The Placebo Effect in Investing | Elliott Wave International
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Friday, July 10, 2009
With no entry load, MF distributors eye HNIs
With market regulator Securities and Exchange Board of India (Sebi) abolishing 'entry load' for investors from August 1 2009, several distributors have slightly altered plans to include high net-worth individuals (HNIs) in their targets rather than retail investors. With the ban on entry load or commission an investor pays while purchasing units of a mutual fund, the earnings of distributors will take a huge hit, and they would want to compensate for this by targeting HNIs.
According to mutual funds players, this will be the distributor strategy for at least the first few months starting August 1.
Distributors feel HNIs will provide appropriate remuneration for their advice, while it will take few months for retail investors to decipher with their distributor a 'non entry load' fee structure for advice rendered.
Kanwar Vivek, CEO of Birla Sun Life wealth management says, "The move to end the entry load structure is one of the ground-breaking events for the Indian mutual fund (MF) industry. We are planning several strategies that can attract investors after August 1. However, for the first few months, we will be targeting HNIs along with retail investors. We are also preparing what commission we can charge from retail investors, as this step has been taken to help retail investors investing in MF."
Last month, Sebi had banned entry load from August 1 in all the MF schemes. A senior official from one of the leading asset management companies (AMC) said, "This move will have a huge impact on the distributors and independent financial advisor (IFAs). However, we might not see any major New Fund Offer (NFO) in the coming months, due to this ban on entry load. It will take at least a year for things to settle, but in the long term, this can be very helpful for retail investors."
In the month of June, MF assets under management (AUM) stood at Rs 6,70,993.13 crore, a rise of 4.98% or Rs 31,863.31 crore compared to Rs 6,39,129.81 crore in May. Sebi has directed AMCs to carry a suitable 'disclosure' on application forms that upfront commission will be paid by investors directly to the distributors based on their assessment of various factors including the service rendered by the distributor.
On 'exit load' paid by investors, Sebi said that a maximum of 1% will be maintained in a separate account by mutual fund companies to pay commission to the distributors. It directed distributors to disclose all commissions payable to them for different competing schemes of various mutual funds.
According to mutual funds players, this will be the distributor strategy for at least the first few months starting August 1.
Distributors feel HNIs will provide appropriate remuneration for their advice, while it will take few months for retail investors to decipher with their distributor a 'non entry load' fee structure for advice rendered.
Kanwar Vivek, CEO of Birla Sun Life wealth management says, "The move to end the entry load structure is one of the ground-breaking events for the Indian mutual fund (MF) industry. We are planning several strategies that can attract investors after August 1. However, for the first few months, we will be targeting HNIs along with retail investors. We are also preparing what commission we can charge from retail investors, as this step has been taken to help retail investors investing in MF."
Last month, Sebi had banned entry load from August 1 in all the MF schemes. A senior official from one of the leading asset management companies (AMC) said, "This move will have a huge impact on the distributors and independent financial advisor (IFAs). However, we might not see any major New Fund Offer (NFO) in the coming months, due to this ban on entry load. It will take at least a year for things to settle, but in the long term, this can be very helpful for retail investors."
In the month of June, MF assets under management (AUM) stood at Rs 6,70,993.13 crore, a rise of 4.98% or Rs 31,863.31 crore compared to Rs 6,39,129.81 crore in May. Sebi has directed AMCs to carry a suitable 'disclosure' on application forms that upfront commission will be paid by investors directly to the distributors based on their assessment of various factors including the service rendered by the distributor.
On 'exit load' paid by investors, Sebi said that a maximum of 1% will be maintained in a separate account by mutual fund companies to pay commission to the distributors. It directed distributors to disclose all commissions payable to them for different competing schemes of various mutual funds.
Saturday, July 4, 2009
India Funds dominate world top-100 stock funds in Q2
MUMBAI (Reuters) - Fifty one India-focused funds were among the world's top 100 performing stock funds in the quarter to June as domestic shares leapt by nearly half, recording their biggest surge in 17 years, data from fund tracker Lipper showed.
They are led by those investing in shares of infrastructure firms, a favoured theme in Asia's third largest economy after the Congress-lead coalition won a strong mandate in April-May polls raising hopes for higher spending on roads, ports and bridges.
The Lipper's list of 29,942 world stock funds with a track record of at least a quarter showed India funds recording an average 50.45 percent jump in their net values in three months to June as compared to just over 18 percent gain for the fund group.
India funds were led by Naya Bharat Property Company fund, domiciled in the Isle of Man, which gave a return of nearly 135 percent, followed by JM Core 11 Fund, a concentrated 11-stock portfolio, which rose more than 100 percent.
