A mutual fund is a pool of savings contributed by multiple investors. The common fund so created is invested in one or many asset classes like equity, debt, liquid assets etc. It is called a ‘mutual’ fund because all risks, rewards, gains or losses pertaining to, or arising from, the investments made out of this savings pool are shared by all investors in proportion to their contributions.
A mutual fund is in essence a Trust with a sponsor. They are registered with SEBI (Securities Exchange Board of India) who approves the Asset Management Company (AMC) managing the fund. The AMC is under the purview of the trustees who have to ensure the fund complies with regulation.
There are some terms unique to mutual funds which investors should be aware about.
Mutual funds have become a very popular investment option in India and this trend still continues with new funds and schemes being introduced in the market regularly. Some of the key reasons why people invest in mutual funds are outlined below.
Mutual funds are open to a wide range of investors including Resident Individuals, NRIs, PIOs, HUFs, Companies, Partnership Firms, Trusts, Cooperative Societies, Banking and Non-Banking Financial Institutions, registered FIIs, QFIs etc. This is not an exhaustive list but represents the more commonly known types of investors in mutual funds in India.
Mutual funds are made easily accessible to investors. Applications can be made in the following ways.
Online transactions are becoming increasingly popular for many reasons, as mentioned below.
There are many different types of mutual funds categorised based on structure, asset class and
Mutual funds offer investors many benefits. However, the onus of making a sound investment lies on the investor. Funds should be chosen keeping in mind investment objective, liquidity requirements. investment timelines and affordability.
Market regulator SEBI has advised fund houses to depend upon their own research for portfolio sorting and to not rely solely on credit agencies for portfolio ratings. SEBI wants fund houses to have their own system of credit risk assessment. The regulator is expected to come out with more guidelines which are sectoral as well as company-specific.
There are some issues with respect to the rolling of guidelines however, SEBI is confident of resolving those and coming out with the guidelines as soon as possible. This move has been prompted due to some mutual fund schemes facing huge losses in the recent past.
2nd December 2015
Mutual funds have the norm of paying out their worth when considered for a long term investment. Though short term funds are also available, the healthy mix of strong performing funds and secure opportunities in long term mutual funds are a much lucrative option. Keeping the same in view, Principal Pnb, a mutual fund house based out of Mumbai, will be launching its first fund of funds that is aimed at long term wealth generation.
The mutual fund thus being started will be investing in principal schemes that are already in place. There will a choice of three offerings that offer various options of growth, namely - conservative, moderate and aggressive. While the first will have maximum of 30% stake in equities and the rest in fixed income, moderate option can have a 20-60% stake in performing high-cap equities. As its name suggests, the aggressive option will bank more on the equities share of the portfolio, with a stake of 70-90%.
1st December 2015
Mutual funds have slowly made their niche quite a sizable one in the investments market and are being considered more readily by the layman as compared to the scenario a few years earlier. That in turn has made institutions offering mutual funds more open towards projecting more financing into various options of investments.
The downside of the deal is that many MF institutions are not being wary about their own research in their investment regarding debt papers and are relying too much on rating agencies. In order to curb this unhealthy trend, the Securities and Exchange Board of India (SEBI) has a proposal to impose limits on how much investment can be done in a single sector and a single investee company. The concrete decisions regarding the same will be passed soon.
30th November 2015
Domestic mutual funds are continuing to receive strong inflows from investors in the last 18 months. Despite a low in the market, the ownership in Indian equities has witnessed an all-time high of around. According to the latest report by Bank of America Merill Lynch (BofA-ML), there has been an inflow of $18 billion in domestic mutual funds for 18 consecutive months.
The report also stated that despite negative sentiments and backed by strong inflows, domestic mutual funds have continued to increase at the BSE500 by 4.6%, which is an all-time high. The high inflow of 18 consecutive months has been a first in the last 15 years. Domestic mutual funds are also continuing to receive strong inflows from individual investors.
27th November 2015
Reliance Mutual Fund has filed offer document with SEBI in the aim of launching an open ended diversified equity scheme for children, ‘ Reliance Children Fund’. The new fund offer price is pretty low at Rs.10 per unit. The entry load is nil and the exit load is 1% if it is redeemed or switched before attainment of 18 years of age. There is no exit load if it is redeemed or switched after 18 years of age or after 3 years of lock in period of the policy. The scheme is aiming to collect a minimum target amount of Rs.10 crore. One can avail growth and dividend option with this scheme.
26th November 2015
SBI Mutual Fund introduced SBI Debt Fund Series B-28 for 1,100 days. This is a close ended income scheme and the NFO opens for subscription on 23rd November, 2015 and it closes on 26th November, 2015. Entry load exit load will not be applicable to this scheme. The minimum subscription amount is Rs.5,000 and thereafter in multiples of Re.1. The performance is benchmarked against Crisil Short Term Bond Fund Index. Rajeev Radhakrishnan the Fund manager. The main objective of this scheme is to provide regular income and enhance capital growth with limited interest rate risk to the investors. The investment portfolio consists of debt instruments such as government securities, PSU, corporate bonds and money market instruments maturing on or before the scheme matures.
25th November 2015
Kotak Mahindra Mutual Fund has launched a new close ended mutual fund that aims at generating income from investments in the debt markets. It will use CRISIL’s Composite Bond Fund Index as its benchmark and has been put under Deepak Agrawal who will serve as the fund manager. The scheme has a maturity period of 1102 days and will close subscriptions by the 24th of November 2015. The minimum amount that can be invested is Rs. 5,000. The investments under this scheme will be in those money market instruments that are going to mature along with this scheme or before it.
24th November 2015
Financial services group Religare Enterprises sold its 51% percent stake in Religare Invesco AMC to the foreign partner Invesco and exited the mutual fund business.
Though the exact reason for the exit was not disclosed, sources said that Religare promoters wanted to monetize a few assets to meet other financial obligations. As a consequence of the deal, Religare shares reacted negatively at the market and fell by nearly 2% this morning.
Though there has been a steady growth in Indian mutual fund industry, Religare Invesco did not see any major upsurge in its asset under management in the recent past. For the quarter ended September, its average AUM was at Rs 21,593 crore. It was only marginally higher than Rs 21,009 crore as on March 31 this year. In between in the quarter ended June, it had fallen to Rs 19,518 crore.
