IDBI, Union Bank to foray into asset management biz in 6 mths

In a bid to diversify their operations, two state-run banks -- Union Bank and IDBI Bank -- are planning to venture into asset management space and have approached the market regulator SEBI for approval.
While IDBI Bank had filed application for licence in January this year, Union Bank of India had submitted its papers with the regulator in February.
All these proposals are at the advance stage of clearance, official sources said.
During the course of the year these banks are expected to get licence and thereafter they can start asset management, sources added.
Meanwhile, the country's third largest private sector lender, Axis Bank has already got the regulator's approval to start asset management business.
The Union Bank of India has set up an asset management firm with KBC Group of Belgium. The joint venture, in which Union Bank owns 51 per cent stake expects to start operations during the current fiscal.
Another public sector lender IDBI Bank has board approval to set up the asset management company either as a wholly-owned subsidiary or as a joint venture.
Currently, there are five mutual funds either fully or partly owned by Indian banks, along with foreign partners.
These include Baroda Pioneer Mutual Fund, Canara Robeco Mutual Fund, ICICI Prudential Mutual Fund, Principal Mutual Fund and SBI Mutual Fund.
The combined average AUM of the 30 fund houses stood at Rs 5,38,736.43 crore at the end of July as monthly AUM figures of many fund houses were not available.
Last month, the total average AUM of 35 fund houses had surged nearly five per cent to Rs 6,70,936.61 crore, according to the data available on the website of the Association of Mutual Fund of India (AMFI).
Fund houses which saw an increase in their average AUM in July include Canara Robeco MF, Deutsche MF, IDFC MF, Religare MF and LIC MF.
Some of the fund houses like HDFC MF witnessed additions of Rs 5,168.20 crore to its assets under management (AAUM), while ICICI Prudential MF's AUMs grew by Rs 3,159.09 crore in July.

Source: http://economictimes.indiatimes.com/Personal-Finance/Mutual-Funds/IDBI-Union-Bank-to-foray-into-asset-management-biz-in-6-mths/articleshow/4977898.cms

Axis AMC gets SEBI nod to launch mutual fund business

Axis Asset Management Company Limited (Axis AMC), a wholly owned subsidiary of Axis Bank Ltd, today announced that it has received the final regulatory approval from the Securities & Exchange Board of India (SEBI) to launch its mutual fund business in the country.
Axis AMC now aims to launch its first set of products in October 2009, a company statement said here.
Axis AMC will shortly be filing for both equity and debt products. These offerings should be available by October / November of this year.
"We have received SEBIs approval. The Asset Management industry in India is amongst the fastest growing financial services businesses from across the globe. With a growth rate of over 30 per cent CAGR during the last 6 years, the mutual fund business presents an interesting opportunity, Axis AMC's MD & CEO, Rajiv Anand said in a statement here.
It is a fairly crowded investment market but we think that there is great merit in delivering solutions rather than just launch products. It is this investor centric approach built on customer oriented communication, long term relationships and enduring wealth creation that will seek to differentiate Axis Mutual Fund. We will aim to be amongst the top 10 fund houses in the country within the next 4-5 years, Anand said.

Source: http://economictimes.indiatimes.com/Personal-Finance/Mutual-Funds/Axis-AMC-gets-SEBI-nod-to-launch-mutual-fund-business/articleshow/4978453.cms

Principal Large Cap Fund (G) Outperforms BSE 100 over All Time Periods

Background:

Principal PNB Asset Management Company (In Association with Vijaya Bank) Pvt. Ltd. is a joint venture between the Principal Financial Group - a Fortune 500 company, Punjab National Bank and Vijaya Bank. It has started the operation in India on September 2000. The fund house manages assets worth Rs 9450.83 crore at end of August 2009.
Principal Large Cap Fund (G) an open-ended equity scheme launched in September 2005. The Investment Objective of the scheme would be to provide capital appreciation and/or dividend distribution by predominantly investing in companies having a large market capitalization. The minimum investment amount is Rs.5000 and in multiples of Rs 500 thereafter. The unit NAV of the scheme was Rs 22.52 per unit as on 7 September 2009.
Portfolio:

The total net assets of the scheme increased by Rs 0.22 crore to Rs 428.25 crore in August 2009.
Principal Large Cap Fund (G) took fresh exposure to four stocks in July 2009. The scheme has purchased 4.99 lakh units (2.82%) of Sesa Goa, 70116 units (2.63%) of Hero Honda Motors, 8.32 lakh units (1.72%) of Allahabad Bank and 1.49 lakh units (1.16%) of GAIL (India).
The scheme exited completely from Lanco Infratech by selling 3.24 lakh units (3.05%), Bharat Petroleum Corporation by selling 2.00 lakh units (2.26%), Tata Steel by selling 1.99 lakh units (2.05%) and Cipla by selling 2.00 lakh units (1.33%) among others in July 2009.
Sector -wise, the scheme took fresh exposures in Automobiles – Motorcycles / Mopeds at 2.63%.
Sector-wise, the scheme did exit completely from Engineering at 3.05%, Steel – Large at 2.05%, Pharmaceuticals – Indian – Bulk Drugs Formulation at 1.33% and Construction at 1.23% in July 2009.
The scheme had highest exposure to Reliance Industries with 1.19 lakh units (5.48% of portfolio size) followed by State Bank of India with 1.19 lakh units (5.08%), Oracle Financial Services Software with 1.09 lakh units (3.95%) and Oil & Natural Gas Corporation with 1.40 lakh units (3.81%) among others in July 2009.
It reduced its exposure from Reliance Industries by selling 55187 units to 1.19 lakh units (by 3.81%), Bharti Airtel to 2.79 lakh units (3.11%), Tata Consultancy Services by selling 2.00 lakh units to 1.49 lakh units (1.74%) and Dabur India by selling 5.00 lakh units to 2.97 lakh units (1.68%) among others in July 2009.
Sector-wise, the scheme had highest exposure to Banks – Public Sector at 11.25% (from 8.24% in June 2009), followed by Refineries at 10.17% (17.39%), Computers - Software – Large at 8.20% (9.51%) and Mining / Minerals / Metals at 6.59% (1.59%) among others in July 2009.
Sector wise, the scheme had reduced exposure from Refineries to 10.17% (by 7.22%), Telecommunications – Service Provider to 2.68% (by 3.11%), Computers – Software - Large to 8.20% (by 1.31%) and Personal Care - Indian to 4.31% (by 1.11%) among others in July 2009.
Performance:

The performance of the scheme is benchmarked against BSE 100. The scheme has outperformed the benchmark index over all time periods.
The scheme has posted returns of 7.03% outperformed the BSE 100 that increased by 6.46% over 1 month period ended 7 September 2009. Over 3 month's period, the scheme advanced by 12.88% outperformed the BSE 100 that gained 6.39%. It rose by 22.19% outperformed the benchmark index that was up by 10.95% over 1 year period.

Source: http://www.apollosindhoori.com/Default.htm

Sensex back at 16k, India best performer among Asian peers

A renewed burst of purchases by foreign funds pushed major stock indices to a 15-month high on Monday, leading to concerns that the market has run far ahead of itself.
The Sensex of the Bombay Stock Exchange and the National Stock Exchange’s Nifty rose by over 2% on Monday and have more than doubled in the past six months, causing market watchers to wonder if stock prices have discounted the economic recovery too quickly. Many fund managers privately voiced concerns that valuations are slowly expanding into a bubble, but added that strong liquidity and a positive mood in world markets could push stock prices higher for some more time.
“In the short term, we could see the market rising further because there is lot of cash on the sidelines, awaiting a correction,” said Nilesh Shah, chief investment officer and deputy MD, ICICI Prudential AMC. “But unless this cash is deployed in the market, we are unlikely to see any deep corrections.”
The 30-share Sensex closed at 16,016.32, or 2.1% higher, and the 50-share Nifty gained 2.2% to 4782.90. Provisional data showed foreign institutional investors net bought Rs 1,060 crore worth shares on Monday and domestic institutions Rs 150 crore.
The mood in world markets was upbeat following a statement over the weekend by the G-20 grouping of major economies that financial markets were stabilising and that the global economy was improving. India was the best performer in Asia while most European markets gained between 1% and 2%. “Possibility of earnings upgrades and hopes of incremental reforms could further strengthen liquidity,” said Navneet Munot, chief investment officer of SBI Mutual Fund, which managed about Rs 35,000 crore in assets.
Dealers said market operators took advantage of the holiday in US markets today to ramp up stock prices. Despite rising stock prices, turnover has remained on the lower side, underscoring the cautious mood among players. On Monday, traded turnover in the derivatives segment was about Rs 57,000 crore while in the cash market it was Rs 23,000 crore.
Investors continued to lap up second line shares, with gainers outnumbering losers nearly 4:1 on the BSE. “It is purely a liquidity-driven rally,” said Rashesh Shah, CMD, Edelweiss Capital. “Maybe, when the quarterly numbers start coming in next month, investors could get a bit more selective,” he added. Realty stocks were the star performers, with the BSE realty index gaining over 5%. Metal, banking and automobile stocks, too, witnessed good demand while investors shunned FMCG and IT shares.