"Stocks in India were spurred on by a steady diet of positive macro data and the strong victory of the incumbent Congress party in national elections mid-May" said Rajeev Baddepudi, a senior research analyst for ASEAN at Lipper.
Indian shares surged 49.3 percent during April-June, the fastest in Asia after Vietnam, on signs of economic recovery and hopes for market-friendly policies by the re-elected Congress-lead government.
The gain was the biggest rise for the benchmark in any quarter since it soared 124.5 percent in January-March in 1992 when Manmohan Singh, the then finance minister, kicked off reforms to open up the economy.
INFRASTRUCTURE
Hopes are high that Manmohan Singh, currently in his second-term as prime minister, would further open up the economy to foreign investment and remove policy bottlenecks.
This has led to sharper surge in shares of infrastructure firms, with capital goods stocks rising nearly twice as fast as the bechmark index in June quarter, lifting portfolio gains for funds primarily investing in the sector.
For instance, all top five Indian funds part of the Lipper's top-100 list are infrastructure or property funds.
Fund houses JM Financial Asset Management and Sundaram BNP Paribas Mutual Fund have four funds each in the list, while Benchmark, India's passive fund manager, DBS Cholamandalam, SBI (SBIN.NS : 1809.65 +50.2) Funds Management and Taurus Mutual Fund had three schemes each.
(For more news on Reuters Money click http://in.reuters.com/money)
They are led by those investing in shares of infrastructure firms, a favoured theme in Asia's third largest economy after the Congress-lead coalition won a strong mandate in April-May polls raising hopes for higher spending on roads, ports and bridges.
The Lipper's list of 29,942 world stock funds with a track record of at least a quarter showed India funds recording an average 50.45 percent jump in their net values in three months to June as compared to just over 18 percent gain for the fund group.
India funds were led by Naya Bharat Property Company fund, domiciled in the Isle of Man, which gave a return of nearly 135 percent, followed by JM Core 11 Fund, a concentrated 11-stock portfolio, which rose more than 100 percent.
"Stocks in India were spurred on by a steady diet of positive macro data and the strong victory of the incumbent Congress party in national elections mid-May" said Rajeev Baddepudi, a senior research analyst for ASEAN at Lipper.
Indian shares surged 49.3 percent during April-June, the fastest in Asia after Vietnam, on signs of economic recovery and hopes for market-friendly policies by the re-elected Congress-lead government.
The gain was the biggest rise for the benchmark in any quarter since it soared 124.5 percent in January-March in 1992 when Manmohan Singh, the then finance minister, kicked off reforms to open up the economy.
INFRASTRUCTURE
Hopes are high that Manmohan Singh, currently in his second-term as prime minister, would further open up the economy to foreign investment and remove policy bottlenecks.
This has led to sharper surge in shares of infrastructure firms, with capital goods stocks rising nearly twice as fast as the bechmark index in June quarter, lifting portfolio gains for funds primarily investing in the sector.
For instance, all top five Indian funds part of the Lipper's top-100 list are infrastructure or property funds.
Fund houses JM Financial Asset Management and Sundaram BNP Paribas Mutual Fund have four funds each in the list, while Benchmark, India's passive fund manager, DBS Cholamandalam, SBI (SBIN.NS : 1809.65 +50.2) Funds Management and Taurus Mutual Fund had three schemes each.
(For more news on Reuters Money click http://in.reuters.com/money)
Portfolio Management Under Sebi Scanner
The Securities and Exchange Board of India (Sebi), after tightening the norms for the mutual fund industry, is now looking at portfolio management services. The market regulator will soon be coming out stricter and comprehensive guidelines for PMS.
According to a senior banker with a leading foreign bank that offers wealth management and portfolio management services, Sebi has been in dialogue with several service providers to get their views on making the services more transparent and investor-friendly. "We have been deliberating with the regulator and it should be coming out with guidelines in the coming few weeks," the executive said on the condition of anonymity.
Earlier, a senior Sebi official has mentioned the watchdog is indeed looking at all areas for making things transparent and investor-friendly. According to industry sources, there are several aspects that the regulator is looking at and one important aspect is the PMS fees.
There are no restrictions now on fees charged by service providers. However, since the market is competitive, rates remain reasonable. "But there are instances of fee structures changing with the market trend. During the boom of 2007-08, some charged atrocious fees, and there were also some handsome profit sharing agreements," says a Mumbai-based broker. Hence, the regulator is expected to cap the fees charged by portfolio managers.
This, however, might not go down well with the 229-odd portfolio managers registered with Sebi. But rthe regulator isn't much worried about that. "In 1992, when we had asked brokers to disclose the fees they charge to clients, there was an uproar, and trading closed for four days, however, they had to comply and things are much better now," said the Sebi official.
