SEBI wants AMCs to launch pension products.

Market regulator Securities and Exchange Board of India today said fund houses should launch pension products, so that retirement money can be brought into the capital market.

Noting that retirement and pension money is not coming to the market, Sebi Chairman U K Sinha wondered why asset management companies (AMCs) are not launching funds aimed at attracting pension money.

"Retirement and pension money is not coming into the market. It is legally possible that retirement money can be invested in the markets ... why are AMCs not able to launch pension funds?" Sinha said at India Investment Conference here.

"We are passing through very difficult times. Margins and volumes and flow of fresh money are coming down. What you do in such a situation? We need to start taking measures," Sinha said, adding that level of participation in the markets by households is very low.

In future, Sinha said, Sebi will be regulating alternative investments. "Currently we are looking at regulations on distributors and investor advisers."

About 50 per cent of mutual fund business is done through distributors who are not regulated at all, he said.

On the proposed new IPO norms, Sinha said, "We are looking at a review of the entire IPO process, as to who would participate, and in what manner and how to reduce the timelines."

Replying to query on insider trading norms, Sinha said, "We will take strict action against market manipulators."

Source: http://articles.economictimes.indiatimes.com/2012-01-13/news/30623887_1_pension-funds-pension-money-pension-products

CFO Rahman named UTI AMC acting CEO

The Board of UTI Asset Management Company (UTI AMC) has appointed its Chief Finance Officer Imtaiyazur Rahman as the acting CEO with immediate effect till the appointment of a new chairman and managing director. The company has been headless for nearly a year since its former CMD UK Sinha quit in February 2011.

"Rahman will look after the day-to-day operations, working closely with the rest of the senior leadership team," the company said in a statement. The Board has also appointed PN Venkatachalam, retired managing director of SBI, as an independent director. Rahman is a member of the four-member management committee of the mutual fund. The shareholders of UTI AMC were on a collision course over the selection of a new CMD, with LIC, State Bank of India, Bank of Baroda and Punjab National Bank on the one side, and the US-based global investment management company T Rowe Price on the other.

The bone of contention between the state-owned financial institutions and T Rowe Price was the inclusion of Jitesh Khosla, a 1979-batch IAS officer, in the panel of prospective candidates to be interviewed by the shareholders. It is learnt that Khosla, who is the brother of Omita Paul, adviser to Finance Minister Pranab Mukherjee, was not in the shortlist prepared by the Board’s human resources committee. Khosla, who was until recently with Indian Institute of Corporate Affairs, an institution under the Ministry of Corporate Affairs, is currently additional chief secretary of Assam.

T Rowe Price which holds 26 per cent stake in UTI AMC was in favour of bringing a professional from the mutual fund industry to head the company.

As market regulator Sebi also directed the UTI AMC not to launch any scheme till it gets a chief, the company was unable to come out with any product since last February. Sebi allowed the company to launch a new scheme only recently. Two independent directors — Anita Ramchandran (who was the acting chairperson of UTIAMC) and Prithvi Haldea — have also recently stepped down from the board citing personal reasons.

Source: http://www.indianexpress.com/news/cfo-rahman-named-uti-amc-acting-ceo/899174/0

Bonds Beating Gold for Funds on Slowest Inflation Since ’09: India Credit

Investors in India are shunning gold while adding to holdings of government bonds, betting that policy makers will cut borrowing costs as inflation slows to the least in two years. 

Assets managed by funds that buy bullion shrank 4.3 percent to 91.5 billion rupees ($1.8 billion) in December, while those that trade in rupee-denominated sovereign debt increased 17 percent to 31.2 billion rupees, according to the Mumbai-based Association of Mutual Funds in India. Gold imports by the world’s biggest buyer may slump 48 percent in the three months ending March from a year earlier, the Bombay Bullion Association said this month.

Government notes are rallying before data next week that economists predict will show wholesale prices rose 7.4 percent in December, compared with 9.11 percent in November, a sign that seven interest-rate increases last year are taming price pressures. The nation’s 10-year bonds yield 8.23 percent, 83 basis points more than the inflation forecast. China has so- called real interest rates of minus 70 basis points, while South Korea’s are minus 41.

