Escorts Mutual Fund

Abolition of entry loads on equity mutual fund schemes has sharply hit sales of equity schemes in the very first month of the new rule coming into effect. Industry sources admit this is the fallout of the recent Sebi regulations scrapping entry loads completely and introducing a variable load structure for all mutual fund investments with effect from August 1, 2009.

Equity assets have recorded a net outflow to the tune of Rs 142 crore in August, despite a 5% increase in the overall industry’s assets under management (AUM) to Rs 7,56,638 crore.

"Around 80-90% drop in the equity assets can be attributed to the scrapping of entry loads as independent financial advisors (IFAs) did not sell equity products in August, 2009,” said a senior official at a fund house. "Even banks have slowed down the sale of equity mutual products drastically, as their sales persons have also seen a sharp decline in their commission structure," he added.

Thus, the share of equity assets in the total industry AUM has slipped further to just about 24%, including ELSS, from over 25% of assets until last month. ULIPs, on the other hand, are now expected to see aggressive push, both by distributors and producers of these products.
bakul.chugan@timesgroup.com

While the industry had been patting itself on the back for recording over Rs 7.5 lakh crore in AUM, the fact remains that it has been driven largely by inflows into debt schemes. Banks have been a major contributor to the rise in industry AUM. For the fortnight ended August 14, 2009, banks had deployed about Rs 1,56,900 crore with mutual funds.

MUMBAI: Buoyed by "extremely good response" for its debenture issue, L&T Finance on Wednesday said that it is open to enter into the mutual fund business through both organic and inorganic routes.

"Mutual fund is an area of interest for us. There are options for both organic and inorganic routes for that. We will look them and evaluate them," L&T Executive Vice- President (Financial Services) N Sivaraman said here.

There were enough mutual fund players to talk to who are particularly available for purchase, he said.

Sivaraman's observation came in the face of reports that L&T Finance may be looking at acquiring DBS Cholamandalam Asset management Company (DCAM), which manages funds in excess of Rs 2,000 crore as on May 18, 2009.

To a pointed question whether the company was in talks with DCAM for acquisition, he said, "We don't want to comment on any particular company."

Established in 1996, DCAM is a subsidiary of Cholamandalam DBS Finance, a joint venture between India's Murugappa Group and Singapore's DBS Bank.

DCAM offers 18 schemes and covers an entire range of cash, debt and equity asset classes. It had posted a loss before tax of Rs 5.32 crore in the first quarter of the current fiscal.

Benchmark plans Hang Seng as underlying; Reliance looks at MSCI. Exchange Traded Funds (ETFs), the only mutual fund asset class that received fresh inflows last year, are catching up fast.
A host of mutual fund houses are set to launch products with global indices as underlying. Sample this: Benchmark has filed for an ETF based on the Hang Seng Index of Hong Kong. Reliance Mutual Fund too will come up with an ETF with MSCI India Index as the underlying and is awaiting the regulator's clearance.
The low-cost advantage is yet another reason for fund houses to look at ETFs as an attractive product for investors wherein they can trade real time. The cost of investing in ETFs stands at 0.5 per cent. With the no-entry load regime kicking in, fund houses want to concentrate on products which offer good returns with low-cost advantage.
With Hang Seng being one of the top traded markets in Asia, Indian investors can now look forward to investing there on real time basis. According to the investment objective of the scheme, it will offer returns that closely correspond to the total returns of securities in the Hang Seng Index. The units of the scheme will be listed on the National Stock Exchange and can be bought or sold like any other fund.
The Chinese market has slipped about 15-16 per cent from its August highs and there have been talks of it being overheated, raising concerns among a lot of FIIs and investors about investing in that market. However, Rajan Mehta, Executive Director, Benchmark Mutual Fund, said, "We feel it is better to enter that market after the meltdown. Chances of making money will be much higher if somebody enters now as stocks have corrected sharply".
Benchmark has also filed for an Infrastructure ETF which will track the CNX Infrastructure index. It had earlier filed for ETFs with silver and oil as the underlying, but could not get approvals due to regulatory issues.
Reliance Mutual Fund's MSCI India Index ETF plans to mirror the returns posted by the MSCI India Index. Some of the stocks, which form a part of the MSCI India Index, include heavyweight Reliance Industries, Infosys, ICICI Bank, L&T, ONGC, BHEL, Sterlite Industries and Wipro among others.
Sundeep Sikka, CEO, Reliance Mutual Fund said, " We already have a tieup with MSCI Barra for risk enterprise solutions. But, there is a lot of international money waiting to come to India and MSCI is the most acceptable benchmark for a lot of institutional investors. We see a lot of appetite going ahead for this product class and will be launching a bouquet of products in this category".
The total assets under management under ETFs in India was Rs 878 crore at the end of July compared to Rs 898 crore in June, according to AMFI.

