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)
Thursday, June 4, 2009
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.
Thursday, April 16, 2009
PAN not needed for small SIPs: SBI
SBI [Get Quote] Mutual Fund, which launched a systematic investment plan with a minimum monthly contribution of Rs 100 on Thursday, has approached the government seeking a relaxation in the know-your-customer norms.
The fund house has proposed that the government allow those investing up to a specified amount to contribute on a monthly basis without submitting a permanent account number, which is a must for all mutual fund investments.
SBI Chairman O P Bhatt told reporters that the move would help to get more participation in the scheme. While SBI MF is hoping to get around 250,000 investors to invest in 'Chota SIP,' the product aimed at the lower income group, the subscription level could rise to 1 million if the PAN requirement was done away with.
Bhatt said that the government, which had already simplified the rules for no-frills accounts, was examining the proposal and a decision was expected after the general elections were over.
SBI is the latest to join the segment which already has ICICI [Get Quote] Prudential and Reliance [Get Quote] Mutual Fund offering SIPs with a minimum monthly investment of Rs 50 and Rs 100 respectively.
SBI is hoping to leverage its distribution reach of over 11,000 branches to attract more investors. The bank has also decided to set targets for its branches to sell these products from this year.
Bhatt said that, this year, the bank is looking to open 1,000 branches, a bulk of which would be in smaller towns and rural areas.
Additionally, it is planning to hire 100,000 banking correspondents by the end of March 2011 to deal with customers in villages where there are no bank branches.
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The fund house has proposed that the government allow those investing up to a specified amount to contribute on a monthly basis without submitting a permanent account number, which is a must for all mutual fund investments.
SBI Chairman O P Bhatt told reporters that the move would help to get more participation in the scheme. While SBI MF is hoping to get around 250,000 investors to invest in 'Chota SIP,' the product aimed at the lower income group, the subscription level could rise to 1 million if the PAN requirement was done away with.
Bhatt said that the government, which had already simplified the rules for no-frills accounts, was examining the proposal and a decision was expected after the general elections were over.
SBI is the latest to join the segment which already has ICICI [Get Quote] Prudential and Reliance [Get Quote] Mutual Fund offering SIPs with a minimum monthly investment of Rs 50 and Rs 100 respectively.
SBI is hoping to leverage its distribution reach of over 11,000 branches to attract more investors. The bank has also decided to set targets for its branches to sell these products from this year.
Bhatt said that, this year, the bank is looking to open 1,000 branches, a bulk of which would be in smaller towns and rural areas.
Additionally, it is planning to hire 100,000 banking correspondents by the end of March 2011 to deal with customers in villages where there are no bank branches.
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Tuesday, April 14, 2009
Sebi puts 30% cap on MFs' money market exposure
Tuesday April 14, 03:10 AM Source: Indian Express Finance
As a part of a derisking exercise, the market regulator Securities and Exchange Board of India (Sebi) in its board meeting held on Monday has decided not to allow a mutual fund scheme to invest more than 30% of its net assets in money market instruments of an issuer.
For this the Sebi board has decided to amend the Seventh Schedule of Sebi (Mutual Funds) regulations. But the schemes will be allowed to continue to invest up to 15% or 20% of their net assets in other investment grade debt instruments of an issuer as already provided in the regulation.
However, these limits will not cover investments in government securities, T-Bills and Collateralized Borrowing and Lending Obligations (CBLO).
The board also approved the proposals to enable mutual funds and Foreign Institutional Investors (FII)s to invest in Indian Depository Receipts (IDR's) subject to FEMA, demat holdings of IDRs and issue of depository receipts by custodians on behalf of issuers.
On putting restrictions on the mutual funds schemes to invest in money market instruments of an issuer, Jayesh Shroff, fund manager-equity, SBI (SBIN.NS : 1217.9 +77.6) Mutual Fund, said, "This is primarily a de-risking exercise targeted mainly at debt funds. It will not have any major implications on the mutual fund industry as already 99% of the mutual funds schemes are well diversified".
According to sources, Sebi's latest move is following few instances where two to three small fixed maturities plan (FMP) schemes of fund houses had exposed more than 30% of their net assets to the money market instrument of an issuer putting investor's money at risk.
On the proceedings against the NSDL on the IPO demat scam; the Sebi board has decided to seek the opinion of an eminent legal counsel on the issue whether the Sebi board has the legal authority to examine whether the committee appointed by the board to deal with the matter involving a conflict of interest of the current Chairman in relation to NSDL has acted within the framework and terms of reference established by the board resolution. Pending that, with one member dissenting, the board has decided to withhold the orders of the committee.
