worth Rs 756.7 crore in this month (up to August 17), data with SEBI shows. The volatility in markets has hurt performance with returns from diversified equity funds slipping in August. Only 23 out of the 280-odd equity MFs have managed to post gains in the month (till August 18). The gainers too managed to deliver only single digit returns. "Valuations are a little stretched. QIPs and new issues (IPOs such as NHPC) have taken out some liquidity," said Sameer Narayan, head, equity , Fortis Investments. "The poor monsoon and the strong rally of the dollar, which made people to move away from risk, have also played a role," he said. "Markets have given strong returns and so some amount of profit booking is happening now." "Investor confidence in India has softened in recent days," according to Moody's Economy.com economist Sherman Chan. Investors are worried that poor agricultural performance could derail overall recovery, she said in her latest note on India. Though the concern on monsoon remained, the strong industrial production data has evoked a lot of optimism and it would be too early to conclude a downtrend, Fortis' Sameer said. MFs turned net buyers of equity in March. They have continued to invest in stocks after remaining on the sidelines for most of April. While net equity purchases by MFs topped Rs 2291.3 crore in May it came down to Rs 839.3 crore in June but recovered in July when net investments stood at Rs 1825.5 crore. Fund houses recorded their best performance for the year in May. More than 100 diversified equity schemes registered 30-40 % growth for the month in a strong post-election rally. However, they couldn't keep up the pace and came up with a tepid performance in June. Only 50 funds registered gains and out of this just two funds managed a growth of above 5% during the month, Value Research data shows. MFs turned in a better show in July buying equity worth Rs 22,559.5 crore, the highest in a month in 2009, SEBI data shows. TIME FOR CAUTION MFs have net sold equity worth Rs 756.7 crore in this month (up to August 17), according to SEBI data The volatility in markets has hurt MFs’ performance with returns from diversified equity funds declining in August Only 23 out of the 280-odd equity MFs have managed to post gains in the month (till August 18). However, the gainers too managed to deliver only single digit returns. http://economictimes.indiatimes.com/Personal-Finance/Mutual-Funds/Now-mutual-funds-switching-to-sell-mode/articleshow/4914468.cms Investors skipped SIP instalments in bear phase

http://www.thehindubusinessline.com/2009/08/21/stories/2009082151801000.htm MFs asked to live with new charge structure Domestic mutual funds returned empty handed from a meeting between them and Sebi on Tuesday. In the meeting called by SEBI chairman CB Bhave to  receive feedback from mutual funds on its recent decisions on entry and exit loads, he is believed to have made it very clear that the industry will have to live with new norms. According to fund officials, who attended the meeting, Mr Bhave patiently heard out the issues related to the new commission structure, but reiterated that the new steps will only be beneficial for the long-term growth of the industry. He suggested that mutual funds need to be investor-centric and should have a uniform cost structure to avoid conflicts within the industry. Mr Bhave is believed to have told the officials that the period for charging exit loads should be one year for all mutual funds, capped at 1%, irrespective of the amount invested by any client. While rules say that funds can charge unitholders up to 7% on exit, they were imposing this load on the basis of the quantum of investments. A fund official said: “In short, SEBI has hinted that mutual funds should compete on the basis of performance of its schemes and not on the commission structure.” http://economictimes.indiatimes.com/Personal-Finance/Mutual-Funds/MFs-asked-to-live-with-new-charge-structure/articleshow/4913156.cms Sebi rejects mutual funds' concerns over new norms

The Securities and Exchange Board of India (Sebi) has ruled out rolling back its order banning entry load and parity in exit loads for all classes of investors.
On Tuesday, Sebi Chairman CB Bhave met chief executive officers (CEOs) of all fund houses to take stock of the ground realities after the new guidelines.
Industry sources said while the fund houses explained that the industry was still in a nascent stage and imposition of stringent guidelines would stifle its growth, the market regulator told them to adjust within the new guidelines.
Industry players, while admitting that the step was in the right direction, said such developments were much ahead of their time.
“Sebi’s moves have moderated the distributors’ compensation and they certainly are not happy. There is no overnight solution to this new development,” said the CEO of a large domestic mutual fund house who did not wish to be named.
While fund managers said there would be three-four months before the industry would be able to gauge the impact of the guidelines, they felt their collections could be hurt. “The market regulator may have to come up with corrective measures if things do not improve,” said the CEO.
Sources added that fund houses with high cost structure would become increasingly uncomfortable in case the adjustment takes longer. “The trend will be visible from the industry’s August numbers,” said another leading fund manager.
Sebi had banned the entry load charged by fund houses from August 1. In the new regime, distributors would have to negotiate the commission with customers and be paid through a different cheque.
Also, distributors would have to disclose the commission they were being paid for similar products.
In yet another move, the market regulator had asked fund houses to stop discriminating between high networth and retail investors and charge them the same exit load.

regulator IRDA tweaking the proposed cap on charges which insurers collect from investors.