Flags off major South India investor meet to showcase Quantum Long Term Equity Fund - launched by India's 1st direct-to-investor mutual fund house
Mr. Ajit Dayal, Chairman & President, Quantum Mutual Fund - India’s first Direct-to-Investor mutual fund - has announced the launch of a major South India investor road trip. The ‘Path to Profit’ campaign will make investors aware of Quantum Mutual Fund’s research and investment philosophy and its flagship offering – the Quantum Long Term Equity Fund.
’Path to Profit’ is an initiative by Quantum Mutual Fund – India’s 1st direct-to-investor mutual fund - to reach out to existing and potential investors in a personal and interactive way. The road trip will cover 7 cities in South India, beginning with Bangalore, and then moving on to – Mysore, Coimbatore, Madurai, Salem, Pondicherry and Chennai. In each city, Ajit will address a group of investors and be available to answer any questions.
Commenting on the road trip, Ajit Dayal said, “For 15 years the mutual fund industry in India has been an Asset Gathering Industry. The recent SEBI ruling that banned front end loads has finally made it an Asset Management Industry. All the distributors, financial advisors, and mutual fund houses like Quantum who were working hard to protect the investors’ interest have reason to cheer.”
“Investing is a very simple business – it is made complicated by financial companies so that we can charge you more for all the complex language and packaging!”
While clocking 4,000 kilometers in their well-branded jalopy, Quantum will emphasize the long term investment philosophy of the Quantum Long Term Equity Fund and the need for investors to be disciplined and stick to simple products as they build their portfolio.
“The Quantum Long Term Equity Fund is ideal for investors who seek a fund that performs predictably across market cycles. While we have seen an encouraging response throughout the entire country, Bangalore – and South India - is home to a large number of our investors and well-wishers and is an important centre for us”, said Ajit Dayal with regards to the significance of Bangalore as a centre for the campaign.
As it winds its way down the Deccan plateau, ‘Path to Profit’ offers investors a chance to meet and interact with Ajit Dayal and the Fund Managers at Quantum. After Bangalore, the Quantum team will drive to Mysore. “This is the start of a long journey”, said Ajit, “and we are hitting the Indian roads on rubber wheels – yet making sure that investors also have access to information about the Quantum Long Term Equity Fund on our web site, www.QuantumEquityDirect.com”
About Quantum Long Term Equity Fund (QLTEF):
Investment Objective: To achieve long-term capital appreciation by investing primarily in shares of large-cap and mid-cap companies that will typically be included in the BSE 200 Index and which are in a position to benefit from the anticipated growth and development of the Indian economy and its markets.Asset Allocation: The Fund normally invests 65%-99% in Equity and Equity related securities, 1%-35% in money market instruments, 0% -3% in Unlisted Equity and Equity related securities, 0%-5% in units of liquid schemes of the Fund or of other mutual funds.
Team of Issue: Redemption and Load Structure: QLTEF is an open-ended Equity Scheme offering Growth and Dividend Plans. The units can be subscribed /redeemed at the applicable NAV, subject to applicable load, on all business days by visiting the website www.QuantumEquityDirect.com or www.QuantumMF.com .
Exit Load: On redemption/switch out within 6 months of allotment - 4%, after 6 months but within 12 months of allotment - 3%, after 12 months but within 18 months of allotment- 2%, after 18 months but within 24 months of allotment - 1%, after 24 months of allotment-Nil All exit loads collected are swept back for the benefit of long term investors who stay on in the Fund.
About Quantum Mutual Fund – www.QuantumAMC.com
Quantum Mutual Fund (QMF) was launched in 2006 as India’s first direct-to-investor mutual fund and currently manages 6 funds across Equity, Fixed Income and Gold. Quantum Advisors, the Sponsor, currently manages and advises on India-dedicated equity allocations for global endowments, pension funds and universities. Quantum was founded by Ajit Dayal in 1990.

