MFs make stock-specific additions in February

Not able to make your mind up on which stocks to buy and which not to? Well, when in doubt, try taking cues from the big guys.
Domestic mutual funds may have net sold equities worth Rs 1,495 crore in February, but insights into what they bought and sold can come in handy in your investment decisions, especially as these funds put together made a gross equity purchase of four times the net amount. So, wondering which stocks made it to the funds’ portfolio and which lost out? Here’s a look at what the funds did, based on end-February portfolios.

GVK Power & Infrastructure was among the most loved of all the stocks last month with more than 14 million shares of the company being accumulated by various fund houses. Idea Cellular, Exide Industries, Suzlon Energy and Chambal Fertilisers were among other stocks that found themselves in the MF buy radar.
GVK Power & Infra also topped the list of stocks that saw the highest number of funds adding it to their respective portfolios; a total of 8 fund houses added the stock. Glenmark Pharmaceuticals came in second with over four funds adding to the stock. Among other stocks that saw a good number of funds show interest were Crompton Greaves (three), Tata Chemicals (three), UltraTech Cement (three) and Allahabad Bank (two). And since these stocks are of varied sectors and market caps, it suggests that mutual fund purchases may have been driven more by the individual stock’s fundamentals and valuations than on anything else.
L&T, however, was the most sought after stock in terms of top additions (market value added) to the existing holdings of equity funds; Alstom Projects and ACC closely followed it. Among others that made it to this list were Reliance Infrastructure, Hindustan Zinc and Ranbaxy Laboratories.
But was there any new stock that got added to the funds’ portfolios? Bannari Amman Sugars, Golden Laminates, Goldstone Technologies and GTL Infrastructure marked their presence on this list.

Sugar stock Balrampur Chini found itself in a not-so-sweet spot; the stock was heavily offloaded by a handful of fund houses last month.
Much like fund purchases, the mutual funds’ selling was also oblivious of the sector and market cap preferences as even the large-cap banking major, State Bank of India, came in for selling.
Hindalco, Tube Investments, Mercator Lines and Tata Teleservices were among other stocks that were sold by the funds.
That said stocks such as Whirlpool of India, Swaraj Mazda and State Bank of Mysore suffered absolute desertion by the MF clan as funds made complete exits from them.

Source: http://www.thehindubusinessline.com/2009/03/24/stories/2009032450791000.htm

AMFI proposes to offer more choices in scheme & loads for investors

If a proposal by Association of Mutual Fund in India (AMFI) is accepted by market regulator Securities Exchange board of India (SEBI), Indian investors could see a mechanism where investors could chose between different classes of units and also the applicable expenses or load to be payable, reports Financial Express.

As per the proposal mutual funds would be segregated into different categories and investors can choose their preferred class and pay the applicable load or expense accordingly. Since each class has its own characteristics and differentiating factors of the classes would depend on the investment time horizon, amount of the investment, and investor`s personal preference. 

This comes after SEBI in January 2008 introduced a guideline directing mutual funds to not charge any entry load in case an investor approaches the fund directly and not through any broker. And later recommended another option that would involve creating separate section in the investment form which would be jointly filled by both the investor and the distributor. Here, both the investor and the distributor would decide on the quantum of commission (subject to a limit) to be paid and both the parties would sign off. The asset management company would then pay the mentioned commission.

Performance, size correlate with mutual fund flows: CRISIL

Fund flows into mutual funds in recent months, have shown a strong correlation to performance and size of fund houses. Large fund houses, with a large number of better performing funds in line with the CRISIL Composite Performance Ranking (CPR) of mutual funds are attracting higher inflows reveals a study by Crisil.
The Indian mutual fund industry`s average assets under management (AAUM) grew for the third month in succession and stood at Rs. 5.02 trillion in February 2009 as compared to Rs. 4.62 trillion in January 2009. The AAUM crossed the Rs. 5 trillion milestone in February 2009 for the first time after it dipped below this level in October 2008.
According to Krishnan Sitaraman, head, CRISIL FundServices, ``The top three fund houses, which recorded the highest increase in absolute AAUM over January and February 2009 have a large number of funds which fall in the CRISIL~CPR 1 (very good) and CRISIL~CPR 2 (good) ranking clusters and are large in size.``
These included Birla Sun Life mutual fund (11 funds of which were ranked CRISIL~CPR 1 or CRISIL~CPR 2), ICICI Prudential mutual fund (8 funds ranked CRISIL~CPR 1 or CRISIL~CPR 2) and Reliance Capital Mutual Fund (10 funds ranked CRISIL~CPR 1 or CRISIL~CPR 2).
Size appears to be a key factor determining choice, as large fund houses have recorded higher net inflows as compared to the relatively small ones, a number of which have seen lower inflows, if not net outflows.
Added Krishnan, ``With equity markets still volatile, and the economic climate uncertain, the AAUM growth currently is driven mainly by debt and liquid funds. Corporate bond yields fell in February 2009 and in such an environment, debt funds held an edge with respect to returns.``
In absolute terms, mutual funds received net inflows of Rs. 340 billion in February 2009 as against Rs. 668 billion in January 2009. Income funds received the largest share of net inflows with Rs. 199 billion followed by liquid funds worth Rs. 149 billion.
However Gilt funds witnessed net outflows of Rs. 5 billion for the first time since November 2008 as G-Sec yields rose in February 2009 adversely impacting returns from these funds. Equity funds witnessed marginal net inflows of Rs. 4 billion, a majority of which were in Equity Linked Savings Schemes (ELSS) as they constitute a tax-planning instrument.
The share of debt funds (income, gilt and liquid) in the Indian mutual funds universe has risen from 62% a year ago (February 2008) to 77% in February 2009 indicating a shift in investor preference towards debt funds due to the change in market dynamics.

