Mutual funds restart buying as inflows from new fund offers rise

After remaining sellers in stocks for most of 2010, mutual funds have started nibbling into shares over the past four months. Beaten-down stock valuations and a gradual rise in inflows are prompting fund houses to increase exposure to the stock market. Under pressure from massive redemption and low inflows into equity schemes, fund houses redeemed Rs 27,550 crore in 2010.

Counting out May 2010, when mutual funds netbought shares worth . 98 crore, mutual fund were net-sellers in the market on all months since September 2009.

The 15-month-long trend reversed only in December 2010, when funds net-bought shares worth Rs 1,377 crore. "Mutual funds were witnessing redemption and low inflows the whole of last year. Things have just started looking up now," said Neelesh Surana, senior fund manager, Mirae Asset Global Investments . The 11% fall in the market since January this year has made stock valuations attractive, fund managers said.

While a section of the fund industry is still sceptical about the future course of the market and corporate earnings, the rise in equity allocation is being attributed to genuine value buying, short trading strategies adopted by funds and deployment of new fund offer (NFO) money. "The market correction (post- huge Diwali rally) has brought frontline stocks at attractive price levels. Our mandate now is to accumulate good stocks and stay invested in them," said Mr Surana.

According to institutional brokers, fund houses are concentrating on large caps and frontline mid-cap stocks currently. Political unrest in some West Asian countries, rising crude prices and inflation are forcing fund managers to take refuge in large-cap stocks, which are known to be more resilient in the event of a deep market correction. Fund houses are maintaining 6-8 % cash to chance upon further buying opportunities.

"We expect funds to continue buying in the coming months," said Hiren Dhakan, associate fund manager (fund-of-funds ), Bonanza Portfolio. "Funds have been increasing exposure to banking, FMCG and auto stocks over the past two months. Telecom and oil & gas stocks are seeing a weightage reduction in fund portfolios," Mr Dhakan said. Among individual stocks, ICICI Bank has replaced Reliance Industries as the most-owned stock in fund portfolios. About 293 schemes have ICICI Bank in their portfolios while Reliance Inds , Infosys and ONGC appear in 280, 278 and 255 equity fund portfolios.

Another reason for the rise in mutual fund investments could be the large line of NFOs that mobilised money over the past few months. Mid-and small-sized fund houses, like Pramerica Mutual Fund, Peerless, Axis Mutual Fund , IDFC , Fidelity, Kotak Mutual , Principal Mutual Fund and Motilal Oswal Asset Management, among others, have launched new funds over the past two months. Equity funds, as a category, have been logging inflows over the past three months.

The average assets under management (AUM) of the fund industry surged 2.3% in February to Rs 7.07-lakh crore. According to data compiled by Association of Mutual Funds in India , the MF industry witnessed inflows of Rs 25,757 crore in all schemes, with equity and money market schemes seeing inflows of Rs 2,495 crore and Rs 8,770 crore, respectively , in February.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/mutual-funds-restart-buying-as-inflows-from-new-fund-offers-rise/articleshow/7732612.cms

IDBI unveils Short Term Bond Fund

Fixed income funds seem to be the flavor of the season as interest rates head northwards and equity markets continue to remain jittery. IDBI Mutual Fund has today announced the launch of its open ended IDBI Short Term Bond Fund to capture this mood.

NFO Date: March 17, 2011 to March 22, 2011.

Investment objective: The scheme aims to provide investors with regular income for their investment. The Scheme will endeavour to achieve this objective through an allocation of the investment corpus in a diversified portfolio of debt and money market instruments.

Asset Allocation: The scheme would allocate 65 to 100 per cent of assets in money market instruments/ debt instruments with maturity/residual maturity up to and including 2 years with low risk profile. The scheme would further allocate up to 35 per cent of assets in debt instruments with low to medium risk profile.

Minimum Application: Rs 5,000

Investor need it seeks to fulfill: “It is both an accrual as well as mark-to-market risk reward product. It is positioned to give higher returns than liquid or ultra short term funds given the high interest rate scenario in sub one year segment,” said Krishnamurthy Vijayan, MD & CEO, IDBI Mutual Fund.

Target Investors: The fund is targeted at all segments of investors looking at an investment horizon of 6 months to 1 year.

Distribution: The fund would be marketed mainly through IFAs, national distributors and corporates. The fund would be available pan-India.

Empanelled IFAs: Approximately 3,000

Exit Load: 0.50 per cent if units are redeemed within 3 months from the date of allotment.

Fund Manager: The scheme will be managed by Gautam Kaul

Benchmark: Crisil Short Term Bond Fund Index

Source: http://www.cafemutual.com/News/InnerNews.aspx?srno=388&MainType=New&NewsType=NFO&id=

HDFC Mutual Fund announces dividend under two equity schemes

HDFC Mutual Fund has declared dividend under HDFC Equity Fund and HDFC Long Term Equity Fund, on the face value of Rs 10 per unit. The quantum of dividend for distribution is Rs 4 per unit. HDFC Equity Fund is an open-ended growth scheme with an investment objective to achieve capital appreciation. HDFC Long Term Equity Fund is an open-ended equity scheme and has the investment objective to achieve long term capital appreciation. The record date for dividend distribution is 22nd March 2011.

Source: http://www.mutualfundsindia.com/news_viwe.asp?news_headline=HDFC+Mutual+Fund+announces+dividend+under+two+equity+schemes@MF041

Goldman Sachs AMC to buy Benchmark MF for Rs 130.5 crore

Goldman Sachs Asset Management Company said on Wednesday that it would acquire Benchmark Mutual Fund, an ETF-focussed Indian fund house. Benchmark mutual fund manages assets worth around Rs 3000 crore.

The deal would be finalised by the end of the year, subject to regulatory approvals, said a statement from Goldman Sachs.

An official associated with the deal said Goldman would pay Rs 130.5 crore or approximately 4.3 per cent of Benchmark's average assets under management (AUM). All Benchmark employees would be retained by the new management, he added. Regulatory approval is expected in the next 3-4 months.

Through the deal, Goldman Sachs aims to bring actively managed on-shore funds into India, added the statement. The financial services major has an office in Mumbai with eight employees, providing research on Indian and BRIC equities for offshore funds.

Goldman Sachs officials could not be contacted for further details.

Benchmark is the country's only fund house with a sole focus on exchange-traded funds (ETFs). The fund house manages eight ETF products and is credited with launching India's first ETF – Nifty BeES. The average AUM for ETFs in India is Rs 5,979 crore, according to the Association of Mutual Funds in India. The gold ETF segment has an AUM of about Rs 3,744 crore with 10 products. India's first Gold ETF – Gold BeES – was conceptualised by Benchmark back in 2007.

MAPE Advisory advised Benchmark in the deal. The Indian MF industry will see further consolidation as the markets become volatile and tough, and big mutual fund players find valuations attractive,” said an industry analyst.

Though Goldman Sachs had received SEBI nod to enter India in September 2008, it kept plans on hold following the economic downturn of 2009.

Source: http://www.thehindubusinessline.com/markets/article1544277.ece?homepage=true