Mutual funds resume buying

Mutual funds (MFs) bought shares worth a net Rs 106.80 crore on Tuesday, 28 June 2011, compared with an outflow of Rs 83.40 crore on Monday, 27 June 2011.

The net inflow of Rs 106.80 crore on 28 June 2011 was a result of gross purchases Rs 657.60 crore and gross sales Rs 550.90 crore. The BSE Sensex had risen 80.04 points or 0.43% to settle at 18,492.45 on that day, its highest closing level since 7 June 2011.

Mutual funds have bought shares worth a net Rs 1062.90 crore this month so far (till 28 June 2011). They had bought stocks worth a net Rs 434.70 crore last month.

Source: http://www.adityabirlamoney.com/news/487787/10/22,24/Mutual-Funds-Reports/Mutual-funds-resume-buying

Non-FII/NRI foreign entities can invest up to $10 b in equity MFs

The Centre has allowed foreign investors other than FIIs and NRIs to invest up to $10 billion in equity schemes of Indian mutual funds.

The $10-billion investment ceiling is meant for a new category of qualified foreign investors or QFIs. These cover individuals, companies and pension funds that are neither non-resident Indians (NRI) nor foreign institutional investors (FIIs) and their sub-accounts registered with SEBI.

The creation of a separate QFI category would basically help broaden the class of foreign investors who could participate in the Indian equity markets. Currently, foreign nationals, other than NRIs, are not permitted to invest directly in Indian markets. But now it is proposed to enable them to do so, albeit through the mutual fund route.

The $10-billion ceiling is an annual cap to start with, which will be reviewed after six months. “SEBI would, by August 1, formulate guidelines to regulate investment by QFIs in equity schemes of mutual funds,” said Mr Thomas Mathew, Joint Secretary (Capital Markets) in the Finance Ministry.

QFIs can buy into mutual fund schemes through two routes — depositories already operating in their countries or by opening an account with an Indian depository participant. These are generally described as the Unit Confirmation Receipt (UCR) and the direct/Depository Participant (DP) routes. The DP concerned as well as the mutual fund would, in turn, have to ensure that the QFI meets the KYC (know your customer) norms to be specified by SEBI, Mr Mathew added.

SEBI to be regulator

The Finance Ministry official clarified that SEBI would be the sole regulator for all investments coming in through both the routes.

Seeking to dispel concerns of the QFI route becoming a new avenue for money-laundering, Mr Mathew said that the eligibility to invest would be extended only to QFIs from countries that are Financial Action Task Force- compliant and with which SEBI has signed MoUs under International Organisation of Securities Commissions.

The idea of allowing QFIs to invest in domestic mutual fund schemes was originally proposed by the Finance Minister, Mr Pranab Mukherjee, in the 2011-12 Budget.

Source: http://www.thehindubusinessline.com/features/investment-world/mutual-funds/article2139471.ece

ICICI Prudential MF launches Visa debit card payment service

ICICI Prudential Mutual Fund has launched Visa debit transactions facility for its investors.

This feature will provide easy accessibility to investors by facilitating mutual fund purchase on their website through Visa debit cards, a company statement said.

ICICI Prudential Mutual Fund plans to introduce Visa PoS (Point of sales) terminals in seven cities including Mumbai, Delhi, Chennai, Kolkata, Bangalore, Pune and Ahmedabad offering investors the convenience of purchasing mutual fund schemes by swiping their Visa Debit card, the release said.

ICICI Prudential Mutual Fund has enabled this unique facility for investors across India in association with the ICICI Merchant Services powered by First Data across 40 banks.

Source: http://www.indianexpress.com/news/icici-prudential-mf-launches-visa-debit-card-payment-service/809410/

IT companies dump MFs for bank fixed deposits

Top tier Indian IT firms with loads of surplus cash has been logging out of mutual funds (MFs) over the last one year, preferring to invest, instead, in fixed deposits (FDs) with Indian banks.