A week after the National Stock Exchange (NSE) launched interest rate futures (IRF) on August 31, the domestic mutual fund industry is all set to make the most of this new instrument. The industry is planning to either come up with new schemes, or use IRF in their existing schemes.
In fact, factors like better liquidity, increase in fund managers’ execution power and ability to hedge risks are tempting fund houses to act swiftly and take advantage of the new instrument.
Sanjay Sinha, chief executive officer (CEO) of DBS Cholamandalam, said: “Though we are not launching separate schemes, we can use IRF in the existing ones by making some changes in their offer documents.”
Fund managers are betting big on IRF and are optimistic about its success. Since traditionally futures are more liquid, it would lead to the design of newer products accordingly, they said.
Since it will require some structural and IT compliances, fund houses expect to come up with the product at the earliest possible.
“We are thinking of amending the offer documents to use IRF in the existing schemes which will help us hedge the portfolios,” said RS Srinivas Jain, chief marketing officer of SBI Mutual Fund.
Industry experts said that liquidity was a basic necessity for Asset Management Companies (AMCs). Last year, the mutual fund industry faced liquidity problem due to a surge in redemptions.
A product linked to IRF would make the entire portfolio liquid and provide the fund house liquidity, which is essential for a fund’s structure as money could be pulled out by the investor, they added.
According to Sandeep Dasgupta, CEO of Bharti AXA Investment Managers, IRF is an additional tool which will enhance the existing portfolio and returns, and mitigate risks to some extent. “We look forward to start acting on this front after three-four months. We want to first assess our back-end processes and internal controls,” said Dasgupta.
Agreeing to this, Saurabh Nanavati, CEO of Religare Mutual Fund, said: “IRF is an excellent instrument and we are working on to get into this market. It has good potential and we will come up with new schemes. It will basically help us create new products and hedge risks.”
The stimulus packages from the government has provided enough liquidity in the system. However, fund managers are cautious. “So far this year, we haven’t had any liquidity issue, but we must not take it for granted,” said a fund manager.
Industry observers said that since IRF has been launched recently, fund houses would require to adjust their systems. Many of the fund houses might not have internal approvals to do that, they added.
In fact, factors like better liquidity, increase in fund managers’ execution power and ability to hedge risks are tempting fund houses to act swiftly and take advantage of the new instrument.
Sanjay Sinha, chief executive officer (CEO) of DBS Cholamandalam, said: “Though we are not launching separate schemes, we can use IRF in the existing ones by making some changes in their offer documents.”
Fund managers are betting big on IRF and are optimistic about its success. Since traditionally futures are more liquid, it would lead to the design of newer products accordingly, they said.
Since it will require some structural and IT compliances, fund houses expect to come up with the product at the earliest possible.
“We are thinking of amending the offer documents to use IRF in the existing schemes which will help us hedge the portfolios,” said RS Srinivas Jain, chief marketing officer of SBI Mutual Fund.
Industry experts said that liquidity was a basic necessity for Asset Management Companies (AMCs). Last year, the mutual fund industry faced liquidity problem due to a surge in redemptions.
A product linked to IRF would make the entire portfolio liquid and provide the fund house liquidity, which is essential for a fund’s structure as money could be pulled out by the investor, they added.
According to Sandeep Dasgupta, CEO of Bharti AXA Investment Managers, IRF is an additional tool which will enhance the existing portfolio and returns, and mitigate risks to some extent. “We look forward to start acting on this front after three-four months. We want to first assess our back-end processes and internal controls,” said Dasgupta.
Agreeing to this, Saurabh Nanavati, CEO of Religare Mutual Fund, said: “IRF is an excellent instrument and we are working on to get into this market. It has good potential and we will come up with new schemes. It will basically help us create new products and hedge risks.”
The stimulus packages from the government has provided enough liquidity in the system. However, fund managers are cautious. “So far this year, we haven’t had any liquidity issue, but we must not take it for granted,” said a fund manager.
Industry observers said that since IRF has been launched recently, fund houses would require to adjust their systems. Many of the fund houses might not have internal approvals to do that, they added.

The mutual fund product launches will now be impacted by the removal of charges levied to enter any scheme which was a financial benefit for distributors, leading fund house UTI Mutual Fund said today.