As a part of a derisking exercise, the market regulator Securities and Exchange Board of India (Sebi) in its board meeting held on Monday has decided not to allow a mutual fund scheme to invest more than 30% of its net assets in money market instruments of an issuer.
For this the Sebi board has decided to amend the Seventh Schedule of Sebi (Mutual Funds) regulations. But the schemes will be allowed to continue to invest up to 15% or 20% of their net assets in other investment grade debt instruments of an issuer as already provided in the regulation.
However, these limits will not cover investments in government securities, T-Bills and Collateralized Borrowing and Lending Obligations (CBLO).
The board also approved the proposals to enable mutual funds and Foreign Institutional Investors (FII)s to invest in Indian Depository Receipts (IDR's) subject to FEMA, demat holdings of IDRs and issue of depository receipts by custodians on behalf of issuers.
On putting restrictions on the mutual funds schemes to invest in money market instruments of an issuer, Jayesh Shroff, fund manager-equity, SBI (SBIN.NS : 1217.9 +77.6) Mutual Fund, said, "This is primarily a de-risking exercise targeted mainly at debt funds. It will not have any major implications on the mutual fund industry as already 99% of the mutual funds schemes are well diversified".
According to sources, Sebi's latest move is following few instances where two to three small fixed maturities plan (FMP) schemes of fund houses had exposed more than 30% of their net assets to the money market instrument of an issuer putting investor's money at risk.
On the proceedings against the NSDL on the IPO demat scam; the Sebi board has decided to seek the opinion of an eminent legal counsel on the issue whether the Sebi board has the legal authority to examine whether the committee appointed by the board to deal with the matter involving a conflict of interest of the current Chairman in relation to NSDL has acted within the framework and terms of reference established by the board resolution. Pending that, with one member dissenting, the board has decided to withhold the orders of the committee.
Thursday, April 9, 2009
Cash rich Indian funds risk missing stocks surge
MUMBAI, April 8 (Reuters) - Indian fund investors have missed large part of the surge in domestic shares in the last one month and may be in for more disappointments as their fund managers sit tight on a multi-year high cash levels.
India's benchmark index .BSESN fell to its lowest level in 2009 on March 9, but has surged almost 30 percent since then, helped by a revival in global risk appetite and some flow of funds into emerging markets, including India.
However, nearly 300 diversified funds have seen their net values rise by an average 20.2 percent, held back by unusually high cash levels, with only nine of them rising more than the main stock index, data from global fund tracker Lipper showed.
"These cash calls would certainly impact fund returns once the market bounces back, which we saw in March," Chintamani Dagade, a senior research analyst with Morningstar India, said.
He said most of the large-cap diversified stock funds held double digit cash levels throughout 2008 in a bid to soften blow from falling shares, which went on to end the year down more than 50 percent, their sharpest fall on record in any year.
However, the strategy did not work for most funds.
Net asset values of stock funds recorded their worst annual fall of 54.7 percent during the year, giving up the entire gain made in the previous two calendar years, with nearly half of the actively managed funds also underperforming the benchmark index.
Most funds continue with the strategy and some have raised the cash levels further ahead of general elections in April-May, anticipating a volatile share market, resulting in a major underperformance in the last one month.
India's benchmark index .BSESN fell to its lowest level in 2009 on March 9, but has surged almost 30 percent since then, helped by a revival in global risk appetite and some flow of funds into emerging markets, including India.
However, nearly 300 diversified funds have seen their net values rise by an average 20.2 percent, held back by unusually high cash levels, with only nine of them rising more than the main stock index, data from global fund tracker Lipper showed.
"These cash calls would certainly impact fund returns once the market bounces back, which we saw in March," Chintamani Dagade, a senior research analyst with Morningstar India, said.
He said most of the large-cap diversified stock funds held double digit cash levels throughout 2008 in a bid to soften blow from falling shares, which went on to end the year down more than 50 percent, their sharpest fall on record in any year.
However, the strategy did not work for most funds.
Net asset values of stock funds recorded their worst annual fall of 54.7 percent during the year, giving up the entire gain made in the previous two calendar years, with nearly half of the actively managed funds also underperforming the benchmark index.
Most funds continue with the strategy and some have raised the cash levels further ahead of general elections in April-May, anticipating a volatile share market, resulting in a major underperformance in the last one month.
Tuesday, April 7, 2009
Index funds versus individual stock picking
“Where should I invest my hard-earned money?” – This question invariably puts investors into a serious dilemma as to which investment option should they consider. They get deeply consumed in the process of assessing, determining and considering options which would render optimal returns to them, involving minimal risk and offering safety to their capital.