Generally, portfolio managers have three schemes, one where a flat fee of around 2% of the portfolio amount is charged, and the service provided includes investment advice at regular intervals and managing the portfolio. The second scheme includes a fixed fee and a profit-sharing scheme, the latter usually kicks in when a return over the government bond (risk-free return) rate is crossed. Then, there is the totally variable scheme where the manager charges a total variable fee structure based on profit sharing.
The first two are said to be the more popular, and the third variety usually gains ground when the market is booming and is offered to high-ticket clients.
The norms are also expected to cover the 'wealth management' area. There are no specific norms now for this burgeoning industry that has several service providers like banks, brokers, financial service firms and individuals. Sebi has applied to the finance ministry to extend the definition of the term 'securities' in the Sebi Act to several instruments, especially alternative investments like those in art and several structured products that usually beat the definition and thereby the Sebi purview. Wealth managers are known to offer such products to their clients and there is usually an issue in the valuation of these instruments, noted a banker. They don't want a Madoff- like situation happening in India where exotic products are peddled to wealthy clients under Ponzi schemes, he adds.
The market size of PMS is estimated to around Rs 1 lakh crore. Sebi has been tightening the PMS norms over the years. In May 2008, Sebi had increased the networth requirement for portfolio managers from Rs 50 lakh to Rs 2 crore and also asked the portfolio managers not to pool accounts of clients. Pooling of clients would mean portfolio managers becoming quasi-mutual funds, not giving customised services.
On June 23, 2009, Sebi clarified that there should be a clear segregation of each client's fund through proper and clear maintenance of back-office records. It also mentioned that portfolio managers were not allowed to use funds of one client for another client. Portfolio managers will also have to maintain an accounting system containing separate client-wise data for their funds and provide statement to their clients for such accounts at least every month. Importantly, managers will have to reconcile client-wise funds with the funds in their bank account every day.
Transparency drive
and#149;Sebi likely to set limits on fee charged by PMS providers
and#149;Guidelines may cover 'wealth managers' as well
and#149;Alternate assets like art, structured products under lens
and#149;Emphasis on reporting asset position and charges likely
and#149;Has already ordered separate client accounts and statement
According to a senior banker with a leading foreign bank that offers wealth management and portfolio management services, Sebi has been in dialogue with several service providers to get their views on making the services more transparent and investor-friendly. "We have been deliberating with the regulator and it should be coming out with guidelines in the coming few weeks," the executive said on the condition of anonymity.
Earlier, a senior Sebi official has mentioned the watchdog is indeed looking at all areas for making things transparent and investor-friendly. According to industry sources, there are several aspects that the regulator is looking at and one important aspect is the PMS fees.
There are no restrictions now on fees charged by service providers. However, since the market is competitive, rates remain reasonable. "But there are instances of fee structures changing with the market trend. During the boom of 2007-08, some charged atrocious fees, and there were also some handsome profit sharing agreements," says a Mumbai-based broker. Hence, the regulator is expected to cap the fees charged by portfolio managers.
This, however, might not go down well with the 229-odd portfolio managers registered with Sebi. But rthe regulator isn't much worried about that. "In 1992, when we had asked brokers to disclose the fees they charge to clients, there was an uproar, and trading closed for four days, however, they had to comply and things are much better now," said the Sebi official.
Generally, portfolio managers have three schemes, one where a flat fee of around 2% of the portfolio amount is charged, and the service provided includes investment advice at regular intervals and managing the portfolio. The second scheme includes a fixed fee and a profit-sharing scheme, the latter usually kicks in when a return over the government bond (risk-free return) rate is crossed. Then, there is the totally variable scheme where the manager charges a total variable fee structure based on profit sharing.
The first two are said to be the more popular, and the third variety usually gains ground when the market is booming and is offered to high-ticket clients.
The norms are also expected to cover the 'wealth management' area. There are no specific norms now for this burgeoning industry that has several service providers like banks, brokers, financial service firms and individuals. Sebi has applied to the finance ministry to extend the definition of the term 'securities' in the Sebi Act to several instruments, especially alternative investments like those in art and several structured products that usually beat the definition and thereby the Sebi purview. Wealth managers are known to offer such products to their clients and there is usually an issue in the valuation of these instruments, noted a banker. They don't want a Madoff- like situation happening in India where exotic products are peddled to wealthy clients under Ponzi schemes, he adds.
The market size of PMS is estimated to around Rs 1 lakh crore. Sebi has been tightening the PMS norms over the years. In May 2008, Sebi had increased the networth requirement for portfolio managers from Rs 50 lakh to Rs 2 crore and also asked the portfolio managers not to pool accounts of clients. Pooling of clients would mean portfolio managers becoming quasi-mutual funds, not giving customised services.
