FMCG, capital goods, bank funds glitter in June

Even though Sensex gained nearly 2 per cent in June, mutual fund schemes that were exposed to FMCG, capital goods and banks turned out to be winners while global funds as well as local ones biased towards oil & gas and metal stocks turned out to be the laggards. Just about 100 equity schemes managed to beat Sensex’s 1.85 per cent gain in June. This is the highest number of equity funds that beat Sensex in any month whenever the index rose since September 2010. In total, over 300 equity schemes gave positive returns while around 130-odd posted negatives returns in terms of net asset values.

In June, the best scheme in terms of rise in net asset value was ICICI Prudential FMCG (7.38 per cent gain), followed by Magnum Emerging Businesses (5.14 per cent), Birla Sun Life India GenNext (4.98 per cent), Infra BeES (4.69 per cent), Birla Sun Life Buy India (4.67 per cent), Magnum FMCG (4.44 per cent) and Franklin FMCG (4.21 per cent). Schemes like ICICI Prudential R.I.G.H.T., Religare Mid Cap, Sundaram Select Midcap, Axis Tax Saver, UTI MNC and HDFC Premier Multi-Cap have given between 3-4 per cent.

Mutual fund experts point out that sectors such as capital goods (6.2 per cent), FMCG (4.85 per cent), banks (2.22 per cent), power (2.2 per cent), information technology (1.77 per cent) and consumer durables (1.6 per cent) have done well, if one were to track the sectoral indices available at BSE. The performance of funds also reflect the same. For example, banking funds have given between 1.2-3 per cent gains while technology funds have registered between 0.6-2.8 per cent. But FMCG funds, which bet on a defensive sector, are clear winners.

For the last 12 months, FMCG funds are the best performers with over 20 per cent returns. In the two-year period, it is the second best category with Rs 100 invested becoming Rs 200. “Off-late, the FMCG sector has done well on occasions when the market has gone up and when the market has gone down. It is true that despite being a defensive sector, it has done well even when the market has risen,” Sankaran Naren, chief investment officer-equity, ICICI Prudential Mutual Fund.

On the flipside, global funds did poorly in June. The net asset values of funds such as DWS Global Thematic Offshore, Birla Sun Life International Equity Plan A, Mirae Asset Global Commodity Stocks, DSPBR World Mining, AIG World Gold, JP Morgan JF Greater China Equity Off-shore and Hang Seng BeES lost between 3-5 per cent in a single month.

“Globally, there were many events that kept markets volatile. While events like Greece were not new, the volatility was high. This could also be a reason why in the Indian market defensive bets such as pharma and FMCG saw investor interest,” said Ramanathan K, chief investment officer-single manager, ING Investment Management (India).

Apart from global funds, select infrastructure funds such as Canara Robeco Infra, Sahara Infra, HDFC Infra, L&T Infra, UTI Infra disappointed with poor returns. Some mid-cap and small-cap funds like L&T Midcap, HSBC Midcap Equity and Reliance Small Cap lost between 1-2 per cent in June.

Source: http://www.mydigitalfc.com/personal-finance/fmcg-capital-goods-bank-funds-glitter-june-114

DSP BlackRock launches another global fund—the Emerging Europe Fund

On 4th May, (DSP BlackRock brings its foreign funds to India), we had written on DSP BlackRock filing an offer document with the Securities and Exchange Board of India (SEBI) to launch three global funds—DSP BlackRock Latin American Fund, DSP BlackRock World Agriculture Fund and DSP BlackRock New Energy Fund. All three were open-ended fund of funds (FoF) schemes investing in international BlackRock funds.

Now, DSP BlackRock Mutual Fund has filed another offer document with SEBI to launch one more global fund—the DSP BlackRock Emerging Europe Fund. It's an open-ended FoF scheme, again investing in BlackRock's international funds.

Moneylife has been wondering whether funds that put your money in other countries offer another round of diversification. Another issue with these funds that bet on global markets is that it is hard to find the details of where exactly your money is being invested.

We had mentioned earlier that Indians have not been keen to channel their savings into domestic mutual funds—for a variety of reasons—despite the excellent performance of many schemes over the past decade. So, it comes as a surprise that fund companies think Indian savers would be keen to invest in funds for overseas markets. The number of fund houses that have planned to raise money from Indians, to invest in overseas securities, is actually turning into a torrent.