23rd November 2015
The newly-launched TSX NAVex Platform will facilitate purchases and redemptions of mutual funds using TMX's equities trading, clearing and settlement infrastructure. By leveraging established connectivity, systems and processes, the new platform,leveraging established connectivity, systems and processes, will provide registered dealers access to a range of investment funds. Mutual funds on the TSX NAVex platform will be visible to all participants currently trading im TSX-listed equities and ETFs.
TMX's centralized mutual fund solution tha is expected to be launched in Q2 2016 will leverage TMX's assets and capabilities, including the settlement of transactions through CDS Clearing and Depository Services Inc. TMX Equity Transfer Services is also available to provide transfer agency services.
20th November 2015
Concerned over the high pay packets of top executives at mutual fund houses, capital markets regulator Sebi wants them to lower their salaries and adopt a more cost-effective structure.
The Securities and Exchange Board of India (Sebi) has also directed fund houses to disclose the compensation paid to senior executives in the past few years, sources said.
The issue is likely to be discussed by the fund houses during the next board meeting of the industry body AMFI, which also acts as the front-end regulator for mutual funds.
The salary of top executives and commissions paid to the distributor account for the bulk of the overall costs incurred by a mutual fund. The senior executives with large pay packages at the asset management companies (AMCs) typically include CEOs, CIOs, sales heads, compliance officers and chief operating officers.
18th November 2015
Keeping in view the difficulties that are faced by cancer patients and the lack of appropriate revenue to solve the same, HDFC Mutual Fund has launched a new debt fund in consultation with the Indian Cancer Society, with a goal to raise 10 crore rupees for the benefit of cancer patients. The debt fund is worth INR 180 crore.
The tenure of the fund is fixed at five years and upon maturity, the principal would be returned to the investors. The proceeds of the fund will be transferred to the ICS. 5000 retail investors and 200 institutional investors have invested in this fund till date. With an approximate cost of treatment of INR 5 to 7 lakhs per patient, around 2-3 crore monthly outflow from the ICS allows the organisation to help around 100 new patients per year. An awareness program about this special fund and cancer in general is going to be organised by the Indian Cancer Society in Mumbai, on November 29, 2015.
16th November, 2015
Mumbai: Axis Mutual Fund filed an offer document to launch its Axis Hybrid Fund-Series 31-34, a close-ended debt scheme on Tuesday.
The scheme, which offers both growth and dividend option, will be priced at Rs.10 per unit. There will be no entry and exit load for the new scheme which aims to collect a minimum of Rs.20 crore per series.
Axis Hybrid Fund-Series 31-34 with maturity period ranging from 1 to 3 years, will be benchmarked against Crisil Short Term Bond Fund Index (85%) and CNX Nifty Index (15%) while those with a maturity period ranging from 3 to 5 years will be benchmarked against Crisil Composite Bond Fund Index (85%) and CNX Nifty Index (15%). The scheme aims to generate revenue by investments in fixed income securities in addition to ensuring capital appreciation via investments in equity instruments.
13th November, 2015
SEBI’s proposal of allowing e-commerce entities in the distribution of mutual funds among the public and institutions might sound futuristic but could encounter a few hiccups along the way. E-commerce companies have had practices that allow them to deal in products and/or services in a way that attract more customers, but it is doubtful if such practices will be condoned by SEBI.
Discounts and offers seem to work like a charm considering products and services offered online, but using the same strategy with mutual funds might not be agreeable with SEBI. While a wider base of the market can be addressed through e-commerce channels, it might be difficult for simpler forms of variables and options to be projected in the case of mutual funds. The human element in mutual funds adds to the buying or investment decision for a customer and that is a field that e-commerce partners can lose out on.
12th November, 2015
As Indians spend a lot on online shopping, SEBI wants them to add mutual funds to their cart. In this year alone, Indians are estimated to spend $9-billion (R125-billion) on online shopping.
The Securities and Exchange Board of India has planned to change its regulations in order to allow Amazon and Flipkart Online Services to offer funds alongside other products.
In a statement released by SEBI, mutual funds has received more money in the past 17 months than the preceding 12 years. gained popularity among Indian savers, Though mutual funds saving has gained popularity among Indian savers, only 3% of India's 1.2 billion people invest in them, with most preferring bank deposits or gold. By allowing e-commerce sites to sell mutual funds money managers can reach out to young investors who accustomed to shopping online, providing the industry with a new distribution channel
12th November, 2015
UTI has launched a new mutual fund called the FTIF Series XXIII-VIII (1100 Days). It is a close ended income scheme that opened for subscription on the 6th of November 2015. The subscriptions are set to close by the 20th of November 2015 and the minimum subscription amount has been set at Rs. 5,000. The company is not planning to waive off entry and exit loads from the scheme and provide returns through investments in fixed income securities.
11th November 2015
The Association of Mutual Funds of India recently launched MF Utilities, an online platform designed to simplify mutual fund investments. MF Utilities allows one to invest in multiple fund houses with a common account number, eliminating the need for paper transactions. Individuals can purchase or sell units with ease thanks to this portal and all one needs to do is contact their distributor and initiate the process. Payment can be made online in case of all transactions.
Individuals who do not have internet banking can also utilise this platform by registering on a bank mandate termed PAyEezz. Registration here enables one to sync their bank account with the Common Account Number. This new platform is destined to simplify investments for millions across the country, with convenience and simplicity assured.
9th November 2015
Sundaram Mutual Fund has introduced the second series of Sundaram Long Term Tax Advantage. This close-ended ELS scheme opens for subscription on November 03, 2015 and closes on March 15, 2016. There will be no entry or exit load applicable for the scheme. The minimum subscription for the scheme is Rs 5000.
Investing in this scheme will generate capital appreciation around a period of ten years The scheme predominantly invests in equity and equity-related instruments of companies along with income tax benefit.
6th November 2015
Among the different markets that are as volatile as they could be, UTI Opportunities Fund for large cap funds seems to be relatively a good choice. The objective of this fund is to protect their investors from markets variations unlike multi cap funds. The funds 88% portfolio is in stocks which are large cap and should not get as affected when the market turns around. This investing in larger stocks help curtail the downside way better than the BSE 100 benchmark.