“Indian investors’ sacred affinity toward gold will be tested by factors like real interest rates and investment opportunities in other assets,” Ritesh Jain, the Mumbai-based head of investment at Canara Robeco Asset Management Ltd. that oversees $1.3 billion, said in an interview yesterday. “Demand for gold in India may fall 25 percent to 30 percent in 2012.”

Borrowing Costs

The metal was being perceived as a hedge against inflation through last year, Jain said, as increases in wholesale prices held above 9 percent for 12 consecutive months through November. This was especially so in rural India, where banking facilities “continue to be dismal,” he said.

Funds that buy gold managed 2 percent of total assets invested by India’s investors in mutual funds at the end of December, compared with 20 percent overseen by those that trade in bonds due in less than 12 months. Debt securities with maturities longer than a year accounted for 49 percent, while equities made up 23 percent.

The nation’s interest-rate swap market suggests that borrowing costs will decline. The cost to lock in interest rates for 12 months dropped one basis point, or 0.01 percentage point, to 7.9 percent yesterday. That’s 60 basis points below the Reserve Bank of India’s 8.5 percent repurchase rate. Goldman Sachs Group Inc. predicts policy makers will cut the repo rate by 1.5 percentage points this year, while Deutsche Bank AG estimates a one percentage point reduction.

Rupee Advances

Global funds are adding to holdings of the nation’s debt securities before the central bank reviews borrowing costs on Jan. 24. International investors bought more rupee-denominated notes than they sold for a seventh consecutive trading day on Jan. 10, boosting their ownership this month by $1.8 billion to $27.8 billion, according to exchange data.

The purchases are spurring a rally in government bonds and the rupee. Yields on the nation’s benchmark 8.79 percent notes due in November 2021 have slumped 32 basis points this year after increasing 65 basis points in 2011. The yield rose two basis points to 8.25 percent yesterday, according to the central bank’s trading system.

The rupee, Asia’s worst-performing currency last year following a 16 percent slide, gained 0.6 percent yesterday to 51.585 per dollar, according to data compiled by Bloomberg. The currency has strengthened 2.9 percent in 2012, the best performance among the region’s 10 most-traded currencies.

Gold Slumps

Gold for immediate delivery, which gained 10 percent in 2011, has slid 14 percent after touching a record $1,921.15 an ounce on Sept. 6 and traded at $1,656.88 in Mumbai yesterday.

Imports of the metal may decline to 150 metric tons in the three months through March, from 286 tons a year earlier, as the rupee’s 2011 decline boosts prices, Prithviraj Kothari, president of the Bombay Bullion Association, said in an interview.

“If gold were to correct, especially in the near term, and the rupee were to remain sideways, it wouldn’t augur very well for the investor,” Lakshmi Iyer, head of fixed income and products in Mumbai at Kotak Mahindra Asset Management Co. that oversees $5.7 billion, said in an interview on Jan. 11. “Sentiment is biased toward investing in fixed income over any other asset class for now.”

The cost of protecting the debt of State Bank of India, which some investors consider a proxy for the nation, is climbing as Europe’s debt crisis dims the allure of emerging- market assets.

Cultural Factors

Credit-default swaps on the lender cost 392 basis points yesterday after touching a two-year high of 405 on Jan. 9, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in privately negotiated markets. The swaps pay the buyer face value for the underlying securities should a company fail to adhere to its debt agreements.

With Europe’s sovereign-debt crisis spreading “like a plague,” gold will continue to attract investment in 2012 because of its appeal as a haven, according to Reliance Capital Asset Management Ltd.

Demand will also be supported by cultural factors as gold is an important part of family occasions in India such as weddings, Sundeep Sikka, the Mumbai-based chief executive officer at Reliance Capital, said in an interview on Jan. 6. Hindus, who account for about 80 percent of the nation’s population, also consider buying gold auspicious during religious festivals.