"In the current regulatory framework it would be difficult to launch new products," UTI Chairman U K Sinha told reporters here.

He said net sales have been impacted due to the removal of the entry load in August as financial incentives attached with the distribution of MF schemes are no longer available.

Entry load refers to the charge levied by a mutual fund when an investor steps in, to meet their marketing costs and distribution commissions.

Sales have declined as much as 75 per cent in some cases in the last month, Sinha added.

In June this year, market regulator SEBI issued a circular prohibiting entry load from August 1. Besides, the decision applies to additional purchases in existing mutual fund schemes and switch over to other schemes as well as new schemes from the specified date. This also entails systematic investment plans registered on or after August 1.

SEBI also said the exit load paid by investors, a maximum of 1 per cent will be maintained in a separate account to pay commission to the distributors by mutual fund companies.

Our Bureau
Mumbai, Sept. 9 Tata Mutual Fund plans to introduce a “Trigger Option” for declaring dividend in the dividend option of its Tata Equity P/E Fund, the fund house said on Wednesday.
This facility would be introduced next month, said Mr Ved Prakash Chaturvedi, Managing Director of Tata AMC.
Based on NAV level. Explaining the mechanism of the trigger facility, he said investors would have to choose trigger levels at 5 or 10 per cent appreciation in the NAV while investing. When the NAV appreciates by 5 per cent or 10 per cent from the applicable base of NAV, dividend would be declared automatically, he added.
The record date for dividend would be announced within five working days from the date of the occurrence of the trigger. Once a dividend is declared, the next trigger shall be calculated from the ex-dividend NAV.
“If this product is successful then we would be looking at introducing this option in our other equity funds too,” said Mr Chaturvedi.
The Tata Equity P/E fund, in which the new facility would be introduced, has an asset base of Rs 162 crore.
Tata Equity P/E’s strategy is to invest 70 per cent of the portfolio in stocks with a P/E that is lower than that of the Sensex.
According to its August-end fact sheet, this scheme has highest exposure of 23.38 per cent in the software sector. The top five stock picks were Mphasis, Patni Computer, Exide Industries, Hindustan Unilever and Hindustan Zinc.

NEW DELHI: A government-appointed panel, which had earlier proposed doing away with commission charged by insurance agents by 2011, on Wednesday said it is open to both the commission system and adviser fee during the intervening period.
“The committee has an open mind... it will deliberate on the suggestion made today and come to a view in due course,” Committee on Investor Awareness and Protection Chairman D Swarup said when asked if the committee would recommend commission and fee structure during the transition phase.
Earlier, in its consultation paper, the committee has proposed elimination of upfront commission paid to insurance agents by April 2011.
“Immediately the upfront commissions embedded in the premium paid (to agents by insurance companies) be cut to not more than 15 per cent of the premium. This should fall to 7 per cent in 2010 and become nil by April 2011,” a consultation paper prepared by the committee had said.
According to the draft suggestion, sale of financial products would not earn any commission to agent or distributor after a specified date fixed by the individual regulator. The committee has recommended self-regulatory organisation (SRO)-driven regulatory system for financial advisers. The SRO will be a statutory body with punitive powers over its members. However, the final decision on the agent’s commission would be taken by the insurance regulator IRDA. The committee was appointed to suggest measures to protect investors’ interests and improve financial literacy levels. The committee, headed by Swarup, who is also the Chairman of the Pension Fund Regulatory and Development Authority, today held discussions with financial services providers and other stakeholders before coming out with the final recommendation. The committee would submit its final suggestion by the month-end, he said.

NEW DELHI: Consumers continued to put in money in their existing unit-linked insurance plans (Ulips) expecting better returns from the stock market as the Indian economy recovers. Premium collection from renewal of Ulips jumped 44% during the first three months of the current fiscal over the year-ago period even as the insurance sector has been seeing a slowdown.

The industry collected Rs 12,698 crore as renewal premium for Ulips during the April-June period this fiscal, against Rs 8,793 crore in the corresponding period last year, as per estimates of the Life Insurance Council of India, the industry body of 22 life insurance companies in India. “It is commendable that renewal premium in terms of Ulips have witnessed a jump when the overall sector witnessed a slowdown in growth in terms of new premium collection,” said SB Mathur, secretary general of Life Insurance Council of India.