Investment in equities (individual stock picking) and various types of mutual funds are two very obvious investment vehicles that would come to investors` mind. Equity funds, debt funds, balanced funds, index funds and so on are the several types of mutual funds, which can be considered. Which type of fund is better amongst them? The answer to this question would depend upon the investment goal, risk appetite and time horizon of the investor.
Let us compare individual stock picking and index funds in detail:
Individual stock picking is nothing but merely equity investing. It is the most popular investment vehicle amongst investors. It is considered a high risk- high returns investment vehicle.
But the Bear Market Run carrying on since last year has been responsible for the erosion of capital of several investors. On a broader side, the returns depend on the financial health of the company (of which you have purchased the shares), the performance of that particular sector and the overall market performance in general.
On a narrower side (investors' side), the returns depend on investors' investment objectives, risk taking capacity and tenure of the investment. If the particular sector or company's shares are not performing well, the investors incur losses. Risk of losing money is high in case of equities due to volatile nature of markets.
Index Funds are a category of mutual funds which invest into a whole index [Sensex (30), Nifty (50)] rather than a specific stock. This strategy is also called ‘indexing’. The goal of most index funds is to follow the index performance. Index funds buy all the stocks of a particular index. This is a passively managed scheme.
The fund managers of these schemes do not get involved actively in shares selection and the process of investing. However, the volatility of markets (indices) is uncertain. The performance of the indices cannot be foreseen by any one. In India, the indices (Sensex, Nifty) are small as compared to US index of S&P 500.
Benefits of index funds
Economical: Indexing is a passive investing strategy; it does not involve any active management by the fund managers as in the case of the actively traded funds. The main objective of index funds is to reflect the performance of indices. The cost of analysts` salaries, research cost, and brokerage is saved in case of the index funds.
Better Performance: The performance of passive funds is likely to be better than actively or professionally managed funds. In the long run, any particular stock cannot beat the whole index performance.
For the week ended Mar. 20, 2009, Index funds were the biggest gainers among all classes of mutual funds with 3.16% gain as the 30 share index, Sensex rose 210.07 points, or 2.40%, to 8,966.68 in the week ended Mar. 20, 2009. On the other hand, the broad based NSE Nifty rose 87.8 points, or 3.23%, to 2,807.05 in the same period.
NAVs of the index funds category gained 3.16% in the week Mar. 20, 2009.
Among the index funds, Nifty Junior BeES gained 4.33%, Benchmark S&P CNX 500 Fund added 3.49%, J M Nifty Plus Fund rose 3.33%, LICMF Index Fund - Nifty Plan climbed 3.27%, Birla Sun Life Index Fund gained 3.24%. (Myiris).
Diversified Portfolio: Index funds invest in all stocks from different companies and different sectors of a particular index, leading to a wide range of stocks, which helps in the diffusion of risk.
Returns: Returns in index funds are largely dependent on the performance of whole indices; the Sensex and Nifty being benchmarks of the index funds` performance in India.
Saves time and money: The hard core research of specific stock or sector is not required in case of index funds as these funds track the performance of whole indices and not a stock and sector in particular. This saves time and money also as nothing comes free and research is not an exception.
Disadvantages of index funds
Market risk: When the market undergoes a fall, you also lose in case of index funds as these funds are entirely based upon the ups and downs of the market
Less Flexibility: Index funds lack in flexibility, as investors don’t get the opportunity to invest into stocks in that particular index. This is so because there is no scope of selecting stocks of personal choice, based on quality and research.
Conclusion:
To conclude, index funds can possibly offer higher returns in the longer period of time, subject to performance of indices or markets. Index funds thus seem to be a better option between the two, as their advantages considerably outweigh the disadvantages. Diversification, lower cost and maintenance give them an edge over individual stock picking.
Investment in equities (individual stock picking) and various types of mutual funds are two very obvious investment vehicles that would come to investors` mind. Equity funds, debt funds, balanced funds, index funds and so on are the several types of mutual funds, which can be considered. Which type of fund is better amongst them? The answer to this question would depend upon the investment goal, risk appetite and time horizon of the investor.
Let us compare individual stock picking and index funds in detail:
Individual stock picking is nothing but merely equity investing. It is the most popular investment vehicle amongst investors. It is considered a high risk- high returns investment vehicle.
But the Bear Market Run carrying on since last year has been responsible for the erosion of capital of several investors. On a broader side, the returns depend on the financial health of the company (of which you have purchased the shares), the performance of that particular sector and the overall market performance in general.