‘Extremely Bullish’

“Demand for physical gold has always been strong in India,” Sikka said. “The current global macroeconomic environment is very conducive for higher gold prices. The fundamental outlook for gold remains extremely bullish.”

Slowing growth in Asia’s third-biggest economy will damp demand for bullion, according to Canara Robeco’s Jain.

Sales of passenger cars in the nation fell almost 7 percent from November to 159,325 units last month, according to data from the Society of Indian Automobile Manufacturers. Gross domestic product will rise about 7 percent in the year ending March, Prime Minister Manmohan Singh said on Jan. 8, less than a prediction of 7.5 percent he made in December.

India’s bonds have returned 1.2 percent this month, the best performance among 10 Asian local-currency debt markets monitored by HSBC Holdings Plc. The difference in yields between rupee-denominated notes due in a decade and similar-maturity U.S. Treasuries has narrowed 31 basis points in January to 631.

“With easing of inflation, people aren’t thinking of buying gold,” Chirag Mehta, Mumbai-based fund manager at Quantum Asset Management Company, a unit of Quantum Advisors Pvt. that manages about $1.1 billion, said in an interview yesterday. “Investors are thinking that bond yields have peaked and it’s a good time to invest in government bonds.”

Source: http://www.bloomberg.com/news/2012-01-12/bonds-beating-gold-for-funds-on-slower-inflation-india-credit.html

Mark to market losses lead to YoY decline in mutual fund assets

The Indian mutual fund industry's year-on-year (YoY) assets fell over 2% in 2011 to Rs 6.11 trillion as of end December 2011, due to mark to market losses in the equity category, despite net inflows of Rs 197 billion over the year, according to a study by ratings firm Crisil. This was the second consecutive year of decline in assets with the industry having logged a 6% (YoY ) decline as of December 2010. The decline in the previous year was on account of net outflows of Rs 907 billion from mutual funds.

For the calendar year 2011, assets of equity funds fell around 23% following mark to market losses in the underlying markets where the benchmark S&P CNX Nifty was down by over 24% in the year. Despite this trend, equity funds witnessed net inflows of around Rs 77 billion in 2011. In 2010, equity funds' assets had risen over 5% to Rs 2.08 trillion on the back of mark to market gains despite net outflows of over Rs 158 billion in the category. The S&P CNX Nifty had risen around 18% in 2010.

Source: http://economictimes.indiatimes.com/markets/stocks/market-news/mark-to-market-losses-lead-to-yoy-decline-in-mutual-fund-assets/articleshow/11464609.cms

Where should NRIs invest their gains from a weak rupee

The rupee was quoting at 44.8001 against the US dollar seven months ago, and has depreciated 18.28% since then. A falling rupee is not the best news for us, but it definitely is for exporters and NRI investors who will receive more rupee funds on conversion. Given the current scenario, NRIs have some good investment options to park their surplus funds.

Short term (6 months to 1 year)
Fixed income mutual funds: A range of fi xed income mutual funds offer customers the combined benefi t of attractive returns with full repatriability, low cost, convenient processing and ease of portfolio tracking. Safe investors should opt for liquid plus funds.

Bond funds/longer-duration gilt funds: They are meant for investors who are comfortable with some price uncertainty. "They can benefit from any potential capital gain arising out of any reduction in future interest rates. Also, any appreciation in the rupee over the investment period would imply additional returns," VISHAL KAPOOR, Head, Wealth Management, Standard Chartered Bank, India.

NRE deposits: "They are clearly the best option after the deregulation by RBI. Short-term deposit rates are attractive due to tight liquidity conditions in money markets while being tax free," SUTAPA BANERJEE, CEO - Private Wealth, Ambit Capital.

Medium term (1-3 years)
Balanced mutual funds/NRE deposits: You can opt for either of these instruments depending on whether the horizon is one or three years, respectively. "The choice depends on the kind of price volatility and whether the investor is seeking a guaranteed return or not," JAYANT PAI, CFP, Vice-President, Parag Parikh Financial Advisory Services.