On June 23, 2009, Sebi clarified that there should be a clear segregation of each client's fund through proper and clear maintenance of back-office records. It also mentioned that portfolio managers were not allowed to use funds of one client for another client. Portfolio managers will also have to maintain an accounting system containing separate client-wise data for their funds and provide statement to their clients for such accounts at least every month. Importantly, managers will have to reconcile client-wise funds with the funds in their bank account every day.
Transparency drive
and#149;Sebi likely to set limits on fee charged by PMS providers
and#149;Guidelines may cover 'wealth managers' as well
and#149;Alternate assets like art, structured products under lens
and#149;Emphasis on reporting asset position and charges likely
and#149;Has already ordered separate client accounts and statement
Wednesday, July 1, 2009
No entry fee on Indian mutual funds from Aug 1-SEBI
Indian mutual funds can not levy any entry charge for investments from August 1, the Securities and Exchange Board of India said in a note late on Tuesday.
Funds could, however, levy an exit fee of up to 1 percent of the redemption amount to pay commissions to distributors and for marketing and selling expenses, it added.
The regulator said investors would pay any upfront charge to distributors directly based on his service. It also directed distributors to disclose commissions payable to them by fund houses.
Funds could, however, levy an exit fee of up to 1 percent of the redemption amount to pay commissions to distributors and for marketing and selling expenses, it added.
The regulator said investors would pay any upfront charge to distributors directly based on his service. It also directed distributors to disclose commissions payable to them by fund houses.
Reliance Cap raises 23.5 bln rupees in infra fund
mutual fund manager Reliance Capital Asset Management has raised 23.5 billion rupees in a new equity fund, a top executive said, the highest collection by a stock fund, since at least March 2008.
Reliance Infrastructure Fund, which closed for initial subscription last month, tapped 436,000 investors from about 1,000 cities, chief executive Sundeep Sikka told Reuters.
The mop-up, more than the collective assets gathered by all the stock funds launched in the last 12 months, also makes the product the third biggest infrastrastructure mutual fund in India.
Infrastructure as an investment theme has gained favour in India following a strong mandate to a Congress-lead government in April-May polls.
Reliance Infrastructure Fund, which closed for initial subscription last month, tapped 436,000 investors from about 1,000 cities, chief executive Sundeep Sikka told Reuters.
The mop-up, more than the collective assets gathered by all the stock funds launched in the last 12 months, also makes the product the third biggest infrastrastructure mutual fund in India.
Infrastructure as an investment theme has gained favour in India following a strong mandate to a Congress-lead government in April-May polls.
Thursday, June 4, 2009
Sebi's Move On Reliance Infra. NFO Ad.
Thu, Jun 4 10:38 AM
Thu, Jun 4 10:38 AM
India's capital markets regulator has directed Reliance Capital Asset Managemnt to withdraw an advertisement for its newly-launched fund as it spends less time on risk warnings to investors than required.
In a notice late February last year, the Securities and Exchange Board of India (SEBI) had asked fund firms to more than double the time they spent on risk warnings to investors in their radio and television commercials to five seconds.
However, the disc submitted by the firm shows the display and voiceover time of the warning in the advertisement for Reliance Infrastructure Fund is less than five seconds, the regulator said in a notice posted on its website late on Wednesday.
SEBI also said the firm took more time than the required seven days of opening of issue to submit the advertisement and has served a show cause notice to the firm.
Officials from Reliance Capital Asset Management could not be reached for comment immediately.
(For more news on Reuters Money click http://in.reuters.com/money)
Thu, Jun 4 10:38 AM
India's capital markets regulator has directed Reliance Capital Asset Managemnt to withdraw an advertisement for its newly-launched fund as it spends less time on risk warnings to investors than required.
In a notice late February last year, the Securities and Exchange Board of India (SEBI) had asked fund firms to more than double the time they spent on risk warnings to investors in their radio and television commercials to five seconds.
However, the disc submitted by the firm shows the display and voiceover time of the warning in the advertisement for Reliance Infrastructure Fund is less than five seconds, the regulator said in a notice posted on its website late on Wednesday.
SEBI also said the firm took more time than the required seven days of opening of issue to submit the advertisement and has served a show cause notice to the firm.
Officials from Reliance Capital Asset Management could not be reached for comment immediately.
(For more news on Reuters Money click http://in.reuters.com/money)
Tuesday, May 19, 2009
Stocks extend election rally; bond yields rise
MUMBAI (Reuters) - Stocks extended a stunning post-election rally to 20 percent in two days on Tuesday on expectations the ruling coalition's decisive victory will lead to more privatisations, financial sector reforms and increased infrastructure spending.
The rupee also extended gains to a five-month peak, driven by hopes foreign investors would keep buying stocks, but bonds backtracked as worries about how much money the new government would need checked optimism.