On a narrower side (investors' side), the returns depend on investors' investment objectives, risk taking capacity and tenure of the investment. If the particular sector or company's shares are not performing well, the investors incur losses. Risk of losing money is high in case of equities due to volatile nature of markets.
Index Funds are a category of mutual funds which invest into a whole index [Sensex (30), Nifty (50)] rather than a specific stock. This strategy is also called ‘indexing’. The goal of most index funds is to follow the index performance. Index funds buy all the stocks of a particular index. This is a passively managed scheme.
The fund managers of these schemes do not get involved actively in shares selection and the process of investing. However, the volatility of markets (indices) is uncertain. The performance of the indices cannot be foreseen by any one. In India, the indices (Sensex, Nifty) are small as compared to US index of S&P 500.
Benefits of index funds
Economical: Indexing is a passive investing strategy; it does not involve any active management by the fund managers as in the case of the actively traded funds. The main objective of index funds is to reflect the performance of indices. The cost of analysts` salaries, research cost, and brokerage is saved in case of the index funds.
Better Performance: The performance of passive funds is likely to be better than actively or professionally managed funds. In the long run, any particular stock cannot beat the whole index performance.
For the week ended Mar. 20, 2009, Index funds were the biggest gainers among all classes of mutual funds with 3.16% gain as the 30 share index, Sensex rose 210.07 points, or 2.40%, to 8,966.68 in the week ended Mar. 20, 2009. On the other hand, the broad based NSE Nifty rose 87.8 points, or 3.23%, to 2,807.05 in the same period.
NAVs of the index funds category gained 3.16% in the week Mar. 20, 2009.
Among the index funds, Nifty Junior BeES gained 4.33%, Benchmark S&P CNX 500 Fund added 3.49%, J M Nifty Plus Fund rose 3.33%, LICMF Index Fund - Nifty Plan climbed 3.27%, Birla Sun Life Index Fund gained 3.24%. (Myiris).
Diversified Portfolio: Index funds invest in all stocks from different companies and different sectors of a particular index, leading to a wide range of stocks, which helps in the diffusion of risk.
Returns: Returns in index funds are largely dependent on the performance of whole indices; the Sensex and Nifty being benchmarks of the index funds` performance in India.
Saves time and money: The hard core research of specific stock or sector is not required in case of index funds as these funds track the performance of whole indices and not a stock and sector in particular. This saves time and money also as nothing comes free and research is not an exception.
Disadvantages of index funds
Market risk: When the market undergoes a fall, you also lose in case of index funds as these funds are entirely based upon the ups and downs of the market
Less Flexibility: Index funds lack in flexibility, as investors don’t get the opportunity to invest into stocks in that particular index. This is so because there is no scope of selecting stocks of personal choice, based on quality and research.
Conclusion:
To conclude, index funds can possibly offer higher returns in the longer period of time, subject to performance of indices or markets. Index funds thus seem to be a better option between the two, as their advantages considerably outweigh the disadvantages. Diversification, lower cost and maintenance give them an edge over individual stock picking.
SIP renewal rates dip 30%
Investors are not only shying away from equity-based mutual funds, they are also scaling down systematic investment plans (SIPs), say market players. There has been a significant drop in the renewal of existing SIPs.
“SIP volume is down between 20 and 30 per cent of the outstanding systematic investment plans,” said Rajiv Deep Bajaj, managing director, Bajaj Capital. “Investors are breaking their SIPs in between.”
While bad market condition is one reason, experts say investors are moving out because the new investors getting into equity are not used to see deterioration of their wealth. The mutual fund houses say that breaking the SIP in between is not the right way of investing. “Investors should stick to equity investments for at least three years,” said Jaideep Bhattacharya, chief marketing officer, UTI AMC.
The average return in a diversified equity scheme over the past three years runs into a negative of 7 per cent while the Sensex return for the same period stands at negative of 2.8 per cent.
“While most of the SIP investments are three to four years old, the investors are largely first timers and are not used to downward cycle in the market. Hence even after enough convincing they are reluctant to continue,” said a financial planer, who did not wish to be named. “We are not facing any such move from the mutual fund investors who are around five years old.”
But the Unit-linked Insurance Plans (Ulips), which got the insurance shield, are in a better position to convince investors to continue with their investments. However, the new investments into Ulips are also getting impacted.
“While the investors are continuing with their existing investments because of the insurance cover, new investments into Ulips are down,” said the planner.
