Equity funds valuation up by Rs 80,000 crore in 5 months

Encouraged by the V-shape recovery in the market value of equity portfolio, the mutual fund industry has started rewarding investors with dividends.

Data compiled by the Association of Mutual Funds in India (AMFI) suggest that equity funds portfolio valuation has risen by Rs 80,000 crore in the five months between March 31, 2009 and August 31, 2009, due to a 60 per cent recovery in the benchmark indices and over 100 per cent rise in mid-cap and small cap stocks.
Dividend payout data sourced from MutualFundsIndia.com shows 71 equity-related dividend paying schemes were back in the dividend paying list in the first half of the current financial year compared to only 4 in the financial year 2008-09. Overall, 96 equity schemes have paid dividend in the first half so far compared to 42 equity schemes in the first half of the financial year 2008-09.
Among the equity funds that paid higher dividends are Franklin India prima fund (60 per cent), Birla Sun Life basic industries fund, Reliance RSF equity fund, SBI magnum sector umbrella fund and Taurus star share fund (50 per cent each) and Principal emerging blue-chip fund, Sahara banking & financial services fund and Birla Sun Life tax relief 96 fund (40 per cent each).
Prateek Agrawal, head of equity at Bharti AXA investment managers said “It is ideal to book profits and reward investors with dividend payments, especially during the current market condition which is good. Investors usually tend to stay invested longer in equity-oriented schemes, which have this discipline.”

Further, he is expecting markets to perform reasonably well in the coming days, which could give further opportunities in terms of regular profit booking and dividend distribution.
Considering favourable market conditions so far in the current fiscal, 25 fund houses have considered dividend this time compared to only 12 same period of the previous fiscal. Among this 25 fund houses, 14 fund houses skipped dividend last year between April 2008 to September 2008.
This include Baroda Pioneer, Bharti AXA, Canara Robeco, Escorts, Fortis, ING, JP Morgan, Principal, Reliance, Religare, Sahara, Tata, Sundaram BNP Paribas and Taurus mutual fund.

Source: http://www.business-standard.com/india/news/equity-funds-valuationby-rs-80000-crore-in-5-months/370726/

'We are cautiously optimistic'

The world markets are abuzz with talks of an earlier-than-expected economic revival. Yet, it makes sense to be cautiously optimistic, Bruno Leefeels Bruno Lee, regional head, wealth management, personal financial services, Asia-Pacific, HSBC. In a conversation with ET, he articulates his views on the wealth management in India and the impact of the regulatory changes on the mutual fund pricing structure. Excerpts:

Many feel that the worst is behind us. Would you agree?
There is some positive improvement in terms of economic data in the US market and Asia. Also, the fear factor has significantly reduced. But, I think we still need to be cautious as there are things that might crop up such as the unemployment situation. Overall, I would say we are cautiously optimistic.

What has been your advice to your high networth income (HNI) clients?
We feel that one should not wait till the market touches a record high to return to investing in equity. HNIs should review and rebalance their portfolios on a regular basis to ensure that they are comfortable with their exposure to risk and the changing environment. Further, to deal with volatility in the markets, diversifying into different asset classes is crucial. In India, where fixed income has been providing attractive returns, clients should have a strategy to allocate assets among equity and fixed income. Indian investors need to understand that the fixed income environment is quite attractive and the equity market is recovering. But outside India, in the US or eurozone, interest rates are low. There is a huge pool of cash sitting on the sidelines. When people’s risk appetite increases, BRIC market will attract a lot of inflow and that will push up the market to the next level.

How do you see the recent regulations on Mutual Fund (MF) pricing structure affecting the market?
Overall, MF penetration is low in India. The regulation ensures more transparency in pricing, which we support. But the other thing to be considered is the high cost of distribution. Bulk of people’s savings are still in fixed deposits, so many are not familiar with stocks/MFs. Thus, it requires a lot of education and financial planning support. Also, unlike stocks, MF is an ongoing service and maintenance cost is high for distributors. So, we are looking at pricing it correctly without sacrificing the service quality.

As a distributor of MFs, what shape is the new charge structure likely to take?
We are thinking along the direction of giving customers a choice. Some customers may do only one transaction for a one-time fee. They could be sophisticated and require relatively limited ongoing servicing. But other customers may need more frequent updates and ongoing services, for them we could charge a certain advisory fee. The charges will also depend on their needs, which are different for customers with lower investible surplus and ones with higher investible assets. We will have to look at customer needs, behaviour and requirements to design an appropriate way within the regulatory environment.