Source: http://www.myiris.com/newsCentre/newsPopup.php?fileR=20090319180635196&dir=2009/03/19&secID=livenews

Hemendra Kothari sells stake, exits DSP Merrill

DSP Merrill Lynch (OOTC:MERIZ) will now be fully owned by Merrill Lynch or effectively by Bank of America (NYSE:BAC) , which had taken over Merrill Lynch for $50 billion last year. As a result, Bank of America owned 90 per cent in DSP Merrill Lynch in India.
Mr Kothari, a high-profile investment banker, is also retiring as Chairman of the company at the end of the month. Mr Kevan Watts will head the company, it is learnt.
Mr Kothari said the sale was planned around six months ago, but he had decided to wait a while. “When the time came for announcement of the merger of Merrill Lynch with Bank of America, I felt it was the right time to sell when integration is taking place across the world,” he told Business Line.
He founded the company in 1975 when it was called DSP Financial Consultants. It was named DSP Merrill Lynch Ltd in 1995 after a stake sale to the American company. Holding in MF biz
Mr Kothari will still serve as the non-executive Chairman of asset management firm DSP BlackRock Investment Managers, a joint venture between the DSP group (NASDAQ:DSPG) of firms owned by the Kothari family and New York-headquartered BlackRock Inc. (NYSE:BNY) (NYSE:BLH) (NYSE:BNJ) (NYSE:BPK) (NYSE:BBF) (NYSE:BHK) (NYSE:BFZ) (NYSE:BJZ) (NYSE:BLK)
The asset management company had acquired 40 per cent stake held by Merrill Lynch in the mutual fund DSP Merrill Lynch Fund Managers in January. The remaining 60 per cent is held by DSP Group.
After the transfer DSP Merrill Lynch was renamed DSP BlackRock Investment Managers, and their mutual fund was renamed DSP BlackRock Mutual Fund. The fund has Rs 14,000 crore in assets under management at the end of February.
The mutual fund business is expanding and the company plans to expand its employee base, said Mr Kothari. Some jobs were being cut but, in the net, one would see an addition of staff, he said.
With the day-to-day affairs of the company being managed by a professional team, he would now be free to concentrate on philanthropic activities.

Source: http://www.istockanalyst.com/article/viewiStockNews/articleid/3128885

Dividend-paying equity schemes fall by over 50% in Jan-Mar

The decline in the stock market has taken its toll on the dividend payout of equity schemes. Only 36 equity-oriented schemes have declared dividends in the January-March period, compared to 85 schemes in 2008.

According to data from Mutual Funds India, a mutual fund research agency, only a few schemes of ICICI Prudential Mutual Fund, HDFC Mutual Fund and Franklin Templeton have been consistent in paying dividends between 2006 and 2009.

The data reflected that dividends declared by these schemes rose consistently in the boom period of 2006 -2008. But these schemes have been hit in the current market crash and, as a result, their dividend-paying ability has eroded substantially.

For instance, Franklin India Blue-Chip Fund, which had declared dividend in the range of 30 per cent to 70 per cent during 2006-2008, has paid only 30 per cent in 2009. While HDFC Long Term Advantage Fund has pruned dividends from 60 per cent to 35 per cent, ICICI Dynamic Plan has reduced it from 20 per cent to 6 per cent.
There were other equity schemes that had a great track record of dividend payment during financial year 2006-07 and 2007-08. But most of these have paid significantly lower in 2008-09.
Birla Sun Life Tax Relief 96, which had given a staggering 1,510 per cent dividend in 2006-07 and another 200 per cent in 2007-08, has paid a dividend of only 50 per cent in 2008-09.
Equity schemes have suffered greatly in the meltdown since the market scaled its all-time high on January 8, 2008. In fact, the fall was so sharp that fund houses were unable to exit stocks. With almost negligible chance of profit-booking, fund houses have found it extremely difficult to make dividend payouts this year.
Equity-oriented schemes have reported value erosion of Rs 81,307 crore in the 11 months of the current financial year.
The unaudited financial results of mutual funds for the period ended September 2008 showed that fund houses had booked Rs 3,858-crore loss on sale of investments. Even the reserves and surpluses declined by Rs 28,900 crore on account of value erosion.
Even investors have not been enthusiastic about investing in mutual funds. Only Rs 3,580 crore was invested in this financial year so far, compared to Rs 45,927 crore during the same period in 2007-08.

