Principal Large Cap Fund declares dividend

Principal Mutual Fund has declared a dividend of 15% (i.e. Rs 1.50 per unit on the face value of Rs 10) under the dividend option Principal Large Cap Fund. The record date for dividend is June 24, 2010.

All investors registered under the dividend option of Principal Large Cap Fund as on record date June 24, 2010, will receive this dividend. The NAV under the dividend plan of the scheme as on June 18, 2010 was Rs 19.970.

Principal Large Cap Fund, is an open-ended equity scheme. The investment objective of the scheme is to provide capital appreciation and/or dividend distribution by predominantly investing in companies having a large market capitalization.

Source: http://www.moneycontrol.com/news/mf-news/principal-large-cap-fund-declares-dividend_465271.html

Correction prompts MFs to raise equity exposure

Mutual funds have stepped up their equity investments over the past one month, and have been net buyers of shares, after being net sellers for the past nine consecutive months.

While a section of the fund industry is still sceptical about the future course of market, the rise in equity allocation is being attributed to a mix of value buying, short-term trading bets and deployment of new fund offer (NFO) money.

Domestic mutual funds net-bought shares worth Rs 98 crore in May. In June, the figures have risen to Rs 523 crore. Before this, mutual funds had been net buyers of equities on a monthly basis was in August 2009, when they bought Rs 570 crore of equities. Mutual funds were heavy sellers, in October ’09 and March ’10, worth Rs 5,194 crore and Rs 4,082 crore, respectively. However, absolute cash proportion rose in May to Rs 10,200 crore from Rs 9,500 crore. This could be because of several NFOs launched during the period, industry experts said.

“There is a sense of optimism that the infrastructure story will induce momentum in stocks along with an offtake in credit disbursals and industrial growth. Apart from a small rise in operating margins, which could lift the bottomlines of companies, this is a good time for investment,” said Satish Ramanathan, head of equity, Sundaram BNP Paribas Asset Management.

According to institutional brokers, fund buying has shifted from mid-cap stocks to large-caps over the past one month. Fund managers are nibbling at mid-caps, post-correction in May. Mid-cap stocks, which are highly volatile, are currently commanding an average price-to-earnings multiple of 21 times.

Going by industry sources, fund managers are increasing exposures to power, FMCG, mid-segment and commercial automobile manufacturers, pharma and two-wheeler companies.

Mutual funds are pulling out money from cement (because of waning demand for cement during rainy season), telecom, steel and banks, which are currently trading at expensive levels.

According to fund managers, the European credit crisis, which resulted in the markets correcting by a good measure, helped funds buy quality stocks at low price-levels. Bearish trends in the market over the past two months had prompted funds to remain in cash all the while. The opportunity to “bottom-fish” stocks came in mid-May, when the broader market was trading at 16,400 levels (on the Sensex). The market has gained 10% since then.

“The near 1000-point momentum over the past one month gave us some chance to churn our portfolios. We got in some of the sure-fire high-beta groups and scalped some profits. Currently, we’ve moved out of these stocks and have taken refuge, partly in slow-moving stocks and large-caps,” said the fund manager of a corporate-promoted fund house.

Another reason for the rise in mutual fund investments in the market could be the line-up of NFOs that mobilised money over the past two months. Mutual funds are in a race to launch new schemes before July 1, after which new offerings (NFOs) will be required to complete the issue within 15 days of opening for subscription.

Top fund houses like Reliance MF, HDFC Mutual, Birla Sunlife MF, UTI Asset Management, SBI Mutual, Tata MF and Axis Mutual Fund, among others had approached investors in May (and even in June) with their NFOs. As on May 31, total average AUM of equity MFs stood at Rs 2,07,162 crore, logging a 4% rise from April. While there is optimism all around, a section of the market is still cautious.

“Data from Europe and US are still bad. China is witnessing a slowdown in real estate and Japan is nursing its huge fiscal deficit. It is difficult to believe, equity funds will do well over the next few months,” said Anand Shah, head-equities, Canara Robeco Mutual Fund.