In choppy trade after Monday's 17.3 percent surge, the benchmark stock index opened at an 8-month high and then fell back, only to recover again to be up 2.1 percent at noon (0630 GMT).
Top infrastructure play L&T (LT.NS : 1343.15 +111.5) was the major gainer, adding another 14.5 percent to Monday's 25 percent jump, as investors thought it would benefit from a government drive to update the country's creaking infrastructure.
State-run firms such as State Bank of India (SBIN.NS : 1753.95 +177.4) and energy explorer ONGC (ONGC.NS : 995.7 +48.5) also extended Monday's sharp gains as traders bet that the Congress party-led coalition may sell stakes in the firms to help fund spending plans and a large budget deficit.
"From the equity perspective, near-term valuations have become rich and performance relative to other major Asian markets is now decidedly superior," Nomura analysts said in a note.
While the MSCI index of Asian markets excluding Japan has risen about 7.5 percent this month, the Indian market had soared by 25 percent through Monday in the same period.
The spurt brought gains for India's stock market to around 53 percent so far this year, bringing the main index back to levels last seen in early September 2008 before the collapse of Lehman Brotehrs send global markets into a tailspin.
Overall volume in Tuesday morning trade was heavy at about 400 million, close to the daily average so far this year.
Nomura advised caution after the market's jump, saying India's already large budget deficit and the global slowdown meant policy was unlikely to produce a sudden acceleration in growth.
REFORM WISH LIST
The Congress party was expected to appoint reformers to key positions, and analysts expect it to push ahead on stalled reforms that could boost flagging growth in Asia's third-biggest economy.
UBS expects foreign investment limits in the insurance and multi-brand retail sector to be raised, and Citigroup was looking for higher foreign direct investment limits in real estate and a speeding up of infrastructure project approvals.
Citigroup also expected stake sales of state assets in the banking and energy sector, along with some regulation changes.
Not all shares were up on Tuesday, with exporters feeling the pinch of the rupee's sharp gains. The currency has risen 5 percent since last Thursday and 10 percent from a record low hit in early March.
Leading tech sector firms Infosys (INFOSYS.BO : 1563.75 -206.1), Wipro (WIPRO.NS : 385.35 -31.6) and Tata Consultancy (TCS.NS : 669.75 -74.1), who earn most of their income overseas, led losses on worries the rupee's rise would hit their earnings.
YIELDS RISE
Bonds lost Monday's momentum after the central bank increased the size of two scheduled auctions this month to 150 billion ($3.2 billion) rupees each from 120 billion rupees.
Planned record government borrowing unsettled debt markets in February and March, and they remain vulnerable to any suggestion of increased bond issuances to fund the fiscal deficit.
The benchmark 10-year bond yield jumped 12 basis points to 6.43 percent in opening trades, but later trimmed the rise to eight basis points.
"We may briefly test 6.50 percent today, but unless supply fears materialise into fiscal profligacy, I don't see yields moving much higher, but the budget will be the decider," Churchil Bhatt, a bond dealer at ING Vysya Bank.
Five-year swap rates rose to 5.66/67 percent from Monday's close of 5.48/5.53.
The partially convertible rupee rose to five-month high of 47.27 as it extended Monday's 3.2 percent jump, but pared gains as importers bought dollars and traders worried the Reserve Bank may step in to check gains.
The rupee has ridden a revival in foreign flows into the stock market. Foreign funds have been net buyers of more than $4 billion of shares since mid-March.
Nomura sees the rupee strengthening to 46.5 by end 2009.
Three-month annualised dollar/rupee forwards eased to 3.30 percent from 3.34 percent at its previous close on hopes of soft interest rates. One-month rupee volatilities was at 14 percent, unchanged from last week.
The rupee also extended gains to a five-month peak, driven by hopes foreign investors would keep buying stocks, but bonds backtracked as worries about how much money the new government would need checked optimism.
In choppy trade after Monday's 17.3 percent surge, the benchmark stock index opened at an 8-month high and then fell back, only to recover again to be up 2.1 percent at noon (0630 GMT).
Top infrastructure play L&T (LT.NS : 1343.15 +111.5) was the major gainer, adding another 14.5 percent to Monday's 25 percent jump, as investors thought it would benefit from a government drive to update the country's creaking infrastructure.
State-run firms such as State Bank of India (SBIN.NS : 1753.95 +177.4) and energy explorer ONGC (ONGC.NS : 995.7 +48.5) also extended Monday's sharp gains as traders bet that the Congress party-led coalition may sell stakes in the firms to help fund spending plans and a large budget deficit.
"From the equity perspective, near-term valuations have become rich and performance relative to other major Asian markets is now decidedly superior," Nomura analysts said in a note.
