With equity, debt schemes in focus, MFs may do well in ’12

Mutual funds are expected to fare better in 2012 with equity and debt schemes likely to be in the limelight. The expectations are based on factors like a possible revival in stock market fortunes along with hopes of a rate cut in the near term. Gold funds, however, are expected to lose their shine in the current calendar year as analysts talk about a price correction.

According to an Icra study, 2012 could see the return of interest in equity funds that would react positively to domestic policy actions like rate cuts by Reserve Bank of India (RBI) along with global newsflow related to a gradual improvement in the economic scenario in Europe.

Debt funds, according to Icra, could witness enhanced interest due to expectation of rate cuts over the short term that will result in better risk adjusted returns for investors. The tight government fiscals could, however, limit the upside over the short term, it adds.

The recent ruling of reducing the marked to market window from 90 days to 60 days and that all securities in the liquid schemes be valued could ensure that investors with a longer term investment horizon stand to benefit, says Icra.

Meanwhile, gold exchange traded funds (ETFs) are expected to witness slight loss of steam due to lower likelihood of 2012 being a repeat of 2011 in terms of spectacular returns that gold provided. Another possible reason for a slight cooling down is the fact that upside gained from gold could increasingly be looked at as collateral to cover for downsides in other asset classes, it explains.

The month-end Assets Under Management (AUM) of the Indian MF industry has witnessed a dip of 2.38% to R6,11,402 crore (as per AMFI monthly data) as compared to last year’s figure of R6,26,314 crore.

The month-end AUM stood at its peak in the month of April 2011, which rose by 32.61% at R7,85,374 crore, on account of eased liquidity conditions in the market which paved the way for investors to park their money in the liquid and income schemes.

HDFC Mutual fund topped the chart with an AUM of R88,628.03 crore followed by Reliance Mutual Fund at R82,305.81 crore. Despite being largest on the AUM front, HDFC MF surged marginally by 0.85%, while Reliance MF fell drastically by 19.36%. Amongst the top five AMCs, ICICI Prudential Mutual Fund and Birla Sun Life Mutual Fund were the major gainers as their average assets rose by 5.4% and 4.7%, respectively.

The recent launch of gold fund of fund (FoF) schemes by various AMCs has been one of the reasons for the rise in the AUM. Also, uncertainty in the equity market has pushed investor’s interest to invest in less risky assets class like gold via ETF route. The AUM of Gold ETF has jumped 160% from R3,516 crore in December 2010 to R9,153 crore in December 2011.

The Indian mutual fund industry comprises of 44 players, with addition of three asset management companies (IIFL, Indiabulls and Union KBC) in the year 2011.

Source: http://www.financialexpress.com/news/with-equity-debt-schemes-in-focus-mfs-may-do-well-in-12/909661/0

CRR cut puts bank stocks back on fund managers' radar

Banks are back on fund managers’ radar. With a 50 basis points (bps) cut in their Cash Reserve Ratio (CRR) and rising anticipation of reduction in key policy rates, mutual fund (MF) equity managers are taking a quick buy call on the banking counter.

In January alone, amid a bull run in the equity markets, the equity asset allocation of fund houses to banks rose by 176 bps. The development came after they had consistently reduced exposure to banks over the previous couple of months. Since June last year, this asset allocation had reduced by close to 200 bps till December. In calendar 2011, when the benchmark indices lost a fourth of their value, the bank index lost a whopping 31 per cent.

Kaushik Dani, equity head at Peerless MF, says, “There is a rising sense that interest rates have peaked out. With cuts in CRR, the next policy may see cuts in other key rates.” This will augur well for the banking sector, he adds.

Amid the overall bullish sentiment, bank indices outperformed benchmark indices and have gained close to 30 per cent since January 1. State Bank of India, ICICI Bank, Punjab National Bank and Canara Bank have gained between 25 and 45 per cent.

Aviral Gupta, equity head at Indiabulls MF, says, “Anticipation of cuts in interest rates have boosted confidence in the sector.”

Overall exposure of equity assets of MFs to banks was 17.23 per cent in January against 15.47 per cent in the previous month. In absolute terms, of all invested equity assets, Rs 32,380 crore were pumped into banks in January. Equity experts see further appreciation in bank stocks as interest rates moderate.

However, while allocating more assets to banking, fund managers have reversed gears for the information technology sector, on the back of a rising rupee.

There was a cut of 100 bps in IT exposure and it is once again back to single digit. And, in and fast moving consumer goods, asset allocation has declined 50 bps.

“Defensive stocks are now highly priced. We are choosing those stocks in the segment which have a strong growth factor,” explains an equity head.

Source: http://www.business-standard.com/india/news/crr-cut-puts-bank-stocks-backfund-managers%5C-radar/464103/