Source: http://www.business-standard.com/india/news/dividend-paying-equity-schemes-fall-by-over-50-in-jan-mar/352346/

Shinsei Bank ties up with Rakesh Jhunjhunwala for mutual fund venture

Jhunjhunwala has picked up around 15% in the venture and Japan's Shinsei Bank has 75% stake in it.
One of the top proprietary investors in the country Rakesh Jhunjhunwala is said to have become the local partner for Shinsei Bank for asset management business in India. Although, this has been in the rumour mills for more than a year now, as per this report Jhunjhunwala has picked up around 15% in the mutual fund venture. Japanese financial services major Shinsei owns 75% while the remaining 10% is with Sanjay Sachdev, the India head of Shinsei Corporate Advisory Services.
The mutual fund arm Shinsei Asset Management had received Sebi approval to set shop in February and has started with a PSU debt fund. Shinsei had earlier in 2007 roped in N Sethuraman Iyer from SBI Mutual Fund where he was the chief investment officer.
As per Shinsei’s website, Iyer is the CIO of Shinsei Investments while Sachdev is the country manager-India & Regional Manager (SE Asia) – Fund Management. Piyush Surana (fomer COO of Alliance Capital) is the CEO of the firm.
This would be the second Indian entity besides the existing Shinsei Corporate Advisory Services which provides investment and corporate advisory services to financial institutions. Earlier in August 2007, it had signed a JV with UTI Asset Management Company to set up UTI International (Singapore) Pte Limited for investment management and distribution of financial products in the South East Asian region. It also had a venture with UTI in Japan under the Shinsei UTI India fund.

Source: http://in.reuters.com/article/indiaDeals/idINIndia-38598620090319

New pension scheme for MFs from April 1

The proposed opening up of the New Pension Scheme (NPS) to the organised and unorganised sectors from April 1 this year had kindled hopes among asset management companies (AMCs) of bolstering their business at a time when they have been coping with a poor appetite for equity offerings and playing second fiddle to insurance companies.
Such hopes are quickly getting doused. There is a growing realisation now that it may be a while before fund houses can take a bite of the pension cake. Sixteen years after it was first conceived, India is just weeks away from finally having a pension system that is meant for private individuals – whether employed or unemployed. From April 1, any individual will be able to start a New Pension System (NPS) account and start building a nest egg.
The Pension Fund Regulatory and Development Authority (PFRDA) has mandated six mutual fund houses to manage pension monies that Invest India Economic Foundation (IIEF), a think thank specialising in pensions, estimates could be close to $300 billion by 2019. Although fund houses are very upbeat about the prospects of the whole enterprise, their optimism is largely based on the premise that the ‘saving for pension’ habit finds roots among average Indians.
Although this is the first time that a cheap pension product will be available to average Indians, mutual fund (MF) houses and insurance companies have been selling such products for several years now. Products from insurance companies enjoy a fair degree of popularity, but only among the more upper middle-class Indians. They are beyond the reach of the man on the street — the fruit seller or the neighbourhood grocer.
For mutual fund houses, it has been a dismal scenario. There are two schemes currently available in this segment (offered by Templeton and UTI, launched in the ’90s), but put together these two schemes have only Rs 600 crore between them. But industry watchers are hopeful that the experience this time should be different.
“The government and the pension regulator will have to spend generously to popularise the pension-for-all scheme,” says Aditya Agarwal, managing director for fund research firm Morningstar. “However, I am hopeful that as financial literacy rises, it will find favour,” he said.
PFRDA chairman D Swarup says the regulator is committed to marketing the product through large ad campaigns. He points out that PFRDA had launched its first advertisement on NPS recently, but had to discontinue it due to the election code of conduct. He is hoping that banks authorised for collecting pension monies will also do their bit, in pursuit of valuable fee income.
Since MFs do not come in contact with the end customer in NPS (government will allot them a part of the collected corpus), they are not expected to splurge on advertising. But since the investor has the choice to select his asset manager, MFs would do well to raise awareness about the product, financial planners say. In addition to this, fund managers should take the effort to educate the investor in forums like investor meets, as PV Subramanyam, a veteran financial trainer who has been advising individuals on their pension requirements, puts it.
The other major issue with NPS, for some, is its legal standing. Officials in the six MFs — UTI Retirement Solutions, SBI, ICICI Prudential Life Insurance, Reliance Capital, IDFC AMC and Kotak Mahindra AMC — agreed that NPS has its basics in place. But at least one chief executive pointed out that with the PFRDA Bill yet to be approved by Parliament, the pension watchdog’s punitive powers have been restricted as compared to other regulators such as Sebi or Irda.
“If I buy pension from an insurance company or a fund house and I have complaints, I can seek help from Irda or Sebi. But if I have issues with NPS whom do I turn to? PFRDA does not have any legal standing,” the official said. He pointed out that the current NPS is, at best, a private contract between the government and applicant. But Mr Swarup counters this, saying that the question is “absurd,” considering that the government has vested powers with the regulator which provides it with enough teeth.
Market experts say that India may not have timed it worse for launching a new pension plan with the government unable to change any laws or spend on ads and the fall in market draining all appetite for investment products. But IIEF director and renowned pension expert, Gautam Bharadwaj, disagrees. “We are nearly at the bottom end of the market and investing at these levels should help in delivering good returns in the long term,” he says. It would not be far-fetched to expect a better performance than those from India Post or bank deposits, that should help popularise the product in the long term, he adds.
Other experts point out that the upcoming pension plan is a product with the longest tenure in the Indian markets (30-40 years) and is still the cheapest managed product available. (NPS money is to be managed at 0.09 paisa per Rs 100 that is cheaper than even liquid mutual funds. ) They feel that this along with portability (investors can change fund manager at no cost), a wide choice available in selecting where the money is invested and transparency should help in the product finding favour in due course.
For years, insurance companies have been stealing the thunder from fund houses for mobilising investments from the public. If all goes according to the script, this may just be the one channel where mutual funds may be able to beat insurance companies at their own game.