4th November 2015
Mutual funds in the country have raised stakes in around 260 of the BSE- 500 listed companies. The stake for domestic mutual fund units have fallen for around 220 companies. The favorite of the fund houses still were the private banking companies like ICICI, HDFC and Axis Bank. Public players like SBI. PNB, Andhra Bank and Karnataka Bank were also among the most favorite public sector financial companies.
Stakes for companies like WonderLa Holiday and Mahindra Holiday have also gone up. Same is the case with pharmaceutical companies like Wockhardt, Ajanta Pharma and Cadilla. Combined mutual fund stake also went up for companies like SKS Microfinance, Gruh Finance, Can Fin Homes, GIC Housing Finance, Edelweiss Financial Services etc.
3rd November 2015
HDFC Mutual Fund has introduced the HDFC FMP 1121D October 2015 (1), which is a close-ended income scheme. Opened for subscription on October 28, 2015, the NFO will close on November 03, 2015. The scheme can be subscribed for a minimum amount of Rs. 5,000. There will be no entry load and exit load applicable.
The objective of this investment scheme is to generate income through debt or money market investments and Government Securities that will mature on or before the maturity date of the respective plan.
2nd November, 2015
A new close ended scheme is to be launched by Axis Mutual Fund called the Axis Hybrid Fund Series 28. The new fund offer which opens on 27th October 2015 for subscription, will have an minimum amount of Rs. 5,000 and in multiples of Rs. 10 thereafter. The NFO will be open until 10th November 2015. There will be no entry or exit loads applicable on this scheme. The scheme's objective is to create income with investments made in high quality fixed income securities on or before maturity. The scheme will be benchmarked in a combined mix of Crisil Composite Bond Fund Index (85%) and CNX Nifty Index (15%) and will headed by the fund manager Devang Shah and Ashwin Patni.
29th October 2015
Almost 56.38% of retails Assets Under Management for equity Mutual Funds are mostly dominated by Corporates and HNIs says Crisil. There are Rs. 2.12 lakh crore of retail investments in equity mutual funds, of which almost Rs. 1.20 lakh crore was held for 2 years. 22% of the HNIs by assets under management stayed invested for more that 2 years in equity mutual funds, which was lower than the previous quarter. Association of Mutual Fund in India (AMFI) has disclosed data every quarter since December 2014, instead of the earlier half yearly. The folios rose by a whopping 16.66 lakh (3.9%) in the September quarter.
28th October 2015
Many investors are not very happy with the losses in their investments in mutual funds, and that’s why investors are wanting to choose alternative systematic investment plans. Many managers are providing their clients with advice to invest in systematic investment plans which will be a change from the existing system of investing. Most of the fund houses are also offering revised systematic investment plans, HDFC Mutual Fund's Swing Systematic Transfer Plan (STP) will invest less, if the net asset value is more and will invest more when the net asset value is low. This plan is also made to redeem excess if the portfolio value is larger than the target value, if so then the amount would be reinvested in debt scheme.
27th October 2015
More foreign fund houses can be expected to leave as Nomura plans to exit LIC. The Japanese foreign investment company will be the tenth company to exit the Indian Mutual Fund market in the last 7 years if the plan goes ahead. The main concern of these foreign fund houses is overcrowding in the Indian mutual fund industry. Earlier Goldman Sachs exited the Indian MF market after selling its share to Reliance Capital which was worth Rs.13 trillion. The current Indian market is all abuzz with news about the Japanese financial giant Nomura not renewing its 5 year contract with the Life Insurance Corporation of India, which is the biggest public insurance provider in the country. Since 2008, a considerable number of foreign players have left the Indian mutual fund market. In case of LIC, the fund has been existing for the past 25 years and has been doing quite well.
22nd October 2015
SEBI with it’s eye on the e-commerce market in India, has asked mutual fund schemes to be made more attractive and widely available at a cheaper cost. SEBI has even suggested that e-commerce companies to sell financial products through their platforms. Companies such as Flipkart, FundsIndia, Paisabazar.com should be able to sell mutual funds to reduce cost strucure said UK Sinha. The result of this step would be an introduction of a new category of Net Asset Value (NAV). With most mutual fund houses accepting the eKYC with taking on investors through a completely paperless process, selling of mutual funds seems to be the next step. The schemes sold online will be different than those sold through direct or distribution channels.
22nd October 2015
DHFL Pramerica Mutual Fund has introduced the DHFL Pramerica Tax Savings Fund which is a close-ended equity linked savings scheme. With an objective to enable long-term capital appreciation from equity and equity-related instruments, investors can avail tax deduction. This is amended on a timely basis, as per Sec 80C of the Income Tax Act, 1961.
A minimum of Rs. 500 is required to subscribe the DHFL Pramerica Tax Savings Fund. Thereafter, it can be renewed in multiples of Rs. 500. Benchmarking against BSE 200 Index, there is no entry or exit load on this scheme. Open from October 19, 2015, the subscription for this scheme closes on December 04, 2015.
21st October 2015
The new Chairman of the Association of Mutual Funds in India, is Leo Puri of UTI AMC. And A Balasubramanian is retained as the Vice-Chairman. In the board meeting in Mumbai late last week, the board made a decision to provide improved representation for smaller fund houses while in the progress of decision making. Currently the Mutual Fund industry is worth Rs. 13 lakh crore, and has 44 fund houses, with a range of assets under management for Rs. 1.7 lakh crore to about Rs. 30 crore
20th October 2015
SBI Mutual Fund has filed a new offer document with SEBI, the new fund is SBI Enhanced Index Fund-Minimum Variance, the fund will be a open ended equity scheme. The new fund offer will be at a unit price of Rs. 10 each, with a minimum subscription of Rs. 5, 000 and multiples of Re. 1 thereafter. The Entry load for this fund will be be applicable, there will be an exit load applied of 1 % if the exit is within 1 year from the date of allotment, and will not be applicable for exit after 1 year from the date of allotment for the scheme. The scheme will be benchmarked against the CNX Nifty Index. The objective of the fund will be to aim at optimum risk adjusted, and to provide long term capital appreciation with investments made into diversified basket of companies.