“All said, the Indian market could witness some short-term blips on account of excess liquidity (in the system) and decent corporate earnings. We are adopting a defensive strategy and are reducing our exposure to high-beta stocks,” Mr Shah added.

Source: http://economictimes.indiatimes.com/Personal-Finance/Mutual-Funds/MF-News/Correction-prompts-MFs-to-raise-equity-exposure/articleshow/6076842.cms?curpg=2

Sebi panel to look into conflict of interest in MFs

Capital market regulator the Securities and Exchange Board of India (Sebi) will form a panel to examine conflict of interests in mutual funds (MFs) between different investor classes such as retail and wealthy, said a person familiar with the plan.

The panel will review a rule permitting MFs to offer advisory services and manage different investment products under different categories, the person said. Sebi is yet to announce the formation of the panel. The latest attempt to review MF operations is part of a regulatory attempt to address complaints that retail investors in some cases are given a raw deal. MFs, besides managing retail investors’ investments, offer portfolio management services to rich clients and corporates. They also manage and advise offshore funds, pension funds, provident funds, venture capital funds, insurance funds and exchange research, creating conflict of interest.

These businesses provide income to MF houses at different rates. So, the prospects of higher income from corporates or wealthy individuals may make the asset management company (AMC) compromise the interests of retail investors. An AMC earns 1.75-2.5% as fees on its equity schemes, while in portfolio management services, it gets a share of the profit in addition to fund management fees.

“Possible conflict of interest is inherent and intrinsic to the asset management business,” says a Sebi discussion paper. “These potential conflicts may manifest themselves in many forms, including front-running, insider trading and unfair treatment to select investors.”

The regulator has been cleaning up the mutual fund business, which, despite a two-decade history, is concentrated in cities and is dependent on corporate and rich clients’ money.

It did away with the entry loads and scrapped the commissions to intermediaries.

Last week, it penalised HDFC Mutual Fund dealer Nilesh Kapadia and others for front-running in a few shares and causing notional losses.

The committee will also deliberate whether AMCs should be granted registration as a separate intermediary, without linking their registration to a particular mutual fund.

Current rules allow AMCs to offer many services if key personnel, systems, back-office, bank and securities accounts are segregated activity-wise. The current regulations have created Chinese walls, verticals across products, says the discussion paper. But conflicts can’t be resolved with separate divisions, it says. They arise not due to common people or common system, but due to conflicts at group and institutional levels. Also, many fund houses sell investment products in the name of celebrity fund managers, though they may not be involved in its management. Employees of different divisions reporting to one person also create conflict despite segregation. The committee will discuss if fair treatment, best execution and trade allocation can be ensured to all investors.

Of the 48 mutual funds, 31 offer portfolio management services, 12 have venture capital funds, five manage offshore funds. Many of the group companies of MFs are registered with Sebi as foreign institutional investors. Out of 74 India-dedicated foreign funds, 36 are managed by 22 Indian MF arms.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/Sebi-panel-to-look-into-conflict-of-interest-in-MFs/articleshow/6076834.cms

Mumbai, Delhi account for 45 pc of total equity AUM

Mumbai and Delhi together account for about 45 per cent of the total equity mutual fund assets under management (AUM), the Boston Consulting Group (BCG) and Computer Age Management Systems' (CAMS) report on the Equity Mutual Funds industry said.

India's mutual fund industry's average assets under management (AUM) is pegged at Rs 8,05,239-crore in June 2010.

According to the report, the concentration of equity AUM in the top cities is fast diminishing. The share of AUM beyond the top ten cities increased rapidly from about 10 per cent in March 2003 to about 26 per cent in March 2010.

Mumbai and Delhi together account for about 45 per cent of total equity AUM, and the top 30 cities account for about 90 per cent of total equity AUM, the report said.

"We believe that the Indian equity mutual funds industry is likely to continue growing rapidly for the next five to six years given many favourable factors such as under penetration, high economic growth rate, tax benefits such as equity linked savings schemes, and enhanced presence in household savings products," the report said.

