ICICI Pru MF enables MicroSIP facility

With effect from 12th November, 2008, ICICI Prudential Mutual Fund has enabled a Micro Systematic Investment Plan (Micro SIP) facility for ICICI Prudential Liquid Plan – Growth option. Under this scheme the facility would be available only for investments in ICICI prudential Liquid Plan – growth plan; it enables minimum installments Rs.100 only and in multiples of Rs.10 thereafter. It allows variable installments constrained to minimum of Rs.100 per installment. ICICI Prudential Mutual Fund states that the MicroSIP dates would be subject to agreement between the AMC & the authorized entities.

Benchmark Mutual Fund launches ‘Benchmark S&P CNX 500 Fund

Benchmark Mutual Fund introduces a new fund offer ‘Benchmark S&P CNX 500 Fund’ which opens on 17th November, 2008 and closes on 15th December, 2008.The investment objective of Benchmark S&P CNX 500 Fund is to generate capital appreciation through equity investments by investing in securities which are constituents of S&P CNX 500 index in the same proportion as in the index. The fund will charge no front end load and no exit load if investment is held for three years for investments less than Rs. 2 crs.

Religare and Aegon Joint Venture for Mutual Fund breaks up.

Dutch financial services major Aegon and Religare Enterprises have decided to call off their joint venture for setting up a mutual fund. They have taken the decision after 1 month of getting SEBI’s approval for setting up the AMC. Aegon is to take up control of Religare Aegon Mutual Fund, a joint venture with 50 per cent stake to both. Lotus India Mutual Fund, which was acquired by Religare Aegon two weeks ago, will be Religare’s asset management business in India. The Lotus acquisition, which is awaiting regulatory approval, Religare Aegon would have got access to six equity funds and a host of debt funds with combined assets under management of Rs 5,458 crore. The fresh proposal is subject to regulatory approval.

Source:http://mutualfundsindia.com/news_viwe.asp?news_headline=Religare+and+Aegon+Joint+Venture+for+Mutual+Fund+breaks+up%2E@

Smaller AMCs bleed like never before

Every fund house claims that the current market turmoil is not a cause for undue concern as they are here for the long haul. After all, ups and downs are part of a regular market cycle, they point out. This may be true for the top asset management companies. But the rate at which some of the smaller mutual funds are bleeding cash, the landscape of the Indian mutual fund industry may change dramatically before long.

Thanks to the dependence of fund houses on institutional investors and declining interest among investors for equity schemes, several middle and small fund houses are losing big money everyday. An ET study of the results recently announced by AMCs shows that for every Reliance Mutual Fund and UTI AMC that have seen their profits rise, there is a Principal or Kotak whose earnings are only shrinking. And with the equity markets showing no sign of recovering, the situation for middle- and small-tier AMCs is only expected to worsen in the coming days. This may just hasten the much-anticipated consolidation process in the industry, many experts predict, pointing out to the recent takeover of Lotus AMC by Religare as an instance.

The worst hit are AMCs that have begun their operations recently. Take for instance, Mirae Asset Management. The AMC said it had lost over Rs 47 crore in the financial year ended March, an amount that would have only shot up in the past few months. (All the numbers we quote are before taxes.) Its assets under management contracted by 57% in October, a trend seen at several other AMCs too as institutional investors moved their investments from MFs to bank fixed deposits. Mirae is now into cost-cutting mode; it had created a splash earlier when it took a bunch of scribes and distributors on a trip to South Korea last year.

Another recurring theme in the numbers is that of personnel costs. The three-year-old Fidelity AMC earned over Rs 80 crore as management fees, but spent close to Rs 50 crore of it on its personnel. It has accumulated close to Rs 160-crore losses, just in the past three years. Many others too have been accumulating losses year after year. In fact, AIG spent more on its personnel (Rs 16 crore) than what it earned through fees (Rs 12 crore). Abhay Aima, HDFC Bank country head of equity and private banking group, says in a relatively new industry AMCs have no option but to put up with high personnel costs.
A CEO of a fund house who requested that he not be quoted (fund managers usually fall over each other to be quoted when the discussion is about India’s long-term growth potential) said as AMCs build scale and their assets under management surge, personnel costs as a component of total expenses would fall.

