Escorts Mutual Fund

MUMBAI: While the equity asset bases of top fund houses paint a rosy picture, much of it has been due to the appreciation in value of shares rather than fresh inflow of money. An industry update by mutual fund registrar Karvy estimates a net outflow of over Rs 2,500 crore from equity mutual fund schemes (managed by them) in October.

According to Karvy Computershare Mutual Fund Services (which services 25 of 36 asset management companies), fund categories like ELSS and balance funds have seen large withdrawals during October. The outflow has been more significant in the case of retail investors (investments below Rs 1 lakh), with nearly a few thousand crores flowing out of these schemes in October. Trust-based investors, too, have withdrawn money from equity schemes during the quarter.

While net asset base (AUM) has gone up for most funds, largely due to inflows to fixed income funds, a shrinking equity asset base would hurt margins, industry sources said. Out of 36 fund houses, a dozen companies like Religare, Fidelity and Baroda Pioneer, saw a fall in their monthly AUM for October. The rise in equity AUMs of other funds is attributed to appreciation in stock prices, fund experts said.

“While SIP money is still coming in, fresh inflows (into equity schemes) are not picking up in a big way. People are not comfortable investing in volatile markets,” said Vikaas Sachdeva, country head-business development, Bharti Axa Investment.

According to experts, though not a direct factor, distributors are not really pushing equity schemes to investors, as they do not earn them enough commission. As per AMFI data, equity scheme sales have nearly halved in three months time, after Sebi abolished entry loads, starting August.

As per AMFI data, sales of equity schemes have come down to Rs 3,363 crore in September, logging a 15% fall from August (AMFI October break-up awaited).

“Money is only coming from HNIs and other classes of affluent investors. Retail investors will keep away from equity mutual funds until the market shows signs of stabilising,” said Avinash Ramnath, national sales head, Canara Robecco Mutual Fund, which recently collected Rs 282 crore through its recently launched FORCE fund.

Sources say investors are withdrawing money from mutual funds to invest into PE funds and PMS schemes run by MFs. Top MFs are secretly recommending their investors to shift investments from schemes to PE and PMS schemes promising higher returns, sources said.

Sagar Bhadra
Sharvari Patwa
Mumbai, Nov. 6
What is the difference between a US and an Indian retail investor?
Ironically, it is the lack of interest in the Indian capital market on the part of the latter.
While retail investors in India still seem to have an aversion to the stock market, the American investor’s interest in the India growth story is persuading US fund managers to launch new India-focused Exchanged Traded Funds (ETFs).
Traded on NYSE
Currently only five India-exclusive exchange traded products with total assets under management of Rs 9,400 crore are available to the US investors, all of which are traded on the NYSE.
Of them, three have been top performers (year-to-date) amongst the 15 existing Asia-Pacific ETFs.
Recently, Van Eck Global, a US money manager, filed papers with the US markets regulator SEC to launch an ETF offering investors access to Indian small-cap companies.
The ‘India Small-Cap ETF’ will be listed on the NYSE and will hold a portfolio of Indian companies with an average market capitalisation of Rs 2,350 crore, according to SEC (Securities and Exchange Commission) filings by Van Eck.
“As the attractiveness for investing in emerging markets gains greater awareness amongst investors, we will see more emerging market ETFs launching and those already in the market gaining significant assets,” said Ms Lisa Dallmer, Head of Global Indexes and Exchange Traded Products, NYSE Euronext.
“Like institutional investors, the US retail investors are attracted to emerging market economies because these economies are outgrowing the US economy”, said Mr Marc Iyeki, Managing Director- International, NYSE Euronext:
“Since retail investors lack the sophistication and resources of financial institutions, they prefer to invest in emerging countries through US-listed products like ETFs and ADRs.”
“Superior returns on equity and the sustained growth in the Indian economy make Indian markets look attractive to US retail investors”, said Mr Sirshendu Basu, Head-Retail Equity Strategy, Standard Chartered, STCI Capital Markets.
The interest in India-based ETFs is not new, but is becoming more relevant with every passing day.
Investment professionals in India are divided on how the higher foreign investment inflows due to the US retail interest would affect the Indian market. “In case of a global sell-off, Indian ETFs might also face heavy redemption pressure, thereby impacting the Indian equity markets”, said Mr Basu. However, Mr Nipun Mehta, Executive Director and Head of India, SG Private Banking believes that “Indian equity markets are deep enough to stave off a bubble”.
There are at least five more India-specific ETFs registered with the SEC but which have not yet been launched. “The US sub-prime crisis could have severely delayed fund houses from launching the planned ETFs,” said an India-based ETF specialist. Also, ETF clearances could take over a year, he added.

http://www.thehindubusinessline.com/2009/11/07/stories/2009110752130100.htm

INSURANCE

IRDA plans to introduce variable annuity products, forms panel

MUMBAI: Insurance sector regulator, IRDA, today said it is planning to introduce variable annuity products and hence formed a committee to study the issue "In India, we have to plan for introducing variable annuity products as there is a tremendous scope for these products," Insurance Regulatory Authority of India (IRDA) said in a circular.