16th October 2015
When State Bank of India started to inquire with debt fund managers about their investment practices after the shock of Amtek Auto last month, they were rattled. The SBI has sent out a 6 point questionnaire asking fund managers to clarify their investment practices in liquid funds, duration and short term debt schemes, liquid plus schemes etc. Fund industry insiders say that SBI is trying to avoid another Amtek Auto default as it could be triggered if similar demands from large investors and corporate houses. The default of Amtek Auto led to two scheme of JPMorgan bearing the brunt of the fall and flight of investors that followed. Such a thing happening again will be difficult for the mutual fund industry to handle.
15th October 2015
KYC or Know your customer, requires a long clunky trail of paperwork before investing in mutual funds. Reliance Capital Asset Management Company has taken a step towards eliminating the entire paperwork with a one-time procedure. The Reserve Bank of India has rolled out an e-KYC in early 2014 for opening bank accounts, and Reliance Capital Asset Management Company has taken a leaf out of this to try the paperless KYC. All you will need to do is fill the form, sign and then upload it on the website, and also scan and upload all supporting documents. Then over a video conference call with the help of the internet you will have an in-person verification (IPV). Once this IPV is done, the mutual fund house will send you a confirmation you can then invest in not only Reliance Capital Asset Management Company schemes but all other mutual funds or any stock market intermediary.
15th October 2015
For the price of Rs. 1,196 crore Nippon Life has bought another 14% stake in Reliance Capital Asset Management Company making it the highest Foreign Direct Investment in the Indian mutual fund industry. The Japanese giant has now increased its stake from 35% to a higher 49% share in the company. The valuation of the company led by Anil Ambani is a whopping Rs. 8,542 crore or $ 1.3 billion.
13th October 2015
The Reserve Bank of India gives Yes Bank the go ahead to start their Mutual Fund Business. And will start their Asset Management Company, after seeking the approval of the Securities and Exchange Board of India. The new business will strengthen and complement their retail liabilities strategy, multi-product customer engagement and allow it to leverage its distribution network to acquire customers, it said. Yes Bank’s greatest rivals will be ICICI Bank, HDFC Bank, Axis Bank and Kotak Mahindra Bank – as well as State Bank of India
13th October 2015
HDFC Mutual Fund and Reliance Mutual Fund are said to be leaders not only in mutual funds but are now running in the frontline for acquiring Goldman Sachs Group Inc fund management business in India . Goldman Sachs has assets of approximately Rs 7,132 crore, as per sources in Goldman Sachs, as reported to Economic Times.
They also added, “"Both the suitors are in the final round of negotiations and hope to clinch the deal. However, it depends on who is more aggressive," said one of them. The deal is likely to be announced shortly. “
HDFC Mutual Fund, intends to consolidate its position with assets of Rs 1.71 lakh crore. Reliance Mutual Fund, Rs 1.53 lakh crore assets under management by the end of September 2015 is expected to make the bidding with aggression as the gap between Reliance and ICICI Mutual Fund, which is at the second rank with Rs 1.65 lakh crore worth of asset management.
12th October 2015
UTI Mutual Fund has introduced a new fixed term plan has been launched by UTI Mutual Fund called UTI Dual Advantage Fixed Term Fund Series II - III (1998 days). The new fund offer opens from 5th October 2015 and closes on 14th October 2015. The is a closed ended income scheme no entry or exit load is applicable for this scheme. Minimum subscription amount for this scheme is Rs. 5, 000. Investing in a portfolio of equity and equity related instruments to generate income and reduce volatility of interest rate is the main objective of this scheme.
9th October 2015
BNP Paribas Balanced Fund an open ended balanced scheme by BNP Paribas Mutual Fund new fund offer price is set at Rs. 10 per unit there will be no Entry load for the scheme. An Exit load will be 1.00% if redeemed or switched within the first year from the date of allotment there will be no exit load if redeemed or switched after the first year from the date of allotment.The offer of the scheme is dividend options and growth and hopes to collect an amount of Rs. 10 crores. The minimum application will be Rs. 5,000 and will be benchmarked against CRISIL Balanced Fund Index.
7th October 2015
SEBI has asked many fund houses to increase their credit research, work out better consolidated schemes and bring down costs. The Chairman of the Securities and Exchange Board of India, U.K. Sinha said at the Association of Mutual Fund of India (AMFI) annual general body meeting.
Many fund houses have also requested AMFI to revise their guidelines when it comes commision being paid in advance. AMFI has capped the upfront commission to 1% for distributors. However many large fund houses have paid much higher commissions to their chosen distributors for their business. Many fund houses such as Kotak Mahindra Asset Management Co. Ltd, IDFC Asset Management Co. Ltd, Goldman Sachs Asset Management (India) Pvt. Ltd, Religare Invesco Asset Management Co. Pvt. Ltd to name a few have sent in a joint appeal to AMFI to standardise the rules set.
5th October 2015
A bullish position was maintained by mutual funds managers on software companies, the sector has been at an all time high this August 2015 with an amount of Rs. 40,500 crore. The record during the same time last year for this sector as Rs. 26, 998. Fund managers say their allocation of the raise in software stock is due to the decline of the rupee against the US dollar.
The equity funds in software stocks as per SEBI stands at Rs. 40, 602 crore in August 2015, in comparison Rs. 38, 404 crore in the previous month.
30th September 2015
With the hope of the repo rate cut the investment in Government Securities through gilt funds is up by 14%. Almost Rs 1.26 lakh crore of debt assets have been put into Government Securities as compared to the Rs. 55,000 crore. The fund manager expectations on rate cuts due to the interest hike of the US Federal Reserve and the drop in oil and commodities, have increased in the investments of government securities.
29th September 2015
The RBI amends Infrastructure Debts Funds-Non-Banking Financial Companies (IDF-NBFCs) to take on investments in non-PPP projects and PPP projects without a project authority. Provided the infrastructure projects have completed one year of satisfactory commercial operation. Earlier the IDF-NBFCs were allowed to invest in PPP projects only post one year of completion of commercial operation and should also have the tripartite agreement with the relevant project authority.
25th September 2015
With the in-principle licence of the RBI, 90% of the Small Finance Banks will have to cut the foreign investor's share down to 49%. This cut will cause them to raise fund of up to Rs. 4,000 crore. Currently the private banks can have up to 74% of foreign investment with the approval of the Foreign Investment Promotion Board. But most of these SFBs will not be looking at tapping the public issue, since they cause pricing challenges. The SFBs are hoping for some sort of levy in terms of time to get a hold of these kinds of funds.