Fixed maturity plans: They are an attractive option for customers looking to locking in at prevailing high rates. For risky investors, Indian equities may offer significant long-term opportunities. "Investors could participate through selective stocks or through a wide range of equity funds with good track record. The quarter ahead may offer selective buying opportunities for active investors, or one could choose to simply stagger investments through a defi ned period, using systematic transfer from debt to equity funds," says Kapoor.

Long term (3 years or more)
Diversified equity funds (through SIPs): They are good options at the current rates. FDs are not a good option as the uncertainty of foreign exchange movements may not be fully compensated by interest rates. "However, risk averse depositors may chits. Gold ETFs are also a oose long-term NRE deposgood option," says Pai. Investors should allocate their funds using a strategic allocation model tailored to their individual risk profi le. This should normally combine debt, equity as well as alternative assets. Clearly, debt offers a very attractive opportunity in the near term but one should also keep in perspective the attractiveness of Indian equities over the medium to long term.

Realty Check
Real estate as an investment option makes sense if you plan to return to India after some time. However, you should choose a location that is familiar to you and stick to a reputed builder, given that proximity is an issue.

From a pure investment angle too, the same caveat applies: Familiarity and reputation. Also, there is greater chance that projects of reputed builders will appreciate more than others'.

Also, as NRIs are not permitted to purchase plots of land/plantations/farm houses. Even commercial real estate is subject to a plethora of limiting regulations. Purchasing apartments or bungalows maybe the only options available.

It is difficult to give a ballpark estimate regarding returns, as it will depend on the location and various other factors.

However, as an investor you have to be cautious in the near-term since it is an interest rate sensitive sector and demand may be impacted by relatively high interest rates.

"It is imperative to find out whether one is allowed to invest in an instrument by RBI as well as by the country of their residence. For example, several bonds don't have separate clauses which allow for NRIs to invest in them," says Banerjee of Ambit Capital.

Choosing The Right Investment
Liquidity, post-tax returns, price volatility and credit risk are the crucial factors that should determine the choice of the instrument you invest in.

The amount of foreign exchange risk one is willing to undertake is also a crucial factor. Of course, the forex risk is always present in all options other than FCNR deposits.

Convenience and trust need consideration. One may choose those options where he/she can transact online. This enables easier portfolio tracking.

Suitability of the product/asset based on endogenous factors such as age, economic situation, liquidity considerations etc. are the same as those for resident Indians.

Source: http://economictimes.indiatimes.com/news/nri/nri-investments/where-should-nris-invest-their-gains-from-a-weak-rupee/articleshow/11453671.cms

US-based financial planning major enters India

With rapid increase of high net worth individuals (HNWI), India has emerged as an attractive market for wealth management. The latest entrant is Ameriprise , the largest financial planning company of the US. The 117-year old company has a client base of over 2 million in US.

At present, the company manages assets of over $600 billion through its mutual funds and life insurance companies in US and Europe. However , in India, it will start operation with financial planning for individuals having annual income of over Rs 20 lakh.

Most of the large companies that are operating in the financial planning space are either banks, life insurance companies or mutual funds. Ameriprise will be the first multi-billion dollar company which will operate only in financial planning space in the country. "This shows our commitment and seriousness to financial planning space,'' said Kim M. Sharan, president - financial planning and wealth strategies.

"With its trilliondollar economy, India is not only an important market from a business perspective, but also one where our unique approach to planning could truly transform the way consumers manages their finances," said James M Cracchiolo, chairman and CEO of Ameriprise Financial.

Sharan said, "As a financial planner we give complete solution to our clients so that they can meet their requirements when they arise.'' On the issue of slowing down of the economy and poor returns of the investments from the various class of assets, Sharan said when the market is not performing , investors need advises to maximize their returns. When the market is going up, anybody can make money and advisors are not required.

Chairman of Ameriprise India Bimal I Gandhi said to begin with, the company would start its operations from Mumbai and Delhi. Later it will expand its operation in the other parts of the country. Gandhi said before starting its operation, it has customized various models of investments . It would not copy the American model for Indian market, he said.

Source: http://timesofindia.indiatimes.com/business/india-business/US-based-financial-planning-major-enters-India/articleshow/11456573.cms