But the situation is perhaps most alarming at middle-tier AMCs, who although are not running losses, are seeing their profits shrink. Principal’s profits fell from Rs 15 crore to Rs 10 crore till March 2008, largely due to a mysterious sounding entry— admin and other operating expenses. Birla Sun Life’s profits contracted to a fifth (Rs 4 crore), thanks to the fund house more than doubling its personnel cost. JM MF, a reasonably old fund house, in fact, managed to triple its losses to Rs 17 crore in the space of a year.

MF officials say these days their fund houses have been losing anywhere between Rs 5 and Rs 15 crore every month because of the slump in the sale of equity products. So MFs without a powerful financial backing or people who were here only for the valuation game are likely to sell out in the coming days, they suggest.

UTI is the most profitable AMC in the country, mostly due to its retail heavy assets, HDFC comes next; Reliance doubled its profits for the year.

Source:http://economictimes.indiatimes.com/Personal_Finance/Mutual_Funds/Analysis/Smaller_AMCs_bleed_like_never_before/articleshow/msid-3724886,curpg-2.cms

An article on Gilt & Presentation

Whether it is returns across various time frames or rankings in the industry over various time periods both are literally unworthy of bringing up for mention to an investor.

However an interest rate call apparently has already been taken ( by the fund/ fund manager/ AMC) as is evident from the fact that the average maturity of the fund has moved up in recent weeks to over ten years from a low of couple of years. The smaller fund size has only helped in this aspect. Mid October onwards we have already been selectively pushing this product to select clients/ corporate/ HNIs/ bank distributors, which has yielded in some limited inflows as well.

All the macro and micro economic indicators in the environment indicate towards an imminent cut in the interest rates in the economy that too in the immediate future.
The expectation is that RBI would cut rates sharply and in good measure in quick succession to make any relevant impact in the economy. Any half hearted slow inadequate symbolic measure would fall flat in its attempt to make the desired impact.

Most importantly and interestingly there is an near term event which makes the whole exercise worth analysis. We all know that in the first week of January every year SDS ( special depository schemes ) money matures. So will this year ( jan09) but only to be compulsorily be reinvested in govt. securities by around end of third week - beginning of last week of January. what is eye propping is the sheer volume of this amount !! We are talking about approximately one lac thirty thousand crores of rupees, plus estimated 8% interest on this amount. This equals to Rs.145.8 or one lac forty six thousand crores approx. Last years policy changes allow 10% of this to be invested in equities. Assuming this happens & remaining chase the gilt papers guess what would happen to their prices.

Let's also take into consideration the fact that balance govt borrowings for remaining fiscal is to the tune of 35000 crores, which the the govt may not go ahead with considering the prevailing liquidity scenario. Even if it chooses to do so there will be a considerable mismatch between the supply of gilt papers and the money chasing it resulting in an increase in gilt prices ( thus gain in gilt fund NAVs ) . Any ( there wd be ) rate cuts is further going to accentuate the spike in the gilt prices making investment in long dated gilts or gilt funds with higher maturity an attractive investment option at this juncture.

Which means even if there is no rate cuts in the economy , still an investor can look forward to ATLEAST 12-15% return annualized from gilt funds by investing for next three months. It can go up depending on the extent & timings of rate cut (s).

Interest rate cut is a probability but SDS event a CERTAINITY !!