We took some time do our research on how best this could be done and are now on the verge of launching our charge structure. We want to ensure that this is a sustainable, profitable structure, otherwise, it could kill the whole distribution.

What kind of potential do you see in the wealth management space in India?
At HSBC, we are excited about opportunities in India. Some estimate the retail segment will grow at around 10% CAGR, from 900,000 in 2007, to over 1.6 million until 2013. The country has a large young population. As education is important in India, there is a need to save for the long-term — for kids’ education and retirement. We are well positioned to provide quality wealth management services to the mass-affluent segment to help fulfil their important goals in life.

Which are the markets that seem attractive at the moment?
Our quarterly global fund managers survey indicates that the relative allocation to equity market will improve during the third quarter. At the same time, within the global equity market, Asia (excluding Japan), particularly the Greater China region, will continue to attract more inflows because of the continued growth. And recently, we have seen the market reaching a relatively high level compared to March. Sensex in India has almost doubled in about six months’ time. So that is a sign that the money is flowing back into the market.

Source: http://economictimes.indiatimes.com/articleshow/5035815.cms?flstry=1

Money flows back into MFs

If the number of draft offer documents filed with Securities and Exchange Board of India (SEBI) is any measure, mutual funds (MFs) seem particularly cheerful despite stricter new rule on entry load.
Market players say AMCs are on a high, thanks to renewed retail investor interest in equity, flow of new money and maturing of fixed deposits where wary investors had parked their funds during the recent trough.
MFs’ offer documents filed with SEBI rose 32-fold between August and September 18 from a single document filed in the seven months to July, 2009. September alone saw 22 offer documents being filed.
“This has to be because of the up move witnessed in markets and improvement in the economy. Fund houses now foresee higher retail investor interest,” said Apurva Shah, VP and Head of Research — Institutional Equity, Prabhudas Liladhar.
Though it appears that the downturn is behind, figures indicate that the market rally was initially not spurred by retail participation. There was no new money flowing into the market.
“The old money had depreciated during the downturn and investors were shying away from investing. Now, with people recovering losses made during the slowdown, they are eager to participate in the rally and invest in equity and Mutual Funds,” said Gopal Agarwal, Equity Head — Mutual Fund, Mirae Asset.
“Also, high-cost fixed deposits, in which investors had parked their funds during tough market conditions, are now going to mature and would flow to mutual fund and equity market,” said Agarwal.
Shah feels that the new SEBI norm on entry load would stem the flow of old money, as distributors would not see any incentive in channelling it into mutual funds.
Indian economy is perceived as resilient, and its cyclical nature of downturn attracts foreign institutional investments, said Agarwal, adding: “Both internal and external factors are in favour of Indian economy and markets. That is why, despite stricter norms by SEBI, MFs are buoyant.”

Source: http://www.hindustantimes.com/Money-flows-back-into-MFs/H1-Article1-456124.aspx

MFs invest Rs 40,246 cr in blue-chip companies

Money managers handling mutual funds are playing it safe and betting on the top 10 stocks in the bourses, ensuring that their funds perform in line with the overall market. In fact, these blue-chip companies are attracting 28% of mutual fund investment in the equity market.
According to a Sunday ET analysis, out of the Rs 143,860 cr being invested in stocks by mutual funds, as much as Rs 40,246 cr has been invested in just 10 scrips — Reliance Industries, Oil & Natural Gas Corporation (ONGC), Bharti Airtel, State Bank of India (SBI), ICICI Bank, Infosys Technologies , Larsen & Toubro (L&T ), Bharat Heavy Electricals (BHEL), Tata Consultancy Services (TCS) and HDFC Bank.
Significantly, the first five have an allocation of around 18% of the total equity investment of the mutual fund industry. Also, the 10 frontline stocks have high weightage in the Sensex index. Their cumulative weightage is around 59% in the Sensex in terms of market capitalisation as on September 16.
The Sunday ET analysis was done on the basis of the data provided by Value Research India, an independent investment information provider. The figures are as on August 31.

According to Kenneth Andrade, head investments at IDFC Mutual Fund, there is a correlation between the weightage of these companies in the overall market capitalization of listed entities and the investments made by the mutual fund industry.
So far as individual holdings are concerned , Reliance Industries and ONGC attracted around 4% of the total equity investment of the mutual fund industry each. Bharti Airtel, SBI, ICICI Bank and Infosys Technologies were allocated 3% of the total amount each.