India’s largest IT services exporter TCS has increased its exposure in FDs from R3,531.31 crore in March 2010 to R6,061.70 crore as on March, 2011. Consequently, the firm has reduced its exposure in MFs from R2,459.44 crore in March last year to R343.24 crore by March, 2011. In its annual report, TCS explains that the shift was in line with the firm’s strategy for optimum utilisation of surplus cash.

Infosys, the country’s second largest software firm, now has about 90% of the firm’s surplus cash in FDs, moved from MFs over the last one year. CFO V Balakrishnan told FE that this was purely a yield issue.

“The returns are low in MFs while in FDs they are very high. Infosys keeps its surplus cash only in liquid MFs where returns are low – around 5-51/2%. FDs can give up to 10%,” he said.

Yields in FDs started going up last year after the RBI, concerned with high inflation, tightened monetary policy, hiking repo and reverse repo rates several times. In the second half of 2010, FD rates jumped in the range of 100-200 basis points.

A Sebi regulation last year too may have contributed to the flight of surplus capital from liquid MFs. Sebi had notified that debt and money market instruments with maturity of up to 91 days will be subject to mark-to-market norms from July 1 2010.

FE had also reported that liquid-plus schemes would become volatile depending on market swings and will no longer show consistency in increase or decrease in the net-asset value under the current amortisation method. Prior to the Sebi notification, only debt securities above 182 days of maturity were subject to mark-to-market norms.

In May this year, the RBI, in a bid to prevent a potential liquidity crisis, capped bank investments into liquid schemes to 10% of bank’s net worth as of March 31 of the previous financial year. At present, banks park 20-30% of their net worth into MF liquid schemes.

Ganesh Murthy, CFO of MphasiS, said that earlier, most of the firm’s cash went into liquid MFs. The company has now shifted a majority of its surplus money to fixed maturity plans (FMPs) that generates a better yield. “Other companies put money in certificate of deposits (CDs) with the bank, which is like a FD. FMPs also invest in CDs – ultimately, the return is the same but in the case of FMP, it will be slightly lower because you have to pay for the asset management fee. The advantage of routing it through FMP is the tax advantage. We pay tax only at 24%. In CDs, where you invest directly, you have to pay tax at the rate of 33%,” he said.

The shift in MphasiS, which has $422 million in cash, has happened over the last one year. “In liquid MFs, you will get 6-7% return. But in CDs, you can get up to 9-10% returns,” the CFO added.

An executive from Wipro, who did not want to be identified, said that investments are normal economic decisions.

“We always had both FDs and MFs. It is more about which instrument gives you the best return at a particular point in time. All these instruments are more or less similar in risk. You keep moving the funds based on yields. If interest rates decline, MFs will become attractive once again,” he noted.

Source: http://www.financialexpress.com/news/it-companies-dump-mfs-for-bank-fixed-deposits/809459/0

Capital market grown significantly in India: UK Sinha, SEBI Chief

The capital market in India has grown significantly but there are areas of weaknesses, including the issues of governance, that needed to be addressed, the head of the Security and Exchange Board of India (SEBI) said today.

"We have grown quite a bit in the Capital market and its penetration, but there are areas of weakness," SEBI Chairman U K Sinha said in his address to the day-long conference on the "US-India Economic and Financial Partnership" organised jointly by the Confederation of Indian Industry (CII) and Brookings Institute, a Washington-based think tank.

"These areas of weakness become very stark if we discover that there are segments of the geography where lot of activities are taking place both by way of surplus money which can be invested and also by way of need for raising money," he said.

"The approach of the regulator is to provide more and more products. The approach is to provide simplification and convenience to the investors going forward. Approach is also to encourage corporate to raise money domestically," Sinha said in his key note address to the panel discussion on 'Increasing Access to Capital to Stimulate Sustainable Economic Growth: The Road to Deepening India's Capital Markets'.

Observing that a "very very large" portion of the Capital market is concentrated in the large eight to ten cities of India, Sinha said there will be need to deepen the access of Capital market to small markets and rural areas. "I believe Mutual Fund can play a very important role in that," he said.