It is also set to raise the lock-in period for investments in Ulips to 5 years from 3 years to promote long-term investments, said a senior IRDA official. Ulips are akin to mutual fund with an added life cover.

The regulator had proposed a cap on all charges last month to ensure higher returns for investors. But it has now accepted the insurance industry’s demand to exclude mortality and morbidity charges from the overall ceiling. Mortality charge, the cost of providing a life insurance cover, is higher for senior citizens compared to younger policy holders.

“The change allows insurance companies to continue providing adequate protection to policyholders, which is the core objective of a life policy. Moreover, it allows companies to offer older customers the benefits of life insurance without crossing the cap,” said TR Ramachandran, CEO & MD, Aviva India.

The regulator has also capped fund management charges at 135 basis points for all insurance contracts, irrespective of their tenure. It has prohibited insurers from levying surrender charges from the fifth year.

Besides fund management charges, investors pay a host of other charges such as the premium allocation charge, administration charge, mortality charge and rider charge. The difference between the premium payable and total charges is the money available for investment.

Starting October, Ulip charges will be capped at 300 bps for insurance contracts up to 10 years and 225 bps for contracts over 10 years. If a fund earns a yearly return of 15%, a policy holder has to get a minimum return of 12%. The cap on charges will be on new policies.

Irda also takes mortality, morbidity charges out of overall 3% cap
You can now surrender your unit-linked insurance plan (Ulip), purchased from a life insurer, after four years without having to pay any charge. This was announced by the Insurance Regulatory and Development Authority (Irda) today.
The regulator has also made some changes to the overall ceiling on Ulip charges, which were fixed at 3 per cent of the gross yield. As a relief to insurance companies, Irda has decided to keep mortality and morbidity out of the overall cap on Ulip charges.
At present, there is no standard norm for surrender value, which is akin to exit load for mutual funds.With this latest Irda decision, insurers will have to pay the accumulated fund value, if a Ulip-holder surrenders his/her policy after four years.
At present, there are around 70.2 million Ulip-holders, of which 25.2 million deal with private players.
Insurers had demanded that mortality charges should be in line with the risk they were carrying and, hence, the decision should be left to them.
They had argued that capping of charges would lead to changes in the distribution model and reduction in commission and acquisition charges.
As per estimates by brokerage firm Edelweiss, for a typical back-loaded policy, the difference between gross and net yields to the policyholder ranges between 2.1 per cent and 4 per cent. This difference, according to Edelweiss, is likely to be higher for high charge front-loaded policies (4-4.5 per cent).
According to the revised circular, mortality and morbidity charges will be excluded in the calculation of the net yield. The difference in the net and the gross yield has been capped at 300 basis points. The modifications were made, keeping in view the concerns expressed by the industry on Irda’s July 22 circular capping the charges.
"The exclusion of mortality and morbidity charges from the cap will ensure that there is no compromise on growth in sales of valuable life cover. In addition, life insurers will not have to resort to cross subsidisation across age groups to meet the charge cap. The decision clearly indicates that Irda wants life insurance to be viewed as a long-term protection product,” said Max New York Life Insurance CEO and Managing Director Rajesh Sud.
V Vaidyanathan, MD and CEO, ICICI Prudential Life Insurance, said that excluding mortality and morbidity charges would promote the core concept of insurance.
It has capped fund management charges at 135 basis points for all tenures. Earlier, there were two caps -- one below 10 years and the other above 10 years. At present, this charge in equity varies between 125 basis points and 225 basis points, and in debt between 80 basis points and 100 basis points.
“Now people in the older age bracket seeking higher assured sum can be insured... Having one cap on fund management charge will result in better administration of the fund as insurance companies will have to manage only one fund,” said Kamlesh Goyal, Bajaj Allianz Life Insurance MD and CEO, and Country Manager of Allianz.
Sud added that surrender charges and quantum and gradients would need to be prudently shaped in the first four years so that it was fair to all policyholders.
“This allows insurance companies to continue to provide adequate protection to the policyholders, which is the core objective of a life insurance policy. Moreover, it allows companies to offer older customers the benefits of life insurance without crossing the cap,” said TR Ramachandran, Aviva India CEO and MD.