Source: http://economictimes.indiatimes.com/Market-News/Sensex-back-at-16k-outperforms-Asia/articleshow/4984390.cms

UPDATE 1-L&T eyeing DBS Chola's India fund operation-sources

The financial services unit of India's Larsen & Toubro Ltd is in talks to buy Cholamandalam DBS Finance's domestic mutual fund operation, two sources familiar with the matter said.
"We are working on their behalf," one source said, referring to L&T Finance, a wholly owned unit of L&T. "We can't share details at the moment. Let's wait for the transaction."
Officials at Cholamandalam DBS, a joint venture between India's Murugappa Group and Singapore's DBS Bank that run DBS Cholamandalam Asset Management, could not be immediately reached for comment.
Another source said Edelweiss Capital was the advisor for the asset manager.
The valuation of Indian money managers has fallen from 2007/08 highs. In June, Japan's Nomura said it would buy a stake in LIC Mutual Fund for about 2.5 percent of fund's assets.
DBS Cholamandalam had assets of about $615 million at the end of August, the company's website showed.
Valuations are likely to come under pressure even more following a recent ban on entry fees, which is widely expected to slow growth, add to distribution cost, cut profitability and delay the path to breakeven for money managers
The country's stock market regulator said in July it would abolish front-end or entry fees charged by mutual funds from Aug. 1, a move aimed at cutting costs for investors and to discourage aggressive selling.
A source in Singapore familiar with DBS said the lender has had a rethink about the India joint venture for some time. The venture laid off staff and cut the number of branches last year.
"It's about high time we do so," he said when asked if DBS was planning to divest its stake in DBS Cholamandalam. Cholamandalam DBS shares rose by the maximum daily limit of 10 percent on Monday to 63.35 rupees.
A L&T Finance official in Mumbai and a DBS spokesman in Singapore declined comment.
Senior officials at Larsen & Toubro, India's largest engineering and construction firm, had said last month the diversified company was interested in expanding its presence to asset management and insurance businesses.
Earlier this month, L&T Finance successfully raised about $200 million via a retail bond sale.
Late last year, Religare Enterprises Ltd agreed to buy Lotus Mutual Fund from Singapore state investor Temasek and London-based Sabre Capital Worldwide for about 1-2 percent of assets under management, according to media reports.
By comparison, Infrastructure Development Finance Co agreed to buy Standard Chartered's Indian fund unit for about 6 percent of assets in March 2008. And in 2007, hedge fund Eton Park paid about 13 percent of assets for a piece of Reliance Capital's fund arm.
In August, consultant McKinsey said in a report the industry was likley to witness consolidation as smaller players might not be able to withstand stress on profitability.

Source: http://in.reuters.com/article/domesticNews/idINBOM49323520090907?sp=true

Fortis Mutual Fund gives 10 pc dividend in Fortis Equity Fund

Fortis Mutual Fund today announced a 10 per cent dividend in its Fortis Equity Fund.
The record date for the declaration of this dividend is September 9, the company said in a statement here.
The unit holders registered under the dividend option of Fortis Equity Fund on this record date will be eligible to receive this dividend.
The investment objective of the Fortis Equity Fund is to generate long-term capital growth from a diversified and actively managed portfolio of equity and equity-related securities.
The scheme invests in a range of companies, with a bias towards large and medium market capitalisation companies.
The fund manager of the Scheme is Amit Nigam.

Source: http://economictimes.indiatimes.com/Personal-Finance/Mutual-Funds/Fortis-Mutual-Fund-gives-10-pc-dividend-in-Fortis-Equity-Fund/articleshow/4982598.cms

A more disciplined approach

PROFILE:

Age: 31 yrs; Dependents: Wife and a 3-year old child; Income: Rs 3.6 lakh a year

CURRENT INVESTMENTS:

Till now, I have largely been confined to mutual funds, on which I have been spending Rs 4,000 a month. This amount flows mostly to Fidelity Tax Advantage, but half of that amount I plan to redirect to Franklin India Taxshield. Also, I plan to increase my emergency fund to Rs 72,000 from Rs 25,000 by adding Rs 2,000 per month and contribute Rs 4,000 a month towards equity-linked savings schemes (ELSS). I intend to add a sum of Rs 2,000 a month to my savings.
My coverage for a life plan (term plan) is Rs 20 lakh and I have invested in a unit-linked insurance policy (Ulip), with a life cover of Rs 5 lakh. Additionally, I subscribe to a pension plan from Max New York Life. I am paying an annual premium of Rs 37,000 for a total life cover of Rs 29 lakh. I also have medical insurance of Rs 5 lakh through my employer.
A large portion of my gains were wiped out in the recent stock market crash. I was also out of a job for a short period towards the end of 2008, as a result of which I had to redeem some of my mutual fund investments.