25th September 2015
Indian markets seem to have reinstated the faith of investors pertaining to the growth factor. Increased inflows to domestic mutual funds, to the tune of 8 billion dollars (almost INR 53,000 crores) seems to suggest that along with national investors, even international investors have become more hopeful about the stable and steady growth of Indian markets.
As per sources from Reliance Mutual Fund, the stock markets have been recording highs and domestic investors have put in large amounts of money in markets and there has been a noticeable increase in the investing ratios from foreign parties too.
22nd September 2015
The Minister of State for Finance Jayant Sinha said that the Government of India has decided to increase the cap of the Employee Provident Fund Organisation from 5% to 15%. The reason for the hike is said to be a domestic equity market stabilizer, and allowing the higher investment in pension funds by long term investors.
The EPFO manages over a $100 billion in savings which are highly invested in government bonds paying an interest rate that is fixed. Even the Prime Minister hopes to increase pensions to cover more workers. Earlier, last week, a smaller state pension fund mentioned that the government may also raise the cap on the investments in equity for government workers. The hike is expected to be 50% of the assets under the management.
23rd September 2015
At Rs.70,000 crores as at August 2015, banks’ investments in mutual funds has risen by 30% year-on-year. Last August, the figure stood at Rs.55,000 crores.
Investments made by banks is mainly in liquid schemes i.e. mostly debt schemes. This is so that banks can park their funds and earn returns without compromising on liquidity. Banks have deployed money to mutual funds given poor corporate credit demand.
Banks, as an investor category, account for 30% of mutual fund assets under management (AUM).
21st September 2015
Owing to the recent turmoil in the mutual funds market, SEBI has called for a meeting with all the credit rating agencies operating in India. The objective is to probe deeper, the rationale behind strategies that mutual fund houses employ for investing in various debt instruments. SEBI has also asked asset management companies to justify their strategies behind corporate bond investments.
In India, almost all fund houses hold debt funds until they mature, however, considering that the secondary debt market is still nascent, there is a risk of complications arising due to unexpected situations or urgent redemption requests by customers.
SEBI is also looking into the issue where companies do not disclose any negative developments regarding their credit rating.
22nd September 2015
In order to protect investor’s interests, SEBI has issued a directive to mutual fund houses requiring them to keep their trustees updated on the quality of their debt investments. If credit ratings of debt instruments change , fund houses now have to relay this information to their trustees on an immediate basis. Additionally, funds will also have to explain their investment rationales when investing in corporate debt instruments.
These tighter norms are a fallout of JP Morgan Mutual Fund’s overexposure to Amtek Auto debt papers despite the latter’s debt instruments being downgraded by rating agencies.
21st September 2015
In the wake of the JPMorgan Mutual Fund turmoil regarding over-exposure to poor quality debt papers, SEBI has got a number of mutual fund houses and listed companies under its scanner. These companies, mostly mid-caps, and fund houses have not disclosed required details about debt quality and investments in debt to investors. This includes not revealing information on debt paper downgrades and liquidity issues. Mutual fund houses investing in sub-par debt instruments of companies without disclosing adequate information to investors can lead to another situation such as with JPMorgan MF.
JPMorgan MF had material holdings in Amtek Auto debt papers which were downgraded earlier this year. When liquidity issues at Amtek began doing the rounds, JPMorgan MF restricted redemption on its schemes which had invested in Amtek. Currently, Castex Technologies is under investigation for possible manipulation of its share prices. Castex Technologies is a subsidiary of Amtek Auto.
21st September 2015
JPMorgan Mutual Fund is under fire from investors for its ambiguous redemption process. The fund house recently restricted redemption of units under two of its schemes i.e. the JPMorgan India Treasury Fund and JPMorgan India Short Term Income Fund to 1% of an investor’s outstanding units in these schemes. This was done as a precautionary measure to prevent mass liquidation of holdings as a fallout of a bad investment in Amtek Auto. Amtek Auto has been facing a liquidity crisis and its debt papers were downgraded by CARE and other rating agencies. By restricting redemptions, investors, mostly corporates seeking returns and liquidity, remain locked-in to these schemes.
Conversely, JPMorgan MF has allowed redemption of 3 large corporate holdings to the tune of Rs.300 crores. In response to this development, corporates who were restricted from redeeming their units are considering legal recourse against the fund house. The total exposure to Amtek Auto by the fund house stands at Rs.200 crores. By revising redemption rules, liquidity as an investment goal is made moot. Corporates relying on these funds are left in a lurch and resent partiality shown by the fund house to certain investors.
JP Morgan Mutual Fund’s average-AUM stood at Rs.14,684 crores in June, 2015.
10th September 2015
JPMorgan Mutual Fund’s Rs.200 crore exposure in the troubled Amtek Auto has cast doubt not only on the relevant schemes fund managers’ abilities to identify and manage funds, and the funds overall investment process, but also in the minds of investors at large. Considering how a large fund house such as JPMorgan MF maintained holdings in the troubled Amtek Auto despite the latter’s debt papers being downgraded by credit rating agencies, investors are wary of investing in schemes that invest in low-rated papers.
Companies issuing investment grade but not AAA papers will be most affected by investor wariness as they shy away from such instruments. Such companies will lose out on a channel of funding on which they could offer low interest rates. Bank lending remains an expensive proposition for most companies as interest rates remain high. Issuance of such papers witnessed a 40% growth since 2012.
Companies tend to invest in short and ultra-short term funds that provide the dual benefits of returns while maintaining liquidity. JPMorgan MF restricted redemption of units of the two schemes that invested in Amtek Auto thereby locking-in investor funds. This makes investors hesitant to opt for funds that invest in non-AAA papers.
10th September 2015
IIFL Mutual Fund will launch a new fixed income plan once it receives approvals for the same. The scheme IIFL Fixed Maturity Plan – Series 11 & 12 will be close-ended.
Key features of the scheme included no entry or exit loads and two options i.e. a dividend payout or growth option. The NFO unit price is Rs.10 and the minimum investment amount is Rs.5000. Subsequent unit purchases can be made at Re.1 or its multiples.
The fund is benchmarked against the CRISIL Liquid Fund Index, CRISIL Short-term Bond Fund Index and CRISIL Composite Bond Fund Index depending on the term of the scheme which ranges from 91 days to 1200 days.