http://www.business-standard.com/india/news/no-surrender-feeulips-after-4-yrs/367632/

CD issuances dip as MF demand falls

Issuances of certificates of deposit (CDs) and commercial papers fell today as mutual funds — regular investors in the market — refrained from investing due to limited inflows in their liquid and liquid plus schemes, dealers said.
Today, just Rs 300 crore of short-term papers were placed compared with Rs 1,800 crore on Tuesday. Money markets were shut Wednesday on account of Parsi New Year.
Mutual funds were cautious of their investments ahead of second-quarter corporate advance tax outflows as they will face redemptions from banks and companies by mid-September.anks were also not keen on raising funds today due to ample systemic liquidity. Those banks who were raising funds, were only looking at issuing one-year CDs. “We are expecting the rates to inch up slightly as liquidity may decline during September-end for payments towards advances taxes,” said a dealer with a state-owned bank.Rates on three-month CDs were quoted at 3.75-4.00 per cent today, unchanged from Tuesday’s levels. Three-month CPs were quoted at 4.20-4.50 per cent today, flat from previous close.
Secondary market
Volumes in the secondary market were thin because mutual funds refrained from trading in this segment as well, dealers said.“Mutual funds are either holding on to cash or investing small quantum in the secondary market,” said a dealer with a mutual fund. Today, April maturity CDs were dealt in the band of 5.15-5.30 per cent, unchanged from Tuesday’s levels.

http://www.business-standard.com/india/news/cd-issuances-dip-as-mf-demand-falls/367618/

BANK

SBI to hire 11,000 this fiscal

State Bank of India, the country’s largest lender, plans to hire 11,000 people in the current financial year as it expands operations.
The state-owned bank is planning to open 1,000 branches a year. According to SBI Chairman OP Bhatt, the bank has witnessed a “lot of growth” in every business segment. The contribution of overseas operations to the bank’s balance sheet had increased to over 12 per cent from about 8 per cent when he took charge as chairman, Bhatt said. SBI’s credit offtake had picked up from July-end and it was expecting to achieve its targeted year-on-year growth rate of 25 per cent in the current year, Bhatt said on the sidelines of the Global Organisational Development Summit 2009 being held at the Indian School of Business here.
He, however, said the existing drought conditions could have some impact on credit offtake. However, it was too early to give an estimate in this regard, he added.
Bhatt said there was no similarity between what was happening in India and what led to the sub-prime crisis in the US, even though all major banks were aggressively pushing the home loan segment. The products and institutions in India and the US were different, he said.
In the US, home loans are given on the basis of the value of the asset, while in India, they are given based on the person’s income and ability to repay. “Except for reducing the interest rate, we have not relaxed any condition (for giving home loans),” he said.
Bhatt said there was traction in the home loan segment following reduction in interest rates. “SBI is now the largest home loan provider. We have surpassed ICICI and HDFC,” he said.
He said SBI was awaiting communication from the Reserve Bank of India and the Union government regarding the merger of State Bank of Indore with it. A decision on the merger of other associate banks would be taken only after this.
Stating that the current and savings accounts (CASA) contributed 38 per cent to the SBI revenues, he said the bank’s CASA registered a growth rate of 23 per cent as against the industry average of 19 per cent.

http://www.business-standard.com/india/news/sbi-to-hire-11000-this-fiscal/367619/

SEBI

SEBI wants MF exit load only for 1st year

MUMBAI: Within weeks of shaking up the mutual fund industry by abolishing entry load in all schemes and moving to a uniform exit load regime, SEBI has given another jolt to the fund houses. In a late evening meeting on Tuesday, SEBI suggested fund houses to move to a regime of charging exit loads only for the first year of investments. Tuesday's meeting with SEBI chairman was attended by all the heads of fund houses, the chief of Association of Mutual Funds in India (AMFI), the MF industry trade body and some top SEBI officials from the mutual fund department.

