarcane, oilseeds and other crops, although the impact has been more severe for certain crops -- particularly rice -- than for many others. A feared shortfall in the sugar harvest has lifted global prices to near record highs.
Mukherjee said the government was ready to manage a drought and a contingency plan was also in place.
"Of course, always there is a contingency plan," the minister said. "There is no point of pressing the panic button because you will go and start chanting drought, drought, drought and it will have an adverse impact," he said.
Among measures the government could take to mitigate the situation are to raise imports and curtail exports. It has already stepped up efforts to buy more sugar and has banned wheat exports and restricted rice shipments.
"Fortunately, Punjab and Haryana have extensively used the ground water. Bihar and certain other states, there are shortfalls," Mukherjee said.
Mukherjee was also confident that targets for direct tax receipts for the 2009/10 fiscal year would be surpassed.
GROWTH THREATENED
Asia's third largest economy expanded 6.7 percent in the last fiscal year, sharply lower than the 9 percent or more it grew in the previous three years, as the global economic crisis took a toll.
"It's still a budding recovery so the deficient monsoon has overshadowed the recovery process," said Rupa Rege Nitsure, chief economist at Bank of Baroda in Mumbai.
"Growth of around 6 percent is feasible despite the fact that monsoon has so far been deficient, but it being above 6.5 percent or in the range of 6.5 to 7 percent looks impossible," she said.
Last month, farm minister Sharad Pawar told the parliament that four states -- Manipur, Jharkahand, Assam and Uttar Pradesh -- declared drought in certain pockets. On Monday, the eastern state of Bihar also declared drought in 26 of 38 districts.
Other than Uttar Pradesh, which accounts of almost half of the country's sugarcane production, other drought-hit states do not make a significant contribution
www.reuters.in
M&M Enters Private Equity ; Forms Mahindra Partners
Anand Mahindra said that Mahindra Partners will look after new business opportunities for the group.
Diversified business group Mahindra & Mahindra (M&M) is the latest business house to form an in-house private equity fund. The company will make proprietary investments from Mahindra Partners.
Anand Mahindra, Vice-Chairman and Managing Director of M&M told ET Now, a domestic business news channel that the new division will be the group’s growth driver in the future. The PE vertical is a ‘fairly significant change’ in the architecture of the group, Mahindra added.
He further stated that unlike conventional private equity, Mahindra Partners will be allowed more elbow room to scale up its start-ups and not pressured to get in and out of a business within a certain period of time.
From now on, Mahindra Partners will look after new business opportunities for the group and will determine whether there is enough potential to enter in or not.
R-ADAG, Aditya Birla group, Nicholas Piramal and Tatas have already tested the private equity waters.
M&M is part of a $ 6.7 billion conglomerate Mahindra Group. It has presence in sectors including automobiles, trade, automotive components, information technology, holidays, financial services, retail and logistics, engineering, steel and infrastructure development.
In the first quarter ended on June 30, 2009, Mahindra & Mahindra Ltd saw a growth of 26.3% in its gross revenue from its corresponding figure in the previous year. The revenue of the company stood at Rs4751.3 crore as against Rs3760.7 crore during the corresponding period last year.
The net profit before tax for the quarter was Rs 538.1 crore as against Rs213.4 crore in Q1 last year – a growth of 152.1%.
Source:-www.vccircle.com
Diversified business group Mahindra & Mahindra (M&M) is the latest business house to form an in-house private equity fund. The company will make proprietary investments from Mahindra Partners.
Anand Mahindra, Vice-Chairman and Managing Director of M&M told ET Now, a domestic business news channel that the new division will be the group’s growth driver in the future. The PE vertical is a ‘fairly significant change’ in the architecture of the group, Mahindra added.
He further stated that unlike conventional private equity, Mahindra Partners will be allowed more elbow room to scale up its start-ups and not pressured to get in and out of a business within a certain period of time.
From now on, Mahindra Partners will look after new business opportunities for the group and will determine whether there is enough potential to enter in or not.
R-ADAG, Aditya Birla group, Nicholas Piramal and Tatas have already tested the private equity waters.
M&M is part of a $ 6.7 billion conglomerate Mahindra Group. It has presence in sectors including automobiles, trade, automotive components, information technology, holidays, financial services, retail and logistics, engineering, steel and infrastructure development.
In the first quarter ended on June 30, 2009, Mahindra & Mahindra Ltd saw a growth of 26.3% in its gross revenue from its corresponding figure in the previous year. The revenue of the company stood at Rs4751.3 crore as against Rs3760.7 crore during the corresponding period last year.
The net profit before tax for the quarter was Rs 538.1 crore as against Rs213.4 crore in Q1 last year – a growth of 152.1%.