10th September 2015
In the wake of the JPMorgan MF problems currently faced with respect to two of its debt schemes, SEBI has decided to revise rules to restrict investments by mutual funds in a single company. Currently, single company exposure is restricted to 15% (maximum of 20% subject to conditions) of the fund’s NAV. This pertains to investments made in those debt papers that have the required rating by credit agencies.
However, considering JPMorgan MF’s large investments in debt papers of Amtek Auto that were downgraded, has raised SEBI’s eyebrows. The regulator has opened investigations into the reasons why the fund house maintained such large holdings in Amtek Auto despite its debt papers being downgraded. By understanding the issues thrown up by this incident, SEBI hopes to devise necessary mechanisms to prevent other such incidents from occurring thereby protecting investors’ interests.
10th September 2015
Led by large withdrawals in the liquid funds, net outflows of Rs.467.50 billion in August 2015 were the highest ever recorded by mutual funds. This was countered by total inflows of Rs 29.63 billion for the same month.
Money market and liquid funds led the liquidation scene with an outflow of Rs.704.89 billion followed by liquidation of holdings in Gold ETFs to the tune of Rs.820 million.
Countering these were inflows into income funds at Rs.126.71 billion, equity funds, Gilt and balanced funds.
10th September 2015
AIFs registered an impressive 84% annual growth in funds available for investment. This is indicative of the amount of funds at hand for investment. However, AIFs are also hesitant, being more careful, about investments considering unfavorable past experiences. With an investment pool of about Rs.28,000 crores, it is apparent AIFs are focusing on value-based investments as opposed to purely returns-based investments.
AIFs or Alternative Investment Funds include all private fund pools viz. private equity firms, venture firms, and hedge funds. Investments are mainly in private companies that are eventually liquidated at a higher value.
Earlier this year, SEBI indicated plans to establish rules regarding AIF investments in startups and taxation thereon. These funds are primary to the startup industry’s growth.
10th September 2015
AMFI has proposed a reduction in expense ratios and disclosure requirements of AUMs of fund houses. According to these proposed reforms, AMFI hopes to bring down expense ratios so as to make mutual funds more affordable especially to investors in small towns. It will also serve to maximise returns. Parallely, it proposes that fund houses declare only retail assets under management as opposed to the current practice of disclosing overall assets under management. This will help curb mis-selling.
Proposed expense ratio cuts, if implemented, will occur in three stages. The first cut would occur in October. i.e.a cut of 10 basis points, the second cut of 10 basis points would occur in April, 2016 and a third cut of a further 10 basis points will occur in October 2016.
10th September 2015
A study by NOVONOUS has revealed that the assets under management (AUM) by mutual funds in India in 2020 will stand at Rs.25.51 trillion. This implies tremendous growth opportunities for present players and space for new players as well. This figure was arrived at by assuming a, overall CAGR of 14.97%. Open-ended funds will continue to rule the roost with a CAGR of 16% while close-ended funds also witness considerable growth at a CAGR of 8%. Interval funds will show the highest growth with a CAGR of 20%.
These growth rates are indicative based on underlying factors such as a rise in disposable income among the general population and growing investor awareness.
The report also indicated that debt funds would see the highest CAGR of 17% followed by liquid schemes at 16%.
The report provides in-depth coverage and analysis of the industry’s key players and their performances and positions vs. peers among other details.
10th September 2015
Indiabulls Value Discovery Fund, an open ended growth scheme was recently launched by Indiabulls Mutual Funds with the NFO opening for subscription on September 3, 2015 and closing on September 7, 2015. This fund will have no entry load and will come with an exit load of 1% for redemptions within one year of allotment.
Indiabulls Value Discovery Fund will have a minimum subscription amount of Rs 500 and will be benchmarked against S&P BSE 500 Index. Malay Shah and Sumit Bhatnagar will be the fund managers for this project.
The primary investment objective of this scheme is to generate capital appreciation through investments in equity and equity related securities of companies which are in the top 500 by market cap.
3rd September 2015
Several mutual funds have made a downward revision of exit loads on debt schemes in order to provide for higher liquidity to investors especially corporates. This applies largely to short and very short term funds. Corporates welcome this move given their requirement for funds for accounting purposes as the quarter-end nears. Exit loads serve as a de-facto lock-in period for a scheme considering that most investors tend to stay invested until such period as when the exit load will not apply on their scheme. By reducing exit loads, to as much as zero under many funds, investors can liquidate their holdings more easily. ICICI Prudential Mutual Fund and Axis short-term funds are among the many who have revised exit loads.
2nd September 2015
FPIs pulled out investments worth Rs.16,842 crores from India as stock markets tanked in August hitting monthly lows last seen in Nov.2011. However, domestic fund houses remain buyers zeroing in on value stocks at lower prices. Domestic funds remain confident about market fundamentals.
Foreign investors pulling out of India follows the global trend of funds withdrawing from emerging markets. India’s ratings were downgraded over concerns that proposed reforms to strengthen the economy were not happening fast enough. Upcoming global events such as the US Fed rate cut are expected to prompt further redemptions from the Indian equity market.
2nd September 2015
Investors continue to allocate funds to mutual funds despite the recent stock market volatility. Sectors that are touted to perform well are pharma, banking and telecom. The senior portfolio manager of the BNP Paribas asset management company indicated that these sectors will deliver good results based on consolidation trends in these industries and positive growth expectations. In an interview with CNBC - TV 18, he opined that macro-economic factors are favorable, creating a stable and conducive investment environment.
He observed that domestic interest in mutual funds is on the rise. This, in addition to the fact that foreign investment inflows occur during dips in the market, indicate a strong confidence in market fundamentals. Another reason for investor interest in mutual funds are the comparably unattractive returns from other asset classes viz. real estate and gold.
2nd September 2015
Despite the recent stock market crash, mutual funds have remained buyers of equity stocks, even as FPIs diluted their holdings. Domestic fund houses are clearly undeterred by the recent lows faced by the stock market which saw lowest monthly figures since 2011. This evinces their confidence in the stock market based on strong positive perception of market fundamentals. Shares worth over Rs.10,533 crore are held by mutual funds who have been pumping cash into equities regularly this year.
Equity mutual funds are preferred considering the unimpressive returns being provided by other asset classes such as gold and real estate. The total asset value of the mutual fund industry is at a record amount of Rs.13 lakh crores. Equity assets account for about Rs.4 lakh cores of this total.