Given the population growth and the need for a proper pension system, the annuity business has tremendous potential in India, IRDA said.

"Internationally, countries are moving towards variable annuity products which give a lot of flexibility to insurers in offering products to meet customers demand and at the same time address all consumer related issues," IRDA said.

With a view to examine the current status of the annuity products and the steps needed to strengthen the same, the regulator has formed a six-member committee.

http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/IRDA-plans-to-introduce-variable-annuity-products-forms-panel/articleshow/5204485.cms

The bank extends 8% home loan scheme till March.
The country’s biggest lender, State Bank of India (SBI), today slashed interest rates on domestic term deposits by 25-50 basis points (bps) across maturities to reduce cost of funds.
It also extended the tenure of its popular home loan scheme till March 31, 2010.
The fresh cut in deposit rates is being seen as a trade-off for extending the tenure of the home loan scheme.
A senior SBI official said, “Though RBI (Reserve Bank of India) signaled the end of its easy monetary policy, it did not increase policy rates. We do not expect the rates to rise at least till March 2010. In fact, they could dip slightly. The system is flush with resources, which provides us room to slash deposit rates and also extend the tenure of the home loan scheme, which is giving business.”
The new deposit rates will be effective from November 9. This is the eighth cut in deposit rates by SBI in the current financial year.
The steepest drop in rate (of 185 basis points since April) has been for deposits with tenures of one year to less than two years. The new rate for this segment is 6.25 per cent.
The lender’s cost of funds has come down to 6.06 per cent from 6.30 per cent at the end of March 2009. The bank has brought down the share of high-cost bulk deposits in total deposits to 3.6 per cent in September 2009 from 16.82 per cent a year ago.
It shed high-cost bulk deposits to the extent of Rs 49,700 crore in the April-September period.
A slow growth in credit demand and a 200 bps cut in the prime lending rate has hit earnings from interest income. These have put pressure on margins, reflected in a sharp drop in net interest margin from 3.16 per cent (September 2008) to 2.43 per cent.The State Bank of India official said the home loan segment had brought the bank good business. Sanctions under the segment have crossed Rs 15,000 crore. Outstanding home loans at the end of September were Rs 62,338 crore, up from Rs 50,584 crore a year ago.
For loans up to Rs 5 lakh (of 10-year tenure), SBI charges a fixed rate of 8 per cent for five years. Loans above Rs 5 lakh and up to Rs 50 lakh carry a fixed interest rate of 8 per cent for the first year and 8.5 per cent for second and third years.

Sebi expands scope of brokers' agents

In a move to expand the reach of market for exchange traded products, the Securities and Exchange Board of India (Sebi) today came up with guidelines for market access through authorised persons.
The regulator has decided to allow registered brokers (including trading members) of stock exchanges to provide security market access to their clients through authorised persons. The regulation follows the recommendations made by the Secondary Market Advisory Committee of Sebi and discussions with the stock exchanges.
Sebi has defined authorised persons as an individual, partnership firm or corporate body appointed by the stock broker and who provides access to the trading platform of a stock exchange. Such appointments can be made only after obtaining specific prior approvals from the concerned stock exchanges for every person.
An authorised person, apart from being an 18-year-old Indian citizen should not be convicted of any offence involving fraud and should have passed at least 10th standard or equivalent examination. Moreover, the person appointed by the stock broker should have the certification, as applicable to approved user of the respective segment and undertakes to continue to have valid certification thereafter, said Sebi in a note today.

Our Bureau
Mumbai, Nov. 6 SEBI on Friday said it has allowed broking firms to provide access to clients through “authorised persons”.
This is being done “with a view to expanding the reach of the markets for exchange traded products”, a SEBI circular said.
This provision would cut time for brokers to enter the broking business as, unlike sub-brokers, authorised persons would only need approval of the stock exchange and would not have to wait for SEBI approval. It takes a sub-broker between four weeks and two months to get registered with SEBI, said a compliance officer with a broking firm.
A stockbroker may appoint one or more authorised persons after obtaining specific approval from the stock exchange concerned for each such person, according to SEBI regulations.
The approval as well as the appointment would be for a specific segment of the exchange.
According to SEBI, an authorised person would mean any person, individual, partnership firm, LLP or body corporate who is appointed as such by a stockbroker and who provides access to the trading platform of a stock exchange as an agent of the stockbroker.
The authorised person should have the necessary infrastructure such as adequate office space, the necessary equipment and manpower to effectively discharge the activities on behalf of the stock broker, SEBI’s Regulatory Framework for Market Access through Authorised Person said.
If any trading terminal is provided by the stockbroker to an authorised person, rules state, the place where such a trading terminal is located would be treated as the branch office of the stockbroker.
The authorized person will receive his remuneration – fees, charges, commission, salary for his services – only from the stockbroker and he will not charge any amount from the clients, said the framework.