While the MSCI index of Asian markets excluding Japan has risen about 7.5 percent this month, the Indian market had soared by 25 percent through Monday in the same period.
The spurt brought gains for India's stock market to around 53 percent so far this year, bringing the main index back to levels last seen in early September 2008 before the collapse of Lehman Brotehrs send global markets into a tailspin.
Overall volume in Tuesday morning trade was heavy at about 400 million, close to the daily average so far this year.
Nomura advised caution after the market's jump, saying India's already large budget deficit and the global slowdown meant policy was unlikely to produce a sudden acceleration in growth.
REFORM WISH LIST
The Congress party was expected to appoint reformers to key positions, and analysts expect it to push ahead on stalled reforms that could boost flagging growth in Asia's third-biggest economy.
UBS expects foreign investment limits in the insurance and multi-brand retail sector to be raised, and Citigroup was looking for higher foreign direct investment limits in real estate and a speeding up of infrastructure project approvals.
Citigroup also expected stake sales of state assets in the banking and energy sector, along with some regulation changes.
Not all shares were up on Tuesday, with exporters feeling the pinch of the rupee's sharp gains. The currency has risen 5 percent since last Thursday and 10 percent from a record low hit in early March.
Leading tech sector firms Infosys (INFOSYS.BO : 1563.75 -206.1), Wipro (WIPRO.NS : 385.35 -31.6) and Tata Consultancy (TCS.NS : 669.75 -74.1), who earn most of their income overseas, led losses on worries the rupee's rise would hit their earnings.
YIELDS RISE
Bonds lost Monday's momentum after the central bank increased the size of two scheduled auctions this month to 150 billion ($3.2 billion) rupees each from 120 billion rupees.
Planned record government borrowing unsettled debt markets in February and March, and they remain vulnerable to any suggestion of increased bond issuances to fund the fiscal deficit.
The benchmark 10-year bond yield jumped 12 basis points to 6.43 percent in opening trades, but later trimmed the rise to eight basis points.
"We may briefly test 6.50 percent today, but unless supply fears materialise into fiscal profligacy, I don't see yields moving much higher, but the budget will be the decider," Churchil Bhatt, a bond dealer at ING Vysya Bank.
Five-year swap rates rose to 5.66/67 percent from Monday's close of 5.48/5.53.
The partially convertible rupee rose to five-month high of 47.27 as it extended Monday's 3.2 percent jump, but pared gains as importers bought dollars and traders worried the Reserve Bank may step in to check gains.
The rupee has ridden a revival in foreign flows into the stock market. Foreign funds have been net buyers of more than $4 billion of shares since mid-March.
Nomura sees the rupee strengthening to 46.5 by end 2009.
Three-month annualised dollar/rupee forwards eased to 3.30 percent from 3.34 percent at its previous close on hopes of soft interest rates. One-month rupee volatilities was at 14 percent, unchanged from last week.
FUND VIEW - Mutual fund managers term stx surge irrational
MUMBAI (Reuters) - A surge in Indian shares, that halted trade on Monday, has stunned fund managers who said the rise is unjustified and expecting immediate big bang reforms and a revival in the economy would be a mistake.
Following are the reactions from fund managers to a more than 17 percent spike in Indian shares on Monday:
SAMEER NARAYAN, HEAD-EQUITY, FORTIS INVESTMENT MANAGEMENT:
"It is very difficult to say if it's justified. Yes, there is definitely some sort of stability. The outlook has improved at least on the stability aspect... but there are a lot things that need to get fixed in terms of the entire reform agenda.
"Right now, it is only expectations and hope. May be we might be pricing in far to early.
"Now valuations are almost 16 times of consensus earnings and no longer cheap.
TOP BETS: Financial and energy
SANJAY SINHA, CEO, DBS CHOLAMANDALAM ASSET MANAGEMENT:
"A rally like this seems to be suggesting that our fundamentals have improved. (It) is discounting what would be a situation 12-18 months down the line.
"In the private sector it will lead to much better investment climate. In the capital market it will be much more enthusiastic participation by all sections and on the global level the visibility of India as an investment destination will become even more bright and that should attract capital at affordable rate.
"If you are coming into the market please do not come with the perspective of a three-month, six-month."
PANKAJ TIBREWAL, FUND MANAGER, PRINCIPAL PNB MUTUAL FUND:
"Actually, fundamentally speaking, things will take its own sweet time. It's not that the government today is coming to power and tomorrow they will do some big bang reforms.
"Though markets run ahead in anticipation, after today's move, the market will start asking: what next?
"Probably a couple of weeks later you will start looking at what's happening globally.
"Flow will continue may be positively to India but you need to take it with a pinch of salt. Are we running too fast, too soon? I think that's the question you need to ask to yourself."