Source: http://economictimes.indiatimes.com/MFs-invest-Rs-40246-cr-in-blue-chip-cos/articleshow/5034235.cms

Axis MF to unveil Short Term Fund; files offer document with SEBI

Axis Mutual Fund has filed an offer document with securities and exchange board of India (SEBI) to launch Axis Short Term Fund, an open-ended debt scheme.

The new fund offer (NFO) price for the scheme is Rs 10 per unit.

Investment objective:The scheme will endeavor to generate stable returns with a low risk strategy while maintaining liquidity through a portfolio comprising of debt and money market instruments.

Plans: The scheme offers growth and monthly dividend option. Monthly dividend option will have payout and reinvestment sub options.

Asset allocation: The scheme would invest 30-100% of asset in money market instruments and debt instruments including government securities, corporate debt, securitized debt (includes securitized debt (excluding foreign securitized debt) up to 30% of the net assets of the scheme) and other debt instruments with maturity/average maturity/residual maturity/interest rate resets less than or equal to 375 days or have put options within a period not exceeding 375 days. 0-70% in debt instruments including government securities, corporate debt, and securitized debt (includes securitized debt (excluding foreign securitized debt) up to 30% of the net assets of the scheme) and other debt instruments with maturity/average maturity/residual maturity/interest rate resets greater than 375 days. The scheme shall not invest in foreign securitized debt. Investment in derivatives will be up to 100% of the net assets of the scheme. Investment in derivatives shall be for hedging, portfolio balancing and such other purposes as maybe permitted from time to time. The scheme can invest up to 50% of net assets in foreign securities.

Minimum application amount:The minimum application amount is Rs 5,000 and in multiple of Re 1 thereafter.

Target amount:The fund seeks to collect a minimum subscription amount of Rs 10 million.
Benchmark index:The schemes performance would be benchmarked against Crisil Short Term Bond Fund Index.

Fund mangers:Sriraj Bhattacharjee and Ninad Deshpande are the fund mangers of the scheme.

Source: http://www.myiris.com/newsCentre/storyShow.php?fileR=20090919114737707&dir=2009/09/19&secID=livenews

ICICI Pru MF to launch Gold ETF; files offer document with SEBI

ICICI Prudential Mutual Fund has filed an offer document with securities and exchange board of India (SEBI) to launch ICICI Prudential Gold Exchange Traded Fund (ETF), an open-ended exchange traded fund. The new fund offer (NFO) price for the scheme is Rs 100 each plus premium equivalent to the difference between the allotment price and the face value during the NFO.

Investment objective:
ICICI Prudential Gold Exchange Traded Fund seeks to provide investment returns that, before expenses, closely track the performance of domestic prices of gold derived from the LBMA AM fixing prices. However, the performance of the scheme may differ from that of the underlying gold due to tracking error.

Asset allocation:
The scheme would invest 90-100% of asset in gold bullion and instruments with gold as underlying asset. 0-10% in debt and money market instruments (including cash& cash equivalent).

Minimum application amount:
The minimum application for issue of units shall be made for a minimum of Rs 5,000 plus in multiples of Re 1 in cash (by way of demand draft and cheque) during the NFO. After the NFO, units will be created in a minimum size of 1000 gold units through Authorised Participants and Large Investors.

Target amount:
During the NFO period of the plans under the scheme, each Plan seeks to raise a minimum subscription of Rs 1 Lakh.

Benchmark index:
ICICI Prudential Gold Exchange Traded Fund will be benchmarked against the domestic price of gold as derived from the LBMA AM fixing prices.

Fund manager:
The scheme will be managed by Chaitanya Pande.

Source:http://www.myiris.com/newsCentre/storyShow.php?fileR=20090919113111707&dir=2009/09/19&secID=livenews

Govt may halve time bar for insurance IPOs

Listing lock-in may be eased to five years, Reliance Life may be the first beneficiary.

The government is likely to allow insurance companies to list after five years of operations against the 10 years prescribed at present.

The move follows a proposal from Anil Dhirubhai Ambani Group’s Reliance Life Insurance, which is planning an initial public offer by March to raise resources and fund its expansion plan. Reliance Life will complete four years of operation and would have to wait for another six to meet the present stipulation. Reliance Capital had acquired AMP Sanmar in 2005, which started operations in 2002. So, the two companies put together have completed seven years.

Citing the guidelines, Insurance Regulatory and Development Authority (Irda) had turned down a proposal from Reliance Life to list this year and referred the case to the finance ministry. The finance ministry, in turn, had sought the law ministry’s opinion on the rules.