After SEBI mandated that all entry loads should go and exit loads should be uniform across-the-board , fund houses had gone into a rejig mode with their finances so that they could compensate MF distributors. The change in the compensation structure was done with the assumption that exit loads could be there for perpetuity.

But ‘‘ the recent SEBI suggestion on exit load has sent all those changes to the compensation structure for a toss,'' said a top official at a fund house. ‘‘ Our capacity to pay to the distributors will reduce substantially,'' said the head of a local fund house.

MF industry officials said that limiting exit load to a year could lead to increased inclination among investors to move out of a scheme if the returns over one year are good. ‘‘ It has the potential to lead to large-scale churning in the fund industry,'' said the official. Earlier, as part of the rejig exercise to change the compensation structure, a host of fund houses had increased exit load period. Now if SEBI's advice becomes a rule, all those will have to be reversed , industry players said.

However, as the CEO of a fund house pointed out that so far SEBI has not come out with any formal letter. ‘‘ It's still evolving. I believe a lot of things can happen before it is formally notified,'' said the fund house CEO.

USHERING IN NEW RULES

After SEBI mandated that all entry loads should go and exit loads should be uniform, fund houses had gone into a rejig mode to compensate MF distributors.

But ‘‘ the recent SEBI suggestion on exit load has sent all those changes to the compensation structure for a toss,'' said a top official at a fund house.

MF industry officials said that limiting exit load to a year could lead to inclination among investors to move out of a scheme if the returns over one year are good.

It was up to ITC to place a proposal before EIH, said P R S Oberoi, responding to queries on ITC chairman’s recent comment on “joining hands” with the company. Oberoi said, “He (Y C Deveshwar) has not approached us, not talked to me... it’s up to them to make a proposal.”
“We are open to any possibility with any company even international,” added Oberoi.
ITC has been buying EIH shares through its investment arm since 2000 and as on June 30, held 14.98 per cent in EIH, according to exchange filings.
According to the Securities and Exchange Board of India (Sebi) regulations, 15 per cent is the threshold limit beyond which the acquirer would have to make a mandatory open offer for another 20 per cent equity in the company.
At the recent ITC AGM, Deveshwar said ITC was not interested in a hostile takeover of EIH and Hotel Leelaventures, in which it has stakes.
“These are good investments but if the other side ever thinks of joining hands with ITC it will come in handy, either in terms of joint ownership or handling just the marketing management,” Deveshwar said at the ITC AGM. In Hotel Leelaventures, ITC has a 3.72 per cent stake through Russell Credit.
http://www.business-standard.com/india/news/it-isto-itc-to-come-upa-proposal-oberoi/367680/

Sebi eases norms for rights issues

In a move that will streamline the rights issue process, the Securities and Exchange Board of India (Sebi) today rationalised the disclosure requirements for rights issues. A rights issue is further issuance of capital by listed entities to existing shareholders.
“In order to encourage listed companies to look at rights issues as a viable form of raising capital by reducing the overall cost of such issuances and to make the process faster, it has been decided to rationalise the disclosure requirements for rights issues”, said Sebi.
It has also made ASBA (application supported by blocked amount) applicable for all rights issues. ASBA is a mode of application wherein investor’s funds leave his bank account only on allocation of shares in public issues. The process is already functional for public issues. ASBA for rights issues will co-exist with the current process of use of cheque/demand draft as a mode of payment.
Sebi has reduced the time period for finalisation of the basis of allotments in rights issues to 15 days from 42 days. The guidelines will be applicable for all rights issues where offer documents have been filed on or after the circular.
http://www.business-standard.com/india/news/sebi-eases-norms-for-rights-issues/367634/

ECONOMY
Inflation rises to - 1.53 percent

Thu, Aug 20 03:20 PM
New Delhi, Aug 20 (ANI): The rate of inflation has increased to 1.53 percent for the week ended August 8 against the - 1.74 percent in the previous week.
It rose despite increase in prices of food articles.
Bajra and urad prices rose by two per cent each while condiments, spices, arhar, and fruit and vegetables became more expensive by one per cent.
However, the prices of jowar came down by four per cent, barley by two per cent, and moong by one per cent. (ANI)
http://in.news.yahoo.com/139/20090820/844/tbs-inflation-rises-to-1-53-percent.html