Ulips are long-term investment products that come with an insurance cover for the holder of the policy. The money collected as premium for Ulip is invested in the stock market and the value of the investment changes daily, based on the movement of stock prices of companies in which the investment has been made.

“Investors have not been impacted by the unprecedented stock market volatility in the last fiscal,” says Sanjay Kumar Jha, zonal manager for north and head of pension business at private life insurer Bajaj Allianz. “Ulips cover a variety of needs, and are flexible and transparent and people have continued to invest in them keeping the long-term returns in mind,” he added.

The high growth in renewal premium for Ulip has come about at a time when the overall insurance industry has seen a slowdown in growth in terms of new premium collection. Moreover, sale of new Ulip products has actually dipped by about 10% during the period. This implies even though new consumers are still wary of putting in money in Ulips fearing volatility in stock market, old Ulip customers are putting in more money.

Ulips are the biggest products for private insurers who derive 70-80% of their premium collection from sale of new Ulips. The country’s largest life insurer, the government-owned LIC derives a little more than half of its total new premium collection from Ulips.

A consortium led by Reliance General Insurance Company on Wednesday bagged the mandate for providing insurance to Air India for $24.3 million. The cover will be provided for one year, starting September.
After Reliance General got the mandate to cover the state-owned airlines, New India Assurance has written to the chief vigilance officer questioning the securities placed by Reliance General.
The private sector consortium was led by Reliance General Insurance with HDFC Ergo, Bajaj Allianz and Iffco Tokio General Insurance Company as partners, whereas the public sector consortium was led by New India Assurance. ICICI Lombard General Insurance was the third bidder. New India Assurance came close with a bid of $24.9 million.
The cover size has gone up to $8.59 billion as against $6.39 billion in 2008-09. The state-owned airlines has paid $24.3 million premium to insure 134 aircraft. The public sector bidder has lost this mega cover after seven years. Last year, the airline had paid $19.5 million to insure 140 aircrafts.
New India Assurance had, in an earlier representation, said that the securities placed by Reliance did not fit the criteria.
Reliance will retain 10 per cent of the risk while it will place the rest 90 per cent in the international market.

Our Bureau
New Delhi, Sept. 9
A Government committee on investor protection is not averse to putting in place a system of fee-based as well as commission-based models in the transition to the proposed zero-commission structure for financial products by April 2011.
This was stated by the six-member committee’s chairman, Mr D. Swarup, also Chairman, Pension Fund Regulatory and Development Authority (PFRDA).
The panel’s draft report, released last week, proposes phasing out of upfront commissions paid to agents by April 2011. This has significant implications for the insurance industry.
Gradual cuts
“Insurance companies need to remove the bias towards selling the policy with the highest commission,” the draft report said. Mutual funds and the new pension scheme are already no-load products.
Mr Swarup told reporters here today that the committee’s final report would be submitted to the Government by the end of this month.
The draft report says the upfront commission embedded in the premium paid should be reduced to no more than 15 per cent immediately, from 16.25 per cent.
This should, it says, be brought down to 7 per cent in 2010 and commissions should be completely phased out by April 2011.

Banks will tweak their information technology systems, especially for authenticating customer identity, over the next 18 months to make them compatible with the unique identification number (UIN) regime.The UID Authority of India, headed by Nandan Nilekani, would publish UID standards for interoperability in six months and banks would get another year to modify their systems, Indian Bank Association Chief Executive K Ramakrishna said on the sidelines of the Ficci-IBA banking summit. IBA will set up group to co-ordinate work for the project.
Nilekani, speaking at the three-day summit, said UID would enable financial institutions to reach out to unbanked areas, facilitating financial inclusion. It would also reduce the overall transaction cost for all intermediaries, he added.
“The authority will collect two sets of data — one will be the demographic profile, which will include a person's name, address and date of birth, while the other will be biometric information such as fingerprints and face,” Nilekani said.
The data would be fed into a centralised database that would be accessible to authenticate the person's identity. Once enrolled, the person will be registered for life.
The authority aims to have “a few hundred million” names in its database in four-five years. Towards this, it plans to rope in all service providers such as banks, passport offices, insurance agencies and LPG connection providers.