Source: http://economictimes.indiatimes.com/Personal-Finance/New-pension-scheme-for-MFs/articleshow/4279357.cms

MFs’ Nifty futures exposure up 2.5 times in 1 year

Nifty--the darling of the trader and investor community in Indian equity markets--is on the radar of the mutual fund managers. Fund houses
increased their exposure to Nifty derivatives from Rs 1,225 crore, or 0.65 per cent of the total assets under management under equity, balanced and ELSS funds, to Rs 1,827 crore, or 1.64 per cent, in February. This amounts to 2.5 times increase in the quantum of derivative exposure, an analysis of the data provided by valueresearchonline.com about fund holdings since March ’08 till February ’09 reveals. Says a fund manager under the condition anonymity, “Normally when one takes exposure to Nifty futures the possibility of under-performance is very low. In fact, there is a case wherein Nifty futures trades at a discount to the spot. And this is primary advantage one has while taking exposure to Nifty futures. Even the transaction costs involved in buying Nifty futures is marginal.” Another factor that has resulted in the increased exposure to Nifty derivatives is the uncertainty in the performances of sectors. The number of schemes that took exposure to Nifty derivatives also increased from 12 to 30 over the same period. Though the participating schemes have grown multi-fold the exposure has gone up by 50 per cent, thanks to the market meltdown. DSP Blackrock (6schemes) and ICICI Prudential (9 schemes) are the two prominent players that took exposure to Nifty derivatives as on Feb 28, 2009. DSP Blackrock increased Nifty derivative exposure from Rs 293.83 in five schemes in March ’08 to Rs 611 crore in six schemes in February 2009. On the other hand, ICICI Prudential AMC raised Nifty derivative exposure from Rs 1003 crore in five schemes in March 08 to Rs 1048.86 crore in nine schemes in February 2009. Gradually unwind and then move to individual stocks, identification, higher returns, buy Nifty, with the market, convert into individual stocks. It gives you a breathing space. “Rising exposure to Nifty derivatives is an outcome of the pressure to perform in sync with the market at a situation where there is comprehensive volatility in the market,” says a mutual fund expert with a leading wealth management set up. The performance pressure on the fund houses led to tactical changes in portfolio constitution in accordance with the market movement. As on Nov 28, 2008, the exposure to Nifty derivatives reached the maximum at Rs 2434 crore at a time when the Nifty gained more than 9 per cent from the all time low of 2524 recorded on October 27, 2008.
Says Sidharth Bhamre, fund manager, PMS and derivative analyst at Angel Broking, “Fund managers do have pressure to perform in these market conditions. In a bull market, when all goes smooth, taking risk in terms of going for momentum stock exposures works for many. But in a falling market, even with the market you don’t earn. And considering that now the Nifty available at a forward of P/E of 9, it makes more sense to take exposure to Nifty index rather than individual stocks from a valuation perspective.”

Source: http://economictimes.indiatimes.com/articleshow/4272050.cms?flstry=1