"The mutual fund asset under management is expected to grow by 20-30 per cent over the next five year period, as compared to 35 per cent growth registered in last five years," BCG's Partner & Director, Alpesh Shah told reporters here.

Source: http://economictimes.indiatimes.com/articleshow/6075258.cms

'Large-caps may be a safer bet now'

Better safe than sorry is Anoop Bhaskar’s strategy to ride out the volatility he foresees in the market over the next three months. Mr Bhaskar, who is the head of equity at UTI Asset Management Company, expects the market to be driven by liquidity more than anything else in the short term. But he will avoid the high beta stocks, and position his portfolio defensively. In an interview with ET, he says that any upswing in major indices will be driven by large-caps that have underperformed so far.

How do you see the market playing out over the next three months?

The US economic data signals a slower recovery than expected. And, therefore, earnings growth may not be as strong as expected. Then, there are the (sovereign debt) problems in Europe. In this context, current equity valuations appear rich. However, there is a significant pool of money sloshing around the world, and that liquidity doesn’t seem to be drying up in a hurry. If you were to be a sane investor and stay in cash, you are practically getting no return for it.

It is the riskier assets — commodities — emerging market equities that are providing the kind of returns that investors expect. That money flow still has not reduced. It gets reduced whenever there are fears of a systemic breakdown. As soon as those fears subside, that money again starts looking out for riskier avenues to generate returns that satisfy investors. So, we are in a phase where valuations are neither expensive nor cheap; they are being driven by liquidity. And the flow of liquidity will determine the movement of the market and valuations.

Locally, what are the factors you would be worried of?

The three risks always in the stock market are valuations, macro-economics and liquidity. In terms of valuations, we are in a zone of neither comfort nor discomfort. In terms of liquidity, it is slightly lower because of the recent 3G auction. Globally, it remains high, despite the huge withdrawals (from Indian shares) in May and patchy inflows in June. So, liquidity doesn’t look very promising for the next one month or so. Interest rates over a 6-12-month horizon look to be trending lower. But over a 1-3-month period... it’s uncertain because of the liquidity that has been sucked out due to the 3G auction and advance tax payments. Once that money returns, liquidity should not be much of a problem.

What strategy would you follow to ride out the short-term volatility in the market?

In times like these, it’s best to be closer to the benchmarks, and move up the market-cap scale. Between a small-cap and a large-cap in the sector, we would go for the company with a larger market cap. They will be more stable and if the market falls, they will not be as volatile as small-caps.

If liquidity were to take the market higher, which set of stocks or sectors do you think are best placed to gain from it?

If you look at Nifty large-caps, the only ones that have not been able to breach their highs made in May last year are Larsen & Toubro, NTPC, Reliance Industries (RIL) and Bharti Airtel. Of these, L&T has just about managed to break that peak last week. These stocks together have around 20-22% weightage in the Nifty, and have been underperforming their peers for the past 12 months. Most other Nifty large-caps are fairly valued. So, if the Nifty has to move up in a big way, these four stocks will have to perform. They are under-owned and available at reasonable valuations.

Which are the stocks and sectors you like in this market?

On the defensive side, we like pharmaceuticals and FMCGs. For a contrarian call, we would buy Bharti at times, because everyone is really underweight on it. On the infrastructure side, construction companies have shown that they are improving their balance sheets, and with the kind of order visibility and sales visibility they would have, there will be less negative surprises on that side. As for banks, there are concerns that rising interest rates could upset the apple cart. But because of the huge weightage of banks in major indices, we would be neutral or very close to neutral on banks. IT would also be a good defensive bet, if there is an inflation scare or high interest rates. In such a scenario, the rupee would depreciate, and that would give a natural protection to IT stocks.

Which are the stocks or sectors you would steer clear of in the short term?

Many of the high beta stocks of 2008-09 are losing steam and investors are becoming wary of them. Some of the traditional high beta stocks like Suzlon, Punj Lloyd, RCom, which even professional investors would take a short-term bet on, are the stocks we would avoid, as they are showing a lot of fatigue and the risk-reward ratio is not favourable at the moment. We would look at buying large-cap cement stocks like Grasim and Ambuja, if they fall 10%., but not at current prices. We would be light on state-owned banks for the next month or two. These are all tactical calls for a short period of time.