DSP BlackRock Emerging Europe Fund plans to invest in units of BlackRock Global Funds-Emerging Europe Fund (BGF-EEF). It has given a return of just 4.3% over the past five years and 17.9% since its inception (1 September 1998).

BlackRock Global Funds-Emerging Europe Fund invests in sector such as financials, energy, telecom services, materials and consumer stables, among other sectors. The fund is also benchmarked to MSCI EM Europe 10/40 (net). The benchmark has given a return of 5.6% over the past five years and 15.8% since inception, while the Sensex and the Nifty have returned 12% CAGR (compounded annual growth rate) over the past five years. Again, both these indices have returned 16% (CAGR) since 1 September 1998.

The top five holdings of BlackRock Global Europe fund are OAO Gazprom, Sberbank, Bk Pekao, Lukoil and OTP Bank.

Source: http://moneylife.in/article/dsp-blackrock-launches-another-global-fundmdashthe-emerging-europe-fund/17788.html

Mutual funds may benefit from long-term money

The finance ministry’s guidelines allowing foreign individual investors to invest in Indian mutual fund schemes should be music to the ears of the industry. Fund-starved since the entry load ban, the industry would look to tap international investors aggressively.

The finance ministry has capped the cumulative investment limit to $10 billion or Rs 45,000 crore. This will be reviewed after six months. The Securities and Exchange Board of India (Sebi) will notify the final guidelines by August 1.

As on May 31, the mutual fund industry’s total assets under management stood at Rs 731,448 crore. The entry of foreign investors is likely to make the market more vibrant.

The advantages are obvious. According to market experts, internationally, foreign retail investors hold mutual funds in their country for an average of five years. In comparison, Indian retail investors hold it for only 18-24 months. In addition, they invest larger sums. This implies more money as well as stable money. This, in turn, could increase the depth of the market.

The reverse is also true. Today, foreign institutional investors dominate the Indian equities market. Their inflows and outflows impact the benchmark indices substantially. In fact, they more or less decide the market sentiment. Since January, they have sold net equity (according to data with the exchanges) worth Rs 12,049 crore. This has dragged the markets down by more than 10 per cent.

One fear experts have is that any change in the sentiment can lead to large outflows as well, leading to redemption pressures on the scheme. This could hurt domestic investors as the net asset value of the scheme will suffer.

The new class of investors, called qualified foreign investors (QFI), will be able to invest through the depository participant route as well as the unit confirmation receipt system, which will involve custodians. QFIs can be individuals and bodies, including pension funds. Though industry players are rather upbeat about the announcement, they say they are awaiting final guidelines from Sebi regarding the same. Fund houses, too, will have to gear up to attract foreign retail investors.

While Sebi guidelines are awaited, it would be interesting to see if the market regulator separates schemes for foreign investors. For instance, even as a fund house has the same scheme today, collections from retail and institutions are kept separately. That is, ICICI Prudential Indo Asia Equity has a separate institutional and retail scheme. The question is, would foreign retail investors be allowed to invest in the Indian retail scheme or a third variant would be made available to them? Experts say this move is more beneficial for investors from smaller countries. In bigger countries, investors have the option to invest in the country through India-dedicated funds.

Source: http://www.business-standard.com/india/news/mutual-funds-may-benefitlong-term-money/441097/

Equity MFs see high net inflow since November

Contrary to claims by the industry, equity and equity-oriented mutual fund schemes have seen net inflows in six of the past seven months, according to data provided by the Association of Mutual Funds in India (Amfi).

Between November and May, net inflows into these funds was Rs 7,759 crore. In comparison, 27 companies raised Rs 6,369 crore through Initial Public Offerings in these months.

Amfi and a few asset management companies have been lobbying hard with the Securities and Exchange Board of India for incentivising distributors, on the plank that the industry has been seeing erosion of assets under management (AUM) and loss of investors after the June 2009 ban on charging investors an entry load. U K Sinha, chairman of Sebi, has said he will take measures for incentives to the distributors.

Equity diversified schemes took a lion’s share of these investments at Rs 4,558 crore. Balanced funds, which are hybrid funds with exposure to both equity and debt instruments, received Rs 1,515 crore. Equity linked savings schemes (ELSS), popular for their tax-saving nature, attracted Rs 964 crore, followed by Rs 722 crore received by exchange traded funds (ETFs). This group of funds recorded net inflows in all months except April. Gold ETFs, which are gaining popularity, recorded inflows of Rs 1,771 crore, netting inflows in each of the seven months analysed.