Source:-www.vccircle.com
Saturday, August 8, 2009
Market Sentiments Should Not Affect Investor Strategy
2009 has already been a year of two halves - the first quarter marked by pessimism and the subsequent by optimism.
From an investor perspective, neither of these are desirable states to base an investment decision.
It is important to have your long-term goals, ability to take risk and requirements of liquidity at the top of the pecking order at all times. This should lead to a serious thought on the appropriate asset allocation.
If this is the framework guiding your investment and is coupled with profit booking when valuation levels get outlandish, the odds are to move in your favour to meet long-term and short-term financial goals.
We have looked at the patterns of monthly inflows and outflows from different categories of mutual fund products across the industry over a ten-year period. There is high degree of correlation between the inflows and the market trend as well as outflows and the market trend.
The magnitude of the former is significantly higher than the latter in a bullish phase while that is not the case in bearish phases.
This indicates two aspects:
• A sizeable cross-section of investors appear to get interested in equity only in the later stages of a bull market.
• A section of investors appear to take profits as equities move towards peak levels, probably to avoid negative effects of deep declines.
Outflows assume a larger dimension only when a downturn gets more protracted. We hope to publish a detailed analysis in the next month or two as information is now available from the Association of Mutual Funds of India for a ten-year period.
What has been indicated is only from a first-cut analysis of the numbers.
Even this points to optimism and pessimism playing a major role in the manner most investors execute plans to deploy their savings. This is not, in our view, appropriate for investors from a long-term perspective.
(T P Raman is Managing Director, Sundaram BNP Paribas Asset Management. The opinions expressed are his own)
Sources:-Ww.REuters.in
From an investor perspective, neither of these are desirable states to base an investment decision.
It is important to have your long-term goals, ability to take risk and requirements of liquidity at the top of the pecking order at all times. This should lead to a serious thought on the appropriate asset allocation.
If this is the framework guiding your investment and is coupled with profit booking when valuation levels get outlandish, the odds are to move in your favour to meet long-term and short-term financial goals.
We have looked at the patterns of monthly inflows and outflows from different categories of mutual fund products across the industry over a ten-year period. There is high degree of correlation between the inflows and the market trend as well as outflows and the market trend.
The magnitude of the former is significantly higher than the latter in a bullish phase while that is not the case in bearish phases.
This indicates two aspects:
• A sizeable cross-section of investors appear to get interested in equity only in the later stages of a bull market.
• A section of investors appear to take profits as equities move towards peak levels, probably to avoid negative effects of deep declines.
Outflows assume a larger dimension only when a downturn gets more protracted. We hope to publish a detailed analysis in the next month or two as information is now available from the Association of Mutual Funds of India for a ten-year period.
What has been indicated is only from a first-cut analysis of the numbers.
Even this points to optimism and pessimism playing a major role in the manner most investors execute plans to deploy their savings. This is not, in our view, appropriate for investors from a long-term perspective.
(T P Raman is Managing Director, Sundaram BNP Paribas Asset Management. The opinions expressed are his own)
Sources:-Ww.REuters.in
Friday, August 7, 2009
Interview with Fund Managers-ING Investment Management India
INR to strengthen vis- a- vis the USD, says K Ramanathan, VP & Head-Fixed Income, ING Investment Management India. Excerpt:
What is your expectation on Indian Rupee movement over US$ over the next one month, one quarter, and the current fiscal. What factors do you feel will be responsible for such movement.
Going forward, we expect the INR to strengthen vis- a- vis the USD. The reasoning is simple; Increasing risk appetite will lead to increase in capital inflows into emerging markets including India. In addition, the global economic climate is only expected to improve. This would translate into a substantial increase in offshore business and lead to better export performance. This scenario offers corporates more incentive to sell USD INR spot/forward at current exchange rate levels.
Though the USD/INR exchange rates in the near term would fluctuate, a strong change in leadership at the centre is expected to be positive for long term capital inflows including FDI. The Balance of Payments (BOP) position is also estimated to become on account of recent oil discoveries and improved FII inflows.
On the contrary, we also need to factor in a couple of scenarios. Any northward crude oil price movement would mean more demand for the USD from oil companies and a stronger USD. And any slippage in global economic recovery would also enable a rally in favour of the USD.
What is your expectation on Indian Rupee movement over US$ over the next one month, one quarter, and the current fiscal. What factors do you feel will be responsible for such movement.
Going forward, we expect the INR to strengthen vis- a- vis the USD. The reasoning is simple; Increasing risk appetite will lead to increase in capital inflows into emerging markets including India. In addition, the global economic climate is only expected to improve. This would translate into a substantial increase in offshore business and lead to better export performance. This scenario offers corporates more incentive to sell USD INR spot/forward at current exchange rate levels.
Though the USD/INR exchange rates in the near term would fluctuate, a strong change in leadership at the centre is expected to be positive for long term capital inflows including FDI. The Balance of Payments (BOP) position is also estimated to become on account of recent oil discoveries and improved FII inflows.
