SEBI Revises Valuation Method

In an order to all mutual funds/asset management companies (AMCs), the Securities and Exchange Board of India (SEBI) has revised the valuation method of debt and money market instruments.

This is a continuation of the efforts of SEBI, started in the wake of the global meltdown, to ensure the industry does not get into another crisis situation.

SEBI is, through its rule change, looking to ensure that the valuations do not stray too far from the underlying securities.

According to the market regulator this will, "Ensure that the value of money market and debt securities in the portfolio of mutual fund schemes reflects the current market scenario."

Impact areas are:

I. Valuation of money market and debt securities with residual maturity of up to 91 days:

All money market and debt securities, including floating rate securities, with residual maturity of up to 91 days shall be valued at the weighted average price at which they are traded on the particular valuation day.

When such securities are not traded on a particular valuation day they shall be valued on amortization basis. It is further clarified that in case of floating rate securities with floor and caps on coupon rate and residual maturity of up to 91 days then those shall be valued on amortization basis taking the coupon rate as floor.

II. Valuation of money market and debt securities with residual maturity of over 91 days:

All money market and debt securities, including floating rate securities shall be valued at weighted average price at which they are traded on the particular valuation day. When such securities are not traded on a particular valuation day they shall be valued at benchmark yield/matrix of spread over risk free benchmark yield obtained from agency(ies) entrusted for the said purpose by AMFI.

III. Valuation of securities not covered under the current valuation policy:

In case of securities purchased by mutual funds that do not fall within the current framework of the valuation of securities then such a mutual fund shall report immediately to AMFI regarding the same. Further, at the time of investment AMCs shall ensure that the total exposure in such securities does not exceed 5 per cent of the total AUM of the scheme.

The valuation of such securities must get covered in the valuation framework within six weeks from the date of receipt of such intimation from mutual fund.

In the interim period, till AMFI makes provisions to cover such securities in the valuation of securities framework, the mutual funds shall value such securities using their proprietary model which has been approved by their independent trustees and the statutory auditors.

IV. Dissemination of information:

All mutual funds shall provide transaction details, including inter scheme transfers, of money market and debt securities on daily basis to the agency entrusted for providing the benchmark yield/ matrix of spread over risk free benchmark yield. Submission of data would help in daily matrix generation and would improve uniformity and accuracy of valuation in the mutual funds industry.

The valuation would be applicable with effect from July 1, 2010.

Source: http://new.valueresearchonline.com/story/h2_storyView.asp?str=101220

HDFC Launches Systematic Savings Plan

HDFC Ltd. India’s premier housing finance company, is introducing ‘HDFC Systematic Savings Plan’ [HDFC SSP], a first-of-its-kind deposit product, which offers a variable rate of interest. It is a monthly savings plan, where one can deposit a fixed sum every month to accumulate a larger capital for future needs. This plan will be available February 3, 2010 onwards to all resident individuals in select Indian cities where ECS facility is available.

Announcing the launch of the HDFC Systematic Savings Plan, Mr. V.S. Rangan, Executive Director, HDFC Ltd. said, “HDFC has always been quick to recognize the market pulse and set higher benchmarks of service delivery through introduction of pioneering products and services. HDFC SSP is a disciplined approach to wealth creation. It allows the investor to adopt a systematic and dedicated approach to financial planning by inculcating a regular savings habit according to his convenience and ability. We have developed this unique installment plan keeping in mind the safety and growth requirements of especially the younger working individuals. For investors looking at earning assured returns over a 2-5 year horizon, SSP will surely emerge as an attractive investment avenue.”

HDFC Systematic Savings Plan offers medium to long-term installment options, where the depositor can choose any period between 24 and 60 months and monthly installment amount can range from Rs. 2000 to Rs. 50,000. Being a variable interest rate plan, the rate of interest applicable is linked to the benchmark rate, reset at the beginning of each calendar quarter. The current interest rates for this plan with effect from February 3, 2010 are 7% p.a., 7.25% p.a. and 7.75% p.a. for 24-35 months, 36-59 months and 60 months respectively.

The key-differentiating factor of HDFC SSP is that it offers depositors a secure and steady way to grow their savings. HDFC SSP is also safe from the volatility of the capital market and the variable interest rate offering ensures that the depositor gets the benefit of higher rate when interest rates increases. The ECS (debit clearing) facility makes investing in HDFC SSP convenient for all.

Product Features:

– Variable Rate of Interest
– Attractive Rate of Interest
– Wide Tenure
– Easy Payment Mode

HDFC Ltd., has displayed consistent performance for over three decades and today is the largest deposit mobilizer outside the banking system in India. With a deposits base of over Rs. 22,000 crore, depositor base of over 10 lakh and a strong distribution network of over 25,000 deposit agents, HDFC is well equipped to offer a host of deposit products with different maturities catering to the unique needs of every investor be it individuals, trusts, institutions or corporate bodies.

HDFC Deposits provide Highest Safety, Attractive Returns and Impeccable Service Standards. HDFC is the only institution in India to have received ‘AAA’ rating from 2 leading credit rating agencies – CRISIL and ICRA for fifteen consecutive years for its deposits program, thus building maximum trust and confidence year-on-year.

Source: http://chackojoseph.com/hdfc-launches-systematic-savings-plan