Cut in listing period, full payment from institutional investors on allotment on agenda.
The next round of primary market reforms is on the radar of the Securities and Exchange Board of India’s (Sebi’s) advisory committee. The committee is meeting today to discuss issues related to shortening the period between the closure of an issue and listing and ensuring that institutional investors make full payment soon after they are allotted shares. Sebi has already introduced the concept of anchor investors for initial public offers (IPOs). These investors can be allotted shares before the issue opens. Anchor investors have to pay 25 per cent money before the issue and the rest within two days of the allotment of shares.
Qualified institutional investors can apply by paying just 10 per cent of the application money. Sebi has been saying that this practice is not healthy as it prevents price discovery. This is because retail and high networth individual investors, unlike institutional investors, have to make full payment with the application. One of the proposals expected to be discussed in the meeting is to have a norm mandating that all institutional investors make full payment soon after the issue closes. For this purpose, the allotment to institutional investors has to be completed in two-three days from the closure of the issue. Since the number of such institutional investors is less, allotment to them can be easily completed in two-three days, say officials. The original proposal was to ask them to make full payment along with the application. The committee is expected to discuss this proposal too.
It is learnt that Sebi also wants to fast-track the process of closure of issues and listings. At present, a lot of time is spent in compiling applications and crediting money for retail applications from distant areas. To hasten this process, Sebi has allowed banks to offer applications supported by blocked accounts (ASBA) facilities. Under this, the bank debits money from the account of the applicant only after allotment of shares.
The facility, however, has not picked up as banks find service not very remunerative. This issue would also be discussed tomorrow.

The National Stock Exchange’s (NSE’s) move to lower trading cost in futures and options (F&O) and cash segments by 10 per cent may force both the Bombay Stock Exchange (BSE) and the upcoming MCX Stock Exchange (MCX-SX) to have a re-look at their business models.
While MCX-SX is still waiting for regulatory approval to host equity trading, BSE has been struggling to maintain its 30 per cent market share in the cash segment. NSE, on the other hand, is already a market leader in both cash as well as futures segments with nearly 70 per cent and 98 per cent market share, respectively.
“While the NSE move may largely benefit investors and traders, the reaction seems to be a prelude to the likely competition that it may face from MCX-SX in the coming months,” said Nikhil Vora, senior stock exchange analyst of IDFC SSKI, a Mumbai-based research house.
Vora is of the view that competition in the stock exchange space will move beyond price attribution as BSE and MCX-SX fight NSE to get more liquidity on their platforms.
However, stock brokers are saying that BSE may be the first casualty if they do not respond to the NSE move as MCX-SX is nowhere in the race since it’s yet to get permission from the Securities and Exchange Board of India (Sebi) to launch equity trading.
“It’s a good move by NSE to lower its transaction charges as the benefits will be passed on to retail investors. However, for brokers to choose an exchange to trade on will depended more on the liquidity factor, and volumes on NSE has gone up by nearly 70 per cent recently,” said a South Mumbai-based broker.
While NSE has reduced transaction charges in the F&O segment for the first time since 2001, the exchange had in September 2005 cut charges in the cash segment from Rs 6 to Rs 3.50 per lakh.
From next month, the cost of transaction in NSE’s cash segment will be Rs 3.25 per lakh and F&O segment will be Rs 1.75 to Rs 1.90 per lakh. At present, NSE charges Rs 2 per lakh in the F&O segment.
The transaction fee charged by stock exchanges in India is the lowest among other exchanges around the world. However, the cost of trading in the country is high due to other statutory charges such as securities transaction tax and stamp duty.
http://www.business-standard.com/india/news/nse-trading-cost-cut-may-hit-bse-hard/369630/