2nd September 2015
A review of the country’s GDP by Emkay Global Financial Services has indicated that growth has slowed down, primarily on account of lack of interest among investors. The organisation has stated that a GDP of 7% is below the benchmark when compared to the indicators, which gave a different view of growth momentum in the country. The major reason for this difference lies in the fact that GDP is based on Value Addition whereas leading indicators are based on the output data.
The country also witnessed stable CPI and WPI inflation, with the WPI forecasted at 0-(2.0) % for the Financial Year 2016, suggesting that the nominal growth might stay below government estimations of 11.4%. The report also mentioned that factors like US Federal rate cut, strengthening of US Dollar and weakening of Indian rupee could influence RBI’s rate decisions in the coming future.
1st September 2015
JP Morgan, in response to a sharp drop in NAVs of its JP Morgan India Treasury Fund and JP Morgan India Short Term Income Fund decided to restrict redemptions on these funds. This follows a write down to the tune of Rs 200 crore by these funds with regard to Amtek Auto’s debt, which resulted in a 3.4% drop in the India Short Term Income Fund NAV and a 1.7% drop in the India Treasury Fund NAV.
JP Morgan has limited the redemption on these two schemes to less than 1% of the total number of units outstanding on any particular day of business. Following this decision JP Morgan had a mutual fund treasury estimated at Rs 2,534 and a shot term income fund of Rs 430 crore.
31st August 2015
Following a meeting between SEBI officials and members of the Association of Mutual Funds in India (AMFI), SEBI has advised Mutual Fund investors to express caution while investing in corporate bonds. This is on account of a growth in mutual fund investments issued by companies, which have attracted many investors to it.
This advice was taken by SEBI to protect small investors who could be worst hit by investments in corporate bonds, which are traditionally considered risky. SEBI recently identified certain funds having high exposure to low quality papers, which could put investments at risk. All Asset Management Companies in India are required to submit stress-test reports to SEBI for examination, in a bid to prevent risky exposures.
31st August 2015
Shares worth almost Rs.9,500 crores have been purchased this month by various mutual fund managers amid a steep correction in equity markets. The investments this month have been far higher than last month with Rs.5,442 crores pumped into the markets last month. These figures are as per the release from Securities and Exchange Board of India (SEBI).
Of the overall investment of Rs.9,490 this month, more than 3/4th of the funds were invested in the period between 24-27 August totalling at Rs.7,188 crores. During this period the benchmark index SENSEX plunged by more than 4% or 1,135 points.
The recent crash in Chinese equity markets was the prime mover for increased buying by fund managers in the Indian markets. With overseas investors selling-off their equities, mutual fund managers had been given an opportunity to buy more.
Since the BJP-led government came to power last year, fund managers have generally been bullish on stock markets and more than Rs.1 lakh crore has been pumped into equity markets in the past year.
Fund managers have also been strengthened by robust inflows through retail investors who were until last April redeeming their equities, resulting in liquidity crunches for various funds.
31st August 2015
Reliance Mutual Fund has come up with Reliance Fixed Horizon Fund XXIX-Series 5 scheme, which is a close-ended income or debt fund. Customers can subscribe for the NFO between 31st August 2015 and 7th September 2015. There are no exit or entry loads in this scheme.
Subscriptions are available for a minimum denomination of Rs.5,000 after which deposits are accepted in multiples of Re.1. Managed by Mr Amit Tripathi, this scheme is set to be benchmarked with CRISIL Composite Bond Fund.
This scheme comes with the investment objective of generating growth of capital and returns by cashing in on a diversified portfolio of securities with maturity dates falling on or before the maturity of the mutual fund scheme. The aim here is to limit volatility of state or central government securities and other types of debt/income instruments.
31st August 2015
Mutual fund industry has emerged as a major player in the domestic equity market as its total investment in equities has exceeded the investment made by overseas investors in 2015. Mutual funds have invested Rs.47,807 crores in equity markets in 2015 till date which is ten times more than Rs.4,631.57 crores invested by foreign portfolio investors.
Dinesh Khara, managing director of SBI MF said that the confidence of retail investors have increased and that they have sustained inflow of funds from small investors. He also said that they are promoting the systematic investment plan in a big way.
In the month of August, mutual funds have pumped Rs.9,490 crores in equities. Markets across Asia and Europe have fallen more than the domestic equity markets, but the Indian markets are still trading with attractive valuations.
Devan Choksey, managing director of K.R. Choksey Shares and Stock brokers said that the Indian markets are trading 15 to 16 times, China is trading at 61, 20 times for Brazil and Russia and 19 times for the US. He also added that the Indian markets are looking at attractive reversal in foreign fund flows.
31st August 2015
L&T India Special Situations Fund invest in stocks that are out of favour, undervalued or in special situations like mergers, turnaround and takeovers. The fund spots stocks that are unjustly beat and buys them as they bounce back over the long term. This approach is risky and it means that the investment horizon has to be 3 to 5 years to earn reasonable returns from the fund.
If you approach is what you think suits you, then you can invest in this fund as it has impressive track record. The 5 year return is 13.7 percent and it is on par with multi-cap funds such as Franklin Flexi-cap and is higher than its peer, Birla Sun Life Special Situations.
The funds strategy is that it follows a multi-cap approach with exposure to mid and small caps stocks which ranges from 20 to 40 percent. It does not take to cash or debt holdings when markets seem risky. Though these strategies have an aggressive stance, it is balanced out by the funds ability to alter these according to the market directions. The fund gained increasing mid-cap holdings of up to 40 percent of its equity portfolio in the year 2012. The fund currently has 80 percent of its investments in large caps, thus mitigating the risk.
Nestle stock drop due to Maggie was seen as an opportunity. The stock has bounced back sharply. Emami has been a part of the portfolio since September 2013. The stock prices of Emami has moved from Rs.430 to Rs.1,200 now. The fund bought Ranbaxy ahead of its merger with Sun Pharma in the early 2014. MCX was added to the portfolio in February 2015. The fund takes a cautious view on markets.
31st August 2015
Exchange traded Funds with G-sec Underlying (GILT-ETFs) are now part of approved investments for insurers, thanks to a notification issued by the Insurance Regulatory and Development Authority of India (IRDAI). GILT-ETFs will be issued and managed by mutual funds registered with SEBI, in a bid to ensure that the entire process is streamlined.