A ministry official said the government wanted to understand if the10-year period was the minimum stipulation or if it meant the company had to list by the time it completed 10 years of operations.

“There is one insurance company that has had discussion with the Irda on whether we will permit them to disinvest now. We said it is only the government that can reduce the tenure. Then they approached the government. The government is thinking of reducing it to five years. Therefore, they have written to us, saying we propose to make rules like this and sought our suggestions We have no particular issue,” Irda Chairman J Hari Narayan told Business Standard in an interview.

None of the private players have completed 10 years of operation, with the first licence issued to HDFC Standard Life in October 2000. If the rules are amended, of the 22 private players, at least 10 insurance companies can raise funds from the public market. Apart from Reliance and HDFC Standard Life, the list includes ICICI Prudential Life Insurance, SBI Life, Max New York Life, Kotak Mahindra Old Mutual Fund, Birla Sun Life, Bajaj Allianz Life Insurance, Metlife, ING Vysya Life Insurance Company and Tata AIG Life Insurance.

The companies would, however, be able to tap the markets only after the insurance regulator finalised its IPO guidelines, which are expected later this month. Hari Narayan said the promoters would have to reduce their stake proportionately. So, in the case of a 10 per cent dilution, the Indian partner, which has, say, a 74 per cent stake, would have to pare its holdings by 7.4 per cent, while the foreign partner’s stake would fall by 2.6 per cent.

The stipulation could, however, create complications for the foreign partner since it could lose the power to block a board resolution, which requires a minimum 26 per cent holding. The regulator is expected to address these issues in the guidelines.

Apart from the guidelines, some life insurance companies are also waiting to turn profitable to tap the markets. Barring a few players such as SBI Life, Metlife and Sahara Life, most insurance players make losses.

“Under general rules only profit making companies are allowed to go public but the Securities and Exchange Board of India has, in certain situations, allowed loss-making companies to go public but only through the book-building procedure. But it will be subject to Sebi’s guidelines,” Hari Narayan said.

Source: http://www.business-standard.com/india/news/govt-may-halve-time-bar-for-insurance-ipos/370573/

IDFC Asset Allocation Fund of Fund files offer document with SEBI

IDFC Mutual Fund has filed an offer document with securities and exchange board of India (SEBI) to launch IDFC Asset Allocation Fund of Fund, an open-ended fund of fund scheme.

The new fund offer (NFO) price for the scheme is Rs.10 per unit.

Investment objective:
The primary investment objective of the scheme is to generate capital appreciation through investment in different mutual fund schemes based on a defined asset allocation model covering both local and offshore assets.

Plans:
The scheme will offer 3 different plans -conservative asset allocation plan (Conservative AA Plan), moderate asset allocation plan (Moderate AA Plan) and aggressive asset allocation plan (Aggressive AA plan) that will offer 3 different risk profiles for investors. Conservative AA Plan will target the lowest risk profile followed by Moderate AA Plan. Aggressive AA will be the highest risk profile asset allocation.
Each plan offers both growth option and dividend option (payout and reinvestment).

Asset allocation:
The Conservative AA Plan will invest 10-15% in equity funds, 45-50% in debt funds, 45-50% in money market funds, 0% in alternate and 0-15% in money market securities.Moderate AA Plan will invest 25-30% in equity funds, 60-70% in debt funds, 0-5% in money market funds, 5-10% in alternate and 0-15% in money market securities.Aggressive AA Plan will invest 45-50% in equity funds, 35-45% in debt funds, 0-5% in money market funds, 10-15% in alternate and 0-15% in money market securities.Alternate - It will consist of allocations to offshore commodity equity funds as well as domestic Gold ETFs.

Minimum application amount: The minimum application amount for all plans (non SIP purchases) is Rs 5,000 and in multiple of Re 1 for purchases and in multiples of Re 0.01 for switches. SIP purchase - Rs 1,000 (subject to minimum of 6 installments of Rs 1,000 each).
Target amount: The fund seeks to collect a minimum subscription amount (plan level) of Rs 10 million under the scheme during the NFO period.

Load structure: The scheme will charge no entry load. But an exit load of 0.25% of the NAV shall be applicable if investors who redeem / switch out such investments within 3 months from the date of subscription applying First in First Out basis, (including investments through SIP/STP).

Benchmark index: The schemes performance would be benchmarked against Crisil MIP Blended Index.

Fund manager: The scheme will be managed by Ashwin Patni.

Source:http://www.myiris.com/newsCentre/storyShow.php?fileR=20090917135234707&dir=2009/09/17&secID=livenews