The Takeover Regulation Advisory Committee (TRAC), set up by market regulator Securities and Exchange Board of India (Sebi), is likely to meet in the third week of September to discuss the agenda for changes in the takeover code.
According to regulatory sources, some of the important changes would be related to the creeping acquisition clause, the threshold for open offer and pricing norms in the takeover code."The exercise will take over two months, after which a white paper inviting market comments will be put out," said a top Sebi official.
Sebi Chairman CB Bhave had said yesterday that the 12-member committee, headed by C Achuthan, the former presiding officer of the Securities Appellate Tribunal (SAT), would review the entire takeover code soon.
The members of the committee, however, told Business Standard that they were yet to receive any formal correspondence from Sebi.
The members, who did not want to be named, were of the view that since the first takeover code had come into existence in 1997, mergers and acquisitions (M&As) were on the rise, revealing several loopholes in the regulations. "These holes need to be plugged,” they said.
In many cases, promoters got all the benefits while small shareholders got into trouble, they pointed out. The members opined that the level of purchase that triggered an open offer (which currently stands at 15 per cent) for an additional 20 per cent, should be on the higher side. “At the same time, the offer of 20 per cent should be increased,” they added.
The members also expressed reservations over the existing non-compete fees which an acquirer pays to the seller company to avoid any new buyer. On the front of competitive bidding involving counter offers, sources said, the window of counter offer should not be shut as it allowed transparency and fair transactions.
http://www.business-standard.com/india/news/committee-to-taketakeover-code-changes-this-month/369629/

Economists and policy makers have been pleasantly surprised by the sharp industrial recovery in India, which will nullify the impact of lower farm output due to deficit rains and enable the economy to grow at 6 per cent or more in 2009-10.
The recovery seems to be gaining momentum. Auto, cement and steel despatches are up, sales of medium and heavy commercial vehicles have turned positive for the first time in 14 months, prices of construction steel are up and so are property prices in key markets like Mumbai and the national capital region (NCR), and banks are again willing to lend.
Samiran Chakraborty, head of research, Standard Chartered Bank, says the industrial momentum is very strong, adding that the growth rate sequentially month-on-month is as high as what it used to be at the peak of the industrial cycle.
This is borne out by the sales of two-wheelers. “Typically, in a drought year, sales of two-wheelers begin to get impacted from August-September, which hasn’t happened this year,” says Manishi Roychaudhury, India head of equity research, UBS Securities. Two-wheeler major Hero Honda’s sales grew 36 per cent in August to over 400,000 bikes, more than 50 per cent of which are sold in rural and semi-urban areas.
The stimulus packages have done the trick. While waiver of loans improved rural incomes and spurred the sales of two-wheelers, increased pay of government employees improved the sales of compact cars in smaller towns. “If you look at the corresponding income profile, in smaller towns, the share of government employees in the pool of higher income growth is high,” says Abheek Barua, chief economist, HDFC Bank.
Crisil chief economist DK Joshi says that despite an errant monsoon, industrial growth will be better than last year. He expects the industry to grow at 6 per cent this year against 3.9 per cent last year. “Growth has not been broad-based but limited to sectors where the stimulus has been effective. But a lot of export-intensive sectors like textiles and jewellery are in dire straits,” says Joshi.
Industrial growth will partly offset the decline in agriculture, which is likely to shrink 2.6 per cent this year. That’s also because industry accounts for 26 per cent of the gross domestic product (GDP), while agriculture accounts for 16-19 per cent and services for the rest (55 per cent). So, higher growth in industry would compensate for a drop in agricultural production.

UPTICK
Various sectors show signs of recovery

* Various sectors show signs of recovery

* Automobile sales in August grew at over 24%, bettering 21% growth in July

* Tata Steel sells 25% more steel in August; JSW Steel increases output 53%

* Cement sales growing at 10-17% against a growth of 4% in October 2008

* Medium & heavy commercial vehicle sales turn around; grow 1% in Aug

* Sales of medium and heavy commercial vehicles are in the positive territory for the first time since June 2008

* Steel makers raise prices of construction steel by Rs 1,000 to 1,500 a tonne

* Real estate developers in Mumbai and Delhi selectively increase prices

In 2002-03, an industrial growth of 6.8 per cent had partly offset a 7.1 per cent decline in agricultural growth, and there’s a growing disconnect between agricultural and industrial growth.
“It’s a weak and nascent recovery, given the industry grew at 9-10 per cent between 2003 and 2008,” adds an economist.
The current traction is driven by consumption demand, led by pay hikes to government employees and waiver of farm loans, investment demand is very tentative and patchy though companies are showing interest. Credit is growing at 15 per cent, while it was growing at 29-30 per cent a year ago. While the economy may continue to grow at 6-7 per cent, for a faster growth, the demand for investment has to pick up. Typically, when growth picks up sharply, investment demand grows at 20-25 per cent.
http://www.business-standard.com/india/news/industrial-recovery-may-offset-fall-in-farm-output/369670/