Where should I invest the additional savings of Rs 2,000 a month that I intend to generate in future? In which investment product should my emergency fund reside? Can it be in a savings account? Problem: Your resources are limited, but needs are urgent. First, it calls for a disciplined approach to achieve the family's goals. Since the major source of income, your job, was lost last year, attention must be lavished on retaining the new one. And that brings us to addressing your concerns about an emergency fund.

EMERGENCY FUND:

An emergency fund adequate to meet all kinds of crises comes in handy to meet sudden financial needs, medical emergencies and even a loss of income. Setting this fund's limits will depend upon factors such as your family's medical profile, medical insurance and adequacy of life cover.
Since transferring the emergency fund into cash is of prime importance, you can keep it in a savings bank account. However, some part of it can be moved to a liquid plus mutual fund to earn better returns.

INVESTING ADDITIONAL SAVINGS:

Of the Rs 6,000 you plan to invest each month, put Rs 1,000 in a debt fund. After this, exhaust the exemption limit of Rs 1 lakh under Section 80C. Once this limit is exhausted, invest in a rated diversified large cap fund like BSL Frontline Equity, HDFC Top 200 and DSPBR Equity.
Proceeds from your life insurance policy should be enough to take care of your family and their financial needs and aspirations in case of any eventuality. Your present cover of Rs 29 lakh should be raised to Rs 60 lakh. Stick to term plans. As your investments accumulate, the need for this sum assured will reduce.

SHUN ULIPS:

Ulips are a combination of two components-insurance and investments. But they are not the best of both worlds. While the cost component in the premium remains the same as in term plans, the investment component is subject to high charges by insurers.

MEDICAL:

The health cover you have is dependent upon your being with the present employer. Any transition period will leave you uninsured. You should also get a medical insurance on your own that will adequately cover some basic risks.

ACHIEVING GOALS:

Assuming an inflation rate of 6.50 per cent, you will need a sum of Rs 82,150 when you retire after 27 years, which is equivalent to Rs 15,000 today. If your investments earn a return of 10 per cent per annum, then to meet all your goals, you need to increase your present contribution of Rs 6,000 per month by 10 to 12 per cent each year. Your retirement corpus will also enable you to increase your expenditure in conjunction with increasing prices.

To conlcude, you have suffered from the loss of a job, as well as booked losses on the markets and therefore are looking to guarantee an adequate amount of income from other, less risky, sources. That is commendable, shows positive intent and promises a disciplined approach that will ensure you are able to follow the path charted for you by us.

Source: http://www.business-standard.com/india/news/a-more-disciplined-approach/369183/

Govt may bear maintenance charges of low-cost pension scheme

To help workers in the vast unorganised sector have a safety net at affordable prices, the government may bear the account maintenance charges of the proposed low-cost pension scheme.

"The government is likely to bear the charge after PFRDA reaches an agreement with depository NSDL on the low-cost pension model," an official with the Pension Fund Regulatory and Development Authority told PTI.
Under the present structure, a subscriber has to pay at least Rs 470 as initial charges in the first year and Rs 350 annually to the National Securities Depository (NSDL) for maintenance of account.
"We are holding discussion with NSDL to bring the cost down and we would reach an agreement in two weeks time. Technical matters have already been sorted out," the official said.
NSDL has agreed to bring its account maintenance cost down but the regulator wants it to be lowered further, the official added.
PFRDA has been asking the government to bear the cost of maintaining accounts of policy holders under the New Pension System after it was thrown open to all citizens from May one this year. However, the proposal is still lying with the government and was not announced even in the Budget.
The unorganised sector employs about 86 per cent of the country's total workers.Both the low cost and the present model would run separately. The subscribers will have to make their choices.
"Some facilities in the present model might not be there in the low cost model. The functionality would be less in the cheaper model," the official added.
Under the present structure, a person has to deposit minimum Rs 6,000 each year into his account.
"In the low cost model the Rs 6,000 cap would be there otherwise there would be no relevance of a pension system as the amount accrued will be less," the official added.
Initially, the government launched the NPS for central government employees joining service from January 1, 2004, and later it was extended to all citizens from May one this year.
Parliament is yet to pass the PFRDA Bill. But it is expected to sail through in the Winter Session of Parliament.
There are six fund managers for all the citizens' scheme- IDFC Mutual Fund, Kotak Mahindra, SBI, UTI Asset Management, ICICI Prudential Life Insurance and Reliance MF-to manage the corpus of customers.
Besides, there are 21 PoPs of NPS, which include, State Bank of India, ICICI Bank, IDBI Bank, Oriental Bank of Commerce, Axis Bank and Union Bank of India.
PoPs are contact and collection points for customers wanting to be part of the NPS.

Source: http://www.business-standard.com/india/news/govt-may-bear-maintenance-chargeslow-cost-pension-scheme/72677/on