Source:- Hindustan Times
“SIP volume is down between 20 and 30 per cent of the outstanding systematic investment plans,” said Rajiv Deep Bajaj, managing director, Bajaj Capital. “Investors are breaking their SIPs in between.”
While bad market condition is one reason, experts say investors are moving out because the new investors getting into equity are not used to see deterioration of their wealth. The mutual fund houses say that breaking the SIP in between is not the right way of investing. “Investors should stick to equity investments for at least three years,” said Jaideep Bhattacharya, chief marketing officer, UTI AMC.
The average return in a diversified equity scheme over the past three years runs into a negative of 7 per cent while the Sensex return for the same period stands at negative of 2.8 per cent.
“While most of the SIP investments are three to four years old, the investors are largely first timers and are not used to downward cycle in the market. Hence even after enough convincing they are reluctant to continue,” said a financial planer, who did not wish to be named. “We are not facing any such move from the mutual fund investors who are around five years old.”
But the Unit-linked Insurance Plans (Ulips), which got the insurance shield, are in a better position to convince investors to continue with their investments. However, the new investments into Ulips are also getting impacted.
“While the investors are continuing with their existing investments because of the insurance cover, new investments into Ulips are down,” said the planner.
Source:- Hindustan Times
Unitech may have to roll over dues to MFs again
New Delhi: Cash-strapped property developer Unitech Ltd may have to roll over debt owed to mutual funds for a second time. Unitech has to repay Rs500 crore to mutual funds by 19 April, and if it’s unable to tie up the money by then, the firm may have to seek a rollover of the debt, said people familiar with the situation who didn’t want to be named.
The realty firm had to repay Rs900 crore to mutual funds on 19 January. It repaid part of this and managed to roll over the balance by three months.
The company declined to comment on the possibility of it seeking a second rollover.
Unitech is working on several options for raising money. It recently received around Rs380 crore from Unitech Wireless after the latter closed a $1.2 billion (Rs6,036 crore) deal with Norwegian telecom company Telenor SA. Unitech also sold its 200-room Marriott Courtyard hotel in Gurgaon for about Rs230 crore. It is trying to fast track the sale of its 200,000 sq. ft corporate office in Saket, in south Delhi, to raise around Rs500 crore. Proceeds from the launch of its recent mid-income housing project in Gurgaon may also be considered.
Still, a person in Unitech who didn’t want to be named said the exercise may not be easy. “There are a lot of repayment commitments that Unitech has to adhere to, so we may just try and rollover the repayments owed to mutual funds,” said the person.
Unitech has debt of at least Rs8,000 crore on its books. Real estate firms are struggling with a property market downturn and declining valuations as economic growth slows and consumers avoid property purchases in the expectation that prices would slump further.
In January, Unitech filed an application with the Foreign Investment Promotion Board to raise Rs5,000 crore by diluting promoters’ equity. According to the application, the promoters were willing to dilute their equity from their then shareholding of 67.45% to 36.71%. Unitech, however, pulled back the application. As per the company’s last public filing, Unitech promoters have pledged 49.48% of their shares.
cnbctv18@livemint.com
The realty firm had to repay Rs900 crore to mutual funds on 19 January. It repaid part of this and managed to roll over the balance by three months.
The company declined to comment on the possibility of it seeking a second rollover.
Unitech is working on several options for raising money. It recently received around Rs380 crore from Unitech Wireless after the latter closed a $1.2 billion (Rs6,036 crore) deal with Norwegian telecom company Telenor SA. Unitech also sold its 200-room Marriott Courtyard hotel in Gurgaon for about Rs230 crore. It is trying to fast track the sale of its 200,000 sq. ft corporate office in Saket, in south Delhi, to raise around Rs500 crore. Proceeds from the launch of its recent mid-income housing project in Gurgaon may also be considered.
Still, a person in Unitech who didn’t want to be named said the exercise may not be easy. “There are a lot of repayment commitments that Unitech has to adhere to, so we may just try and rollover the repayments owed to mutual funds,” said the person.
Unitech has debt of at least Rs8,000 crore on its books. Real estate firms are struggling with a property market downturn and declining valuations as economic growth slows and consumers avoid property purchases in the expectation that prices would slump further.
In January, Unitech filed an application with the Foreign Investment Promotion Board to raise Rs5,000 crore by diluting promoters’ equity. According to the application, the promoters were willing to dilute their equity from their then shareholding of 67.45% to 36.71%. Unitech, however, pulled back the application. As per the company’s last public filing, Unitech promoters have pledged 49.48% of their shares.
cnbctv18@livemint.com
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