TOP BETS: Infrastructure, FDI related sectors such as aviation, telecom, insurance.
MANISH BHANDARI, FUND MANAGER, ING INVESTMENT MANAGEMENT:
"What you have to do is to look at all the bills that the Congress wanted to introduce, were debated and (the) Left had shut doors on. And insurance was one. Those are the things we will be watching carefully.
"I am worried about people's expectations, which are very high. We are slowing down. Don't see one month's frame."
TOP BETS: Capital market linked sectors, infrastructure
ANAND SHAH, HEAD-EQUITY, CANARA ROBECO ASSET MANAGEMENT:
"This is a bigger verdict than 1991. We haven't seen such a verdict and with Manmohan Singh at the helm, this much of a reaction is fair.
"Indian consumers continue to remain my bet. With a stable government consumption is only going to pick up.
"I am wary of IT and metals because the rupee has appreciated and when you have your domestic consumption story intact, why will you bet on a recovery in US?"
T.P. RAMAN, MANAGING DIRECTOR, SUNDARAM BNP PARIBAS ASSET MANAGEMENT:
"Now that the mandate is clear and the Congress has emerged as a very, very strong winner that it can have its say.
"Every person who is connected with the capital market will definitely feel bullish."
"Euphoric moments will probably stabilise and settle down. The direction of progress is well known, but then, what is important is the push and pace of progress has to be fast and now I think it can be safely assumed that the pace of the progress will be faster.
TOP BETS: Infrastructure, power
Following are the reactions from fund managers to a more than 17 percent spike in Indian shares on Monday:
SAMEER NARAYAN, HEAD-EQUITY, FORTIS INVESTMENT MANAGEMENT:
"It is very difficult to say if it's justified. Yes, there is definitely some sort of stability. The outlook has improved at least on the stability aspect... but there are a lot things that need to get fixed in terms of the entire reform agenda.
"Right now, it is only expectations and hope. May be we might be pricing in far to early.
"Now valuations are almost 16 times of consensus earnings and no longer cheap.
TOP BETS: Financial and energy
SANJAY SINHA, CEO, DBS CHOLAMANDALAM ASSET MANAGEMENT:
"A rally like this seems to be suggesting that our fundamentals have improved. (It) is discounting what would be a situation 12-18 months down the line.
"In the private sector it will lead to much better investment climate. In the capital market it will be much more enthusiastic participation by all sections and on the global level the visibility of India as an investment destination will become even more bright and that should attract capital at affordable rate.
"If you are coming into the market please do not come with the perspective of a three-month, six-month."
PANKAJ TIBREWAL, FUND MANAGER, PRINCIPAL PNB MUTUAL FUND:
"Actually, fundamentally speaking, things will take its own sweet time. It's not that the government today is coming to power and tomorrow they will do some big bang reforms.
"Though markets run ahead in anticipation, after today's move, the market will start asking: what next?
"Probably a couple of weeks later you will start looking at what's happening globally.
"Flow will continue may be positively to India but you need to take it with a pinch of salt. Are we running too fast, too soon? I think that's the question you need to ask to yourself."
TOP BETS: Infrastructure, FDI related sectors such as aviation, telecom, insurance.
MANISH BHANDARI, FUND MANAGER, ING INVESTMENT MANAGEMENT:
"What you have to do is to look at all the bills that the Congress wanted to introduce, were debated and (the) Left had shut doors on. And insurance was one. Those are the things we will be watching carefully.
"I am worried about people's expectations, which are very high. We are slowing down. Don't see one month's frame."
TOP BETS: Capital market linked sectors, infrastructure
ANAND SHAH, HEAD-EQUITY, CANARA ROBECO ASSET MANAGEMENT:
"This is a bigger verdict than 1991. We haven't seen such a verdict and with Manmohan Singh at the helm, this much of a reaction is fair.
"Indian consumers continue to remain my bet. With a stable government consumption is only going to pick up.
"I am wary of IT and metals because the rupee has appreciated and when you have your domestic consumption story intact, why will you bet on a recovery in US?"
T.P. RAMAN, MANAGING DIRECTOR, SUNDARAM BNP PARIBAS ASSET MANAGEMENT:
"Now that the mandate is clear and the Congress has emerged as a very, very strong winner that it can have its say.
"Every person who is connected with the capital market will definitely feel bullish."
"Euphoric moments will probably stabilise and settle down. The direction of progress is well known, but then, what is important is the push and pace of progress has to be fast and now I think it can be safely assumed that the pace of the progress will be faster.