What about the cash levels in your portfolio?

We are sitting on less than 7-8% of cash on an average across our portfolios. It could be higher in a few schemes, but that’s because those schemes could be announcing dividends shortly. We are not taking any cash calls at the moment.

Source: http://economictimes.indiatimes.com/Opinion/Interviews/Large-caps-may-be-a-safer-bet-now/articleshow/6072723.cms?curpg=2

HDFC Mid-Cap Opportunities Fund to be converted into an Open-Ended Equity Scheme

HDFC Mutual Fund has announced that HDFC Mid-Cap Opportunities Fund, a three year close ended equity scheme is being converted into an open ended equity scheme with effect from 25 June 2010.

All the provisions pertaining to close-ended scheme shall cease and those pertaining to open-ended scheme viz. subscriptions/ redemptions/switches, minimum number of investors and maximum holding by single investor, cut-off timings for subscriptions / redemptions/switches, facilities such as Systematic Investment Plan (SIP) / Systematic Transfer Plan (STP) / Flex STP / Systematic Withdrawal Advantage Plan (SWAP) / HDFC FLEXINDEX Plan / Dividend Transfer Plan/ purchase and redemptions of units through the stock exchange infrastructure, etc. shall become applicable from the Effective Date. The units of the scheme shall be available for continuous sale and repurchase on every business day at NAV based prices on an ongoing basis from the Effective Date.

HDFC Mutual Fund has decided to carry out the following changes in the scheme effective 25 June 2010 i.e. pursuant to the conversion to open ended equity scheme.

Exit Load Structure: In respect of each purchase / switch - in of units, an exit load of 1% is payable if units are redeemed / switched - out within 1 year from the date of allotment. No exit load is payable if units are redeemed / switched - out after 1 year from the date of allotment.

Investors can purchase/ redeem units of HDFC Mid-Cap Opportunities Fund on BSE StAR MF and MFSS platform from the Effective Date.

Source: http://beta.profit.ndtv.com/news/show/hdfc-mid-cap-opportunities-fund-to-be-converted-into-an-open-ended-equity-scheme-74893

SEBI bars HDFC AMC exec, three others from market

The Securities and Exchange Board of India (Sebi) today barred Nilesh Kapadia, Assistant Vice President – Equities, HDFC Mutual Fund, from participating in the securities markets for irregularities in trading. Kapadia has been with HDFC MF for the last 10 years. The regulator also asked Kapadia and HDFC MF to jointly deposit Rs 2.38 crore — losses estimated due to trading irregularities — to the Trustees of HDFC Mutual Fund within a month.

According to Sebi, the investigation revealed 38 instances over 24 days spread across the BSE and NSE during April-July 2007. In these instances, three individuals — Rajiv Ramniklal Sanghvi, Chandrakant Mehta and Dipti Paras Mehta — were placing buy/sell orders ahead of substantial buy/sell orders of HDFC AMC. Known as front-running, the three squared off their trades within the same trading session, substantially against the orders of HDFC AMC.

Source: http://www.indianexpress.com/news/SEBI-bars-HDFC-AMC-exec--three-others-from-market/635317

Tata Mutual Fund announces dividend under its scheme Tata Equity Opportunities Fund

Tata Mutual Fund has declared dividend under its scheme Tata Equity Opportunities Fund. The quantum of dividend decided for distribution will be Rs. 0.50 per unit on the face value of Rs. 10 per unit. The record date decided for declaration of dividend is 22nd June, 2010. Tata Equity Opportunities Fund is an open ended equity scheme with an investment objective to provide income distribution and medium to long term capital gains while at all times emphasizing the importance of capital appreciation. The scheme is managed by Mr. M Venugopal and benchmarked against BSE Sensex.

Source: http://finance.indiamart.com/cgi-bin/mutual_top_stories.cgi?news_headline=Tata+Mutual+Fund+announces+dividend+under+its+scheme+Tata+Equity+Opportunities+Fund+@MF031