WHY THE CHANGE
Experts attribute the investor interest to the changing market conditions. Aditya Agarwal, managing director, Morning Star India Pvt Ltd, an international fund tracker, said the change is driven by two key factors.

“Markets are going down. People have started feeling it’s time to invest, as valuations are starting to look attractive.”

During most of 2010, the markets were in a positive mode, with the benchmark Sensex hitting an all-time high of 21,000 points in November 2010. However, over the next six months, it corrected by 12 per cent. Smaller stocks fell even more, making valuations attractive.

This has led to a turnaround in investor behaviour. Over the first 10 months of 2010, investors were busy booking profits. Only three of those 10 months saw net investments in equity funds. Experts say many investors had entered the market during the previous year’s lows, when the Sensex was in four digits — it had touched a low of 8,047 in March 2009.

“Look at when the inflows happened in mutual funds. The big inflow was in 2007-2008. So, 2008-2009, when the market was low, saw the lowest redemption as people hate booking losses. Every time the market has bounced back and when it’s riding high, people get out,” said K N Vaidyanathan, executive director, Sebi, in a recent interview (his term ends today).

Even the attitude of distributors has undergone a change over the two years following the ban on entry loads. “Immediately after the ban, fund advisors dumped mutual funds in favour of other products, as it did not earn them commission. However, most advisors have realised that MFs are an integral part of any investor’s portfolio and begun to recommend funds again,” said Agarwal of Morning Star.

Total AUM under these four categories of funds, however, were lower than the October 2010 levels, as the value of these funds have taken a hit due to the falling share prices of the underlying portfolio. The corpus of these funds fell 10 per cent from Rs 2.32 trillion to Rs 2.12 trillion, a tad lower than the Sensex fall of 12 per cent in these months.

Source: http://www.business-standard.com/india/news/equity-mfs-see-high-net-inflow-since-november/441106/

Mutual funds should decide on incentives for distributors

Abolition of entry load on mutual fund schemes was one of the best decisions by the regulator in favour of investors, says Kavasseri Narayanan Vaidyanathan , an executive director at Sebi in charge of mutual funds whose term ended on Thursday. Mutual funds should decide on incentives for distributors , in stead of middlemen dictating terms to the industry. "Entry load ban is one of the best decisions taken from an investors' point of view. Although some parts of the industry has adapted to it and adopted new strategy, a number of them even today have not adapted to the change," said Vaidyanathan in an interview with ET.

His two-year stint at the capital market regulators office ended on June 30. "Asset management companies have given away their pricing power to distributors. If they want their business plan to succeed, they will have to get it back. For large institutional investments, fund houses have given the pricing power to corporates and banks while for retail investors they have given it to the distributors." Indian fund houses, which manage equity and debt schemes with a corpus of over . 7 lakh crore, have been pinning hopes on a reversal of policy on entry loads taken by CB Bhave.

But new chief UK Sinha has ruled out rolling back his predecessor's decision but is open to incentive schemes. Entry load refers to the industry practice of passing on 2.25% of the money paid by investors to buy mutual fund units as commission to distributors. Asset management companies, which run mutual funds, have incessantly complained that distributors are no longer keen to sell mutual funds to investors. "Sebi has taken note of the fact that number of folios and assets under management has declined. So, Sebi is looking at some way to incentivise distributors in a manner it is not very costly for investors," Sinha recently said at an industry conference .

"We feel especially for those retail investors who may be first-time investors who have not entered the market at all, unless some incentive is given it will be difficult to increase the penetration of the industry." The mutual fund industry's assets under management fell 4% in fiscal 2011, compared with a gain of 47% a year earlier as distributors who could not be paid by mutual funds stopped selling mutual fund schemes. A distributor could earn a commission of three to 4% on new schemes and two to 2.5% on existing schemes prior to the ban on entry loads. It has fallen to 0.75-1 %, a recent PriceWaterhouse report said.

Sale of mutual fund products in small towns has gone down over the past two years and concentration has happened in bigger towns, it said. Along with potential incentives, the regulator has also hinted at some regulation for distributors. "The big issue before Sebi is to address mis-buying and mis-selling . Mis-buying can be dealt with through investor education and mis-selling through distributor regulation ," he said. Mr Vaidyanathan termed his stint at Sebi as very interesting. "A lot of us in life want to do public good but the probability of success is when one is in the system."

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/analysis/mutual-funds-should-decide-on-incentives-for-distributors/articleshow/9059271.cms

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