TOP BETS: Infrastructure, power
Mutual funds fail to cash in as markets hit circuit breaker
By Chirag Madia
Dalal Street on Monday had one of its finest day, however, the Indian Mutual Fund (MF) industry could not benefit from this rise, as they could not buy because trade was halted for the day after benchmark indices breached 20% circuit breaker. However, it has forced many fund managers to rework their strategies. It is now expected that funds would start actively participating in the markets, utilising their cash levels.
Despite domestic markets surging by over 17% and reaching to 14K levels, officials from the fund houses say that, they will start deploying the cash in the markets, which they were holding in various schemes, as they feel this is the right time to enter the enter the equity markets. And with the markets remaining closed for large part of Monday, the Association of Mutual Funds in India (Amfi) asked the fund houses to declare Monday, a non-business day for equity and hybrid schemes as many scrips were not traded during the day. On Monday, the 30-share Sensex (^BSESN : 14213.73 -70.48) of Bombay Stock Exchange (BSE) closed the day at 14,284.21 points gaining 2,110.79 points or 17.34%. The broader SandP CNX Nifty (^NSEI : 4318.45 -4.7) of National Stock Exchange (NSE) added 651.50 points or 17.74% to end the day at 4,323.15 points.
Gopal Agrawal, head-equity at Mirae AMC said, "After the Congress led UPA coming back of power and equity bourses rising at this level, we think that people will start deploying the cash in the market. Now with UPA coming with clear majority, new government policies will be announced and in the coming days markets are likely to continue their upward journey." However, fund managers don't rule out that, in the long run global economy and inflows from the foreign institutional investors (FII) will shape up the domestic markets. An senior official from the leading broking house said, "The sudden surge in the markets were totally unexpected, we will start deploying the cash but only in the benchmark heavyweight as this upward rally does not change the earnings momentum path for the next few quarters. Similarly, the global environment is still in the process of limping back to normalcy."
Most of the fund managers were seen getting into emergency meetings to discuss the new development. "With the surge looking so strong on Monday there was a need to get together and rack our brains," he added.
Some MF players also stated that, cash will be deployed from the schemes which are holding cash of over 10%. Waqar Naqvi CEO of Taurus AMC said, "Since past few trading session we have slowly deployed our cash in the markets. In the coming days also we will continue deploying the cash in the markets. There are also strong chances that, markets are going to continue their rally and profit-booking will only take place after few weeks of trading." The trend that was observed in the markets was that overseas investors were net buyers and the domestic mutual funds were sellers in the past month.
Dalal Street on Monday had one of its finest day, however, the Indian Mutual Fund (MF) industry could not benefit from this rise, as they could not buy because trade was halted for the day after benchmark indices breached 20% circuit breaker. However, it has forced many fund managers to rework their strategies. It is now expected that funds would start actively participating in the markets, utilising their cash levels.
Despite domestic markets surging by over 17% and reaching to 14K levels, officials from the fund houses say that, they will start deploying the cash in the markets, which they were holding in various schemes, as they feel this is the right time to enter the enter the equity markets. And with the markets remaining closed for large part of Monday, the Association of Mutual Funds in India (Amfi) asked the fund houses to declare Monday, a non-business day for equity and hybrid schemes as many scrips were not traded during the day. On Monday, the 30-share Sensex (^BSESN : 14213.73 -70.48) of Bombay Stock Exchange (BSE) closed the day at 14,284.21 points gaining 2,110.79 points or 17.34%. The broader SandP CNX Nifty (^NSEI : 4318.45 -4.7) of National Stock Exchange (NSE) added 651.50 points or 17.74% to end the day at 4,323.15 points.
Gopal Agrawal, head-equity at Mirae AMC said, "After the Congress led UPA coming back of power and equity bourses rising at this level, we think that people will start deploying the cash in the market. Now with UPA coming with clear majority, new government policies will be announced and in the coming days markets are likely to continue their upward journey." However, fund managers don't rule out that, in the long run global economy and inflows from the foreign institutional investors (FII) will shape up the domestic markets. An senior official from the leading broking house said, "The sudden surge in the markets were totally unexpected, we will start deploying the cash but only in the benchmark heavyweight as this upward rally does not change the earnings momentum path for the next few quarters. Similarly, the global environment is still in the process of limping back to normalcy."
Most of the fund managers were seen getting into emergency meetings to discuss the new development. "With the surge looking so strong on Monday there was a need to get together and rack our brains," he added.
Some MF players also stated that, cash will be deployed from the schemes which are holding cash of over 10%. Waqar Naqvi CEO of Taurus AMC said, "Since past few trading session we have slowly deployed our cash in the markets. In the coming days also we will continue deploying the cash in the markets. There are also strong chances that, markets are going to continue their rally and profit-booking will only take place after few weeks of trading." The trend that was observed in the markets was that overseas investors were net buyers and the domestic mutual funds were sellers in the past month.
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