Thursday, August 4, 2011

Investors stay away from 91-day t-bill derivatives

The 91-day treasury bill (t-bill) futures contract, launched a month before, appears to be losing favour with investors. The volumes are down to a pittance as major institutional entities, including banks, are still shying away from the segment. The current market condition is also not conducive for taking a directional call on the interest rates, say experts.

The National Stock Exchange (NSE) launched 91-day t-bill futures contracts on July 4 and the first day saw turnover in excess of Rs 730 crore. The next couple of days also saw the volumes staying above the Rs 300-crore mark. The past few days, however, have seen the volume dropping to one-tenth of the initial days.

On August 1, the volume was a paltry Rs 14.70 crore — the lowest since launch. On most days in the recent past, the volumes have been in the range of Rs 20-40 crore. The underlying market, meanwhile, saw a volume of Rs 740 crore and Rs 175 crore on August 2 and August 3, respectively, according to data available with Clearing Corporation of India.

Corporate houses, which deal in floating rate bonds, are expected to use this instrument to hedge against interest rate volatility. Even the mutual fund industry, which has a lot of debt funds, can use futures on 91-day t-bill for hedging purposes. Banks, however, are expected to be the biggest user as they invest significantly in t-bill as part of their treasury operations. Experts, interestingly, say while the product does not suffer from any inherent flaw, the market condition currently is not ripe for taking a directional call on interest rates.

“Trading has not picked up in the current interest rate environment as the yields have only moved up and players are unable to take call on future. For trading momentum two way quotes are necessary,” says T S Srinivasan, general manager and head of treasury, Indian Overseas Bank. Another head of treasury with a medium-sized private bank said future contracts offer hedge against rate risk. “Players will be inclined take a cover only when there is substantial upheaval in the interest rate. At present, the expectation is of steady upward rise in yields so less reason to buy future on 91-day bill. Also, if one takes cover, the upside gain is limited.” he explained.

The stock exchange, meanwhile, is firing all cylinders to convince more and more players to trade in the instrument, which was seen as a probable game-changer for the interest-rate futures (IRF) segment. NSE has plans to organise awareness seminars across the country in the near future.

“The product will become liquid only when the members are told how to use this product or how to trade in it,” said a senior NSE official. “What is lacking is market development and knowledge. We will conduct seminars to educate our members,” he added.

The IRF segment was launched in 2009 with futures on 10-year government bonds. The contracts were allowed to be settled with delivery of government securities with a tenor between nine and 12 years. The segment, however, failed to enthuse market participants with the biggest fear being that of dumping of illiquid bonds. Market players want the entire segment to be moved to cash-settlement basis, a demand that the Securities and Exchange Board of India is looking into.

Source: http://www.business-standard.com/india/news/investors-stay-away91-day-t-bill-derivatives/444766/

Edelweiss MF launches 'Edelweiss Select Midcap Fund'

The scheme seeks to invest 80% to 100% of the net assets in equity and equity related securities of companies ranked between 101 to 300

Edelweiss Mutual Fund has launched Edelweiss Select Midcap Fund, an open-ended equity scheme, with an objective to generate long term capital appreciation from a portfolio predominantly comprising of equity and equity related securities of mid cap companies.

"The quant model of the fund will help to capture the market trend by analyzing the factors that are currently driving stock performance. It will also make the fund process oriented, adaptive in nature and will result in consistent performance across time periods," said Vikaas M Sachdeva, chief executive of Edelweiss Asset Management Co, in a release.

The scheme seeks to invest 80% to 100% of the net assets in equity and equity related securities of companies falling in Top 101 to 300 companies by market capitalization listed in India, up to 20% of the net assets in equity and equity related securities of other companies listed in India and up to 20% of the net assets in debt and money market instruments. It will not invest in securitized debt.

The new fund offer (NFO) of the scheme opens on 4th August and will close on 18th August. The minimum application amount is Rs5,000. Investors will have the choice of two options growth and dividend. Further, the dividend option offers dividend reinvestment, payout and sweep facilities.

Source: http://www.moneylife.in/article/edelweiss-mf-launches-edelweiss-select-midcap-fund/18630.html

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