We all need agree in using this available window to market gilt fund more aggressively using this information / logic as a pitch.
We can afford to have a dis agreement on the extent of rate cut or timing of the same but we need a consensus on the direction of the same and subsequently the strategy to aggressively push this idea. Gilt_Nw

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India's market will be among the first to recover: Sebi chief

Stock market regulator Security and Exchange Board of India (Sebi) may introduce measures to restrict over-leveraged hedge funds in order to bring in more stability to the volatile market.
Speaking at a seminar in the Capital on Saturday, Sebi chairman C B Bhave said that "where the system is getting over-leveraged and the risk becomes too great, we must intervene and bring it down to ensure it does not lead to systemic risks." He said there is nothing to worry as the Indian stocks would be the first to bounce back in this global meltdown.
Bhave said the present turmoil in the financial markets has been mainly due to leveraged FIIs like hedge funds that are exiting the stock markets. He said, on the contrary, long-term investors like pension funds are buying equities at this moment. However, for the retail investors, the SEBI chief said they must not enter the market on borrowed money. He warned that people should avoid using their emergency funds to buy stocks, hinting that the present uncertain situation in the market may continue for some time.
"We have not found anything in the market that would give us suspicion that something had seriously gone wrong with the market itself," the SEBI chairman said while asserting that the stocks were actually wrongly priced in the bull run. "Pension fund investors stayed away from the market throughout 2007 because they felt it was wrongly priced, but they are investing now," he said.
Affirming his faith in the bounce back, Bhave said minimal selling has taken place since September 1. He said in comparison to FIIs stocks sales of Rs 22,000 crore and brokers Rs 700 crore in the last two-and-half months, mutual funds bought stocks worth Rs 1,000 crore, domestic institutional investors Rs 16,000 crore and other investors including retail Rs 5,600 crore.

Source:http://timesofindia.indiatimes.com/Business/India_Business/Indias_market_will_be_among_the_first_to_recover_Sebi_chief/articleshow/3746234.cms

Markets likely to remain volatile

Domestic markets are likely to remain volatile in the coming week even as expectations of further liquidity infusion measures from the Reserve Bank of India could boost investor sentiment amid worsening global economic scenario, analysts believe. Even though declining inflationary pressure presents a reason to cheer, a falling rupee coupled with fears of protracted economic slowdown could keep the bourses on tenterhooks.
"Volatility is likely to continue in the Indian markets. If the Reserve Bank of India comes up with any guideline or some positive announcements in the US could provide a boost to the investor sentiments."
Moreover, encouraging trends from the Asian and American markets could push the Indian bourses into the positive territory," Taurus Mutual Fund Managing Director R K Gupta said.
With the Finance Minister P Chidambaram calling for more rate cuts, the apex bank is widely anticipated to make an announcement in the coming days.
Meanwhile, Chidambaram in an interview to a private channel said, "The private sector banks should follow suit of public sector banks and cut their rates."
In recent times, the flight of Foreign Institutional Investors (FIIs) from the domestic markets has been a cause of concern and has resulted in depreciating rupee. Till November 21 this calendar year, FII outflow reached Rs 53,476.90 crore.
"Indian markets are waiting for a good trigger. The valuations are attractive now and the banking stocks are likely to continue with its recovery on expectations of a possible rate cut," SMC Global Vice President Rajesh Jain said.

Source:http://timesofindia.indiatimes.com/India_Business/Markets_likely_to_remain_volatile/articleshow/3746994.cms

Reliance Capital to set up Islamic fund management co in Malaysia

The Anil Ambani group-controlled Reliance Capital Asset Management Ltd (RCAML) said on Friday that it will establish an international Islamic fund management company in Malaysia.
The leading asset management company recently received an in-principle approval from the Securities Commission of Malaysia to establish the fund management firm.
Reliance Capital now holds the unique distinction of being the fifth company in the world and the first in India to be allotted the coveted mandate, a release said here.
"We are proud to be the first company from India and the fifth in the world to be given this opportunity. We are the No 1 mutual fund house in India and the new opportunity is in line with our ambition to be one of the leading players globally," Reliance Capital CEO Vikrant Gugnani said in a statement.
Reliance Capital is managing a corpus of over Rs 71,093 crore as on October 31 for over 70 lakh investors. It offers investors a well- rounded portfolio of products to meet varying investor requirements and has a presence in over 400 cities across the country.