Sinha said the Indian Capital Market is facing two problems these days. While a large number of companies have raised money, there is no trading by them. He said, of late, private equity and venture capital has started gaining some ground.

Source: http://economictimes.indiatimes.com/markets/stocks/market-news/capital-market-grown-significantly-in-india-uk-sinha-sebi-chief/articleshow/9021743.cms

JM Financial Mutual Fund announces merger of JM Nifty Plus Fund and JM Emerging Leaders Fund

JM Financial Mutual Fund has announced the merger of JM Nifty Plus Fund and JM Emerging Leaders Fund. JM Nifty Plus Fund will be merged into JM Equity Fund (surviving scheme) and JM Emerging Leaders Fund will be merged into JM Multi Strategy Fund (surviving scheme). Dividend and growth option in respective merging schemes would be merged with respective surviving schemes. In case the investor is not in agreement with the mentioned revision, investors have the option to exit without payment of any exit load. This option can be exercised from 30 June 2011 to 29 July 2011. For investors who do not redeem/switch out, the current value of their holding in respective merging schemes as on 29 July 2011 will be converted into units of respective surviving scheme, by allotting units at the applicable NAV as on 29 July 2011.

Source: http://www.thefinapolis.com/v2/Mutualfunds/MF_news.asp

BNP Paribas MF Announces Change in Fund Manager

BNP Paribas Mutual Fund has announced that Mr. Deepak Shaw, the key personnel of the AMC has been designated as Fund Manager - Overseas Securities of BNP Paribas China India Fund with effect from 28 June 2011.

Further Mr. Chirag Mehta shall cease to be the Fund Manager - Overseas Securities of BNP Paribas China India Fund and the key personnel of the AMC with effect from close of business hours of 27 June 2011.

Source: http://www.adityabirlamoney.com/news/486996/10/22,24/Mutual-Funds-Reports/BNP-Paribas-MF-Announces-Change-in-Fund-Manager

Birla Sun Life seeks Sebi nod to merge MF schemes

Birla Sun Life Asset Management Company, investment manager of Birla Sun Life Mutual Fund, has sought approval from the Securities and Exchange Board of India (Sebi) to merge some of its MF schemes.

“We have identified some of our existing schemes for consolidation on the basis of their underlying investment philosophy and objective match,” said A Balasubramanian, chief executive of Birla Sun Life AMC, in an emailed response. “Any consolidation has to have the necessary permission from Sebi, for which we have applied.”

He did not offer details of the schemes identified for merger. Currently, the fund house, a joint venture between the Aditya Birla Group and Canada’s Sun Life Financial Services, manages 49 open-ended MF schemes including 26 equity ones 16 debt schemes, six hybrid and one exchange traded fund.

“Some of our schemes belong to the erstwhile Allianz Mutual Fund, which we took over in 2004. Consolidation of schemes not only reduces their number; it also helps the portfolio manager to stay a lot more focused on the scheme portfolio construction strategy and also eases the selection of schemes from the investors’ perspective,” said Balasubramanian.

He added the investors would not be negatively impacted because of the merger. Fund houses have began amalgamating MF schemes after the stock market regulator expressed displeasure over the large number in the market.

According to industry analysts, at least six fund houses have merged their schemes since January 2010. Earlier this year, ICICI Prudential AMC said it would merge ICICI Prudential Fusion-I, ICICI Prudential Equity Opportunities Fund and ICICI Prudential Fusion-III into ICICI Prudential Dynamic Fund.

“Sebi had said too many schemes that appear identical tend to confuse investors. Merger is a welcome move. It benefits investors, as they will have a lesser number to choose from. It also benefits the fund house, because managing a large number of schemes is not always viable,” said Dipali Ranu, mutual fund analyst with Sharekhan.

Source: http://www.business-standard.com/india/news/birla-sun-life-seeks-sebi-nod-to-merge-mf-schemes/440257/