On the contrary, we also need to factor in a couple of scenarios. Any northward crude oil price movement would mean more demand for the USD from oil companies and a stronger USD. And any slippage in global economic recovery would also enable a rally in favour of the USD.
Mutual Fund Investing - What To Avoid
The equity markets are on the rise. New fund offers are again the rage. And once again, you are receiving solicitations from your so-called financial advisors to invest in mutual funds so that you don’t miss the boat. At times like these it's important to keep some tips in mind.
1. Invest in Funds backed by experienced Asset Management Companies and Asset Managers: If you had the choice, you’d probably go to an experienced doctor rather than someone fresh out of medical school. Same with mutual funds. Invest through an experienced asset management company and a fund manager, both of whom have operating and investment history in India.
2. Cheapest is not the best: This is probably the most common and silly mistake that investors make when investing in mutual funds. For some reason they think that a Rs 10 net asset value (NAV) is better than a Rs 20 existing fund of the same category and type because the former is cheaper.
What matters is the amount of money you are putting in. Rs 1 lakh put into a either fund will grow the same amount assuming that both funds invested in the same underlying securities. So, whether Rs 10 grows to Rs 12, a 20% increase, or Rs 20 goes to Rs 24, it’s the same thing.
3. Don’t invest in a new fund if a previous one of the same category exists: At the time of a new fund’s launch, there is a lot of hype created through advertising aimed at enticing you to invest.
However, there might be a fund of this type already existing, which might be a better option because it has had an operating history for a while, as well as proven risk management experience in that category. You are better off avoiding the new fund at launch and investing in the older fund of the same category.
4. Understand your risk appetite: Not all medicines are suited to all patients. Some patients can handle a higher dosage depending upon their age, their allergies, their size etc.
Similarly, not all mutual funds are meant for everyone. Before you invest blindly, understand the risks involved and evaluate whether you can handle the risks associated with the fund and its underlying exposure.
5. Build a strong foundation: Just like a house needs a strong foundation, so does your mutual fund portfolio. You need to make sure you have a safe and stable exposure to index funds, large cap diversified funds before you start exposing yourself to sector and industry specific funds, which are usually of a higher risk.
6. Be realistic about returns: Trees don’t grow to the sky, and neither do stock market returns. Be realistic about what returns you can expect. Your money is unlikely to double in the next two years through mutual funds, and don’t fall for the salesmanship of your advisor.
7. Give your money the chance to compound: By chopping and changing your portfolio and getting in and out of funds frequently you are disturbing the process of compounding and not giving your money the ability to grow. Be patient, even if in the short term a fund might not be doing well.
1. Invest in Funds backed by experienced Asset Management Companies and Asset Managers: If you had the choice, you’d probably go to an experienced doctor rather than someone fresh out of medical school. Same with mutual funds. Invest through an experienced asset management company and a fund manager, both of whom have operating and investment history in India.
2. Cheapest is not the best: This is probably the most common and silly mistake that investors make when investing in mutual funds. For some reason they think that a Rs 10 net asset value (NAV) is better than a Rs 20 existing fund of the same category and type because the former is cheaper.
What matters is the amount of money you are putting in. Rs 1 lakh put into a either fund will grow the same amount assuming that both funds invested in the same underlying securities. So, whether Rs 10 grows to Rs 12, a 20% increase, or Rs 20 goes to Rs 24, it’s the same thing.
3. Don’t invest in a new fund if a previous one of the same category exists: At the time of a new fund’s launch, there is a lot of hype created through advertising aimed at enticing you to invest.
However, there might be a fund of this type already existing, which might be a better option because it has had an operating history for a while, as well as proven risk management experience in that category. You are better off avoiding the new fund at launch and investing in the older fund of the same category.
4. Understand your risk appetite: Not all medicines are suited to all patients. Some patients can handle a higher dosage depending upon their age, their allergies, their size etc.
Similarly, not all mutual funds are meant for everyone. Before you invest blindly, understand the risks involved and evaluate whether you can handle the risks associated with the fund and its underlying exposure.
5. Build a strong foundation: Just like a house needs a strong foundation, so does your mutual fund portfolio. You need to make sure you have a safe and stable exposure to index funds, large cap diversified funds before you start exposing yourself to sector and industry specific funds, which are usually of a higher risk.
6. Be realistic about returns: Trees don’t grow to the sky, and neither do stock market returns. Be realistic about what returns you can expect. Your money is unlikely to double in the next two years through mutual funds, and don’t fall for the salesmanship of your advisor.
7. Give your money the chance to compound: By chopping and changing your portfolio and getting in and out of funds frequently you are disturbing the process of compounding and not giving your money the ability to grow. Be patient, even if in the short term a fund might not be doing well.
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