Insurers need to invest a certain minimum amount into these GILT-ETFs, sufficient to maintain a creation unit size, with a requirement that this investment should not fall below this size. The value of a creation unit size during investment should be less than Rs 50 lakh. GILT-ETFs were created with the objective to invest in Government securities which are traded actively in markets.
GILT-ETFs can have a maximum overall expense ratio of less than 0.50% of daily net assets under the scheme. It is upto the insurers to ensure that GILT-ETFs are invested only in domestic government securities, as per the provisions of the Insurance Act of 1938.
29th August 2015
Market-focussed offshore funds and ETFs witnessed a drop in investments in India, imitating international markets. A net inflow of $1.7 billion was observed in the June quarter of 2015, a huge drop compared to 2014, which saw investments to the tune of $5.6 billion. ETFs were the biggest contributor to this fund, with investments of $1.2 billion, compared to the $0.5 billion contribution from offshore equity funds.
The second quarter of 2015 saw overall India-centric offshore equity funds drop from $48.1 billion to $47.9 billion. International factors like a devaluation of the Yuan by China and a strong US Dollar coupled with a weak rupee have made investors cautious about investing in India, something which is evident in the drop in investments. India-centric offshore equity mutual funds and ETFs witnessed a drop of 3.4% in the last quarter, a slight improvement compared to the 3.6% drop in the MSCI India USD Index.
Indian markets witnessed global investments to the tune of $2.8 billion in the quarter ending June, down from a $7.4 billion investment last year. This drop in investment could be attributed to the negative perception of Indian markets among investors, who are wary about investing in the country in spite of a positive growth witnessed by the Indian economy.
28th August 2015
A close ended income scheme, SBI Debt Fund Series B-25 was recently launched by SBI Mutual Fund with a minimum subscription of Rs 5,000. This scheme hopes to provide a regular source of income and capital growth to investors without high risks. The investment portfolio under this would consist of debt instruments like Government securities, corporate bonds and other low risk investments.
Individuals wishing to cash in on this investment have a two day window as the NFO opens on August 26, 2015 and will close on August 27, 2015. There are no entry or exit loads under this scheme with investors having the flexibility to increase their subscriptions in multiples of Re 1.
26th August 2015
The 30-year old Kotak Mahindra Bank’s mutual fund wing, Kotak Mahindra Mutual Fund has added an open ended equity scheme known as Kotak Equity Advantage Fund. The offer was filed with SEBI last week and is currently active.
With an aim to generate long term capital growth through a diversified portfolio comprising mostly equity and equity related instruments, this scheme from Kotak Mahindra Mutual Fund will follow an investment strategy that plans to take advantage of special opportunities whenever applicable. The schemes will be benchmarked against CNX 200 and the new fund offer price will be Rs. 10 per unit. The minimum application amount is Rs. 5000 and further purchases and/or switch-ins will be at Re. 1.
25th August 2015
UTI Mutual Fund, the 12 year old organisation which has a significant footprint in the wealth creation segment of the market has recently launched two new Exchange Traded Funds this month. This will be a part of the repertoire of the mutual funds and ETF schemes already in place from the company.
These two new exchange traded funds are specifically being aimed at the cash rich Employee Provident Fund Organisation and are open ended. The two ETFs are UTI Nifty ETF and UTI Sensex ETF which will remain open for subscription till August 26, 2015 and will be traded on both the exchanges till September 3, 2015.
Post the move by SBI Mutual Fund of having an equity ETF, UTI Mutual Fund has launched these two equity ETFs to cash in on the EPFO funds.
25th August 2015
Debt mutual funds have become the most sought after investment in India in recent times, thanks primarily to their higher yields and better tax efficiency. The market has witnessed a ten-fold increase in debt mutual fund investments, rising from Rs 13,945 crore in March 2009 to Rs 1.40 trillion in 2015. This spurt is largely due to the fact that investors are moving away from traditional investments and are not afraid to take risks.
Bank interest rates have fallen over the last few years, pushing investors towards newer avenues and Debt funds have benefitted the most thanks to this movement. With bank interest rates expected to drop further, experts are of the opinion that debt funds could see more growth. The corporate sector in the country raised over Rs 4.32 trillion in the last year, thanks chiefly due to investments in corporate bonds.
While investors previously preferred AAA rated securities they are now comfortable investing in lower rated securities, primarily on account of better returns, a trend which has been on the rise in recent years. With the equity market reaching its saturation experts believe that the debt market is going to forge on ahead.
24th August 2015
Mumbai: HDFC Mutual Fund is set to change the face value of units offered under its HDFC Cash Management Fund (Savings and Call Plan), SID and KIM of HDFC Liquid Fund with effect from August 30, according to an announcement made on Friday.
HDFC Trustee Company Limited, trustee to HDFC Mutual Fund, announced changes to the face value (per unit) from Rs.10 to Rs.1000 of units provided under the regular and direct plan of HDFC Liquid Fund (open-ended Liquid Income Scheme) and HDFC Cash Management Fund (Savings Plan and Call Plan). As a result, the NAV per unit will be reset. The NAV will, however, continue to be rounded off up to four decimal points in tandem with the prevailing provisions listed in SID of the schemes. Also, the balance unit holding of the existing unit holders will be adjusted, which will, however, have little impact on the current value of holdings. In case of unit holders with less than 1 unit (after the adjustment), the balance units will be repurchased at the applicable NAV. The proceeds will then be paid sans any reference to unit holders.
24th August 2015
Equity mutual funds saw their asset base grow to new heights, with their Assets Under Management (AUM) reaching Rs 3.94 lakh crore in July, a jump of 56% compared to the same time last year. The enthusiasm of retail investors has contributed significantly to this rise, with positive results delivered by equity markets boosting investor confidence.
Equity schemes have seen fund investment of over Rs 1 lakh crore in the last year, especially after the general elections result in May 2014. This influx of money has seen mutual funds reach new heights in the country, as the 44 mutual funds operating in India crossed the Rs 13 lakh crore mark.
Poor performance of gold and a strong display by BSE Sensex which jumped by 8.6% recently have pushed people towards mutual funds, helping their assets grow to this level.
19th August 2015