MUTUAL FUND

MFs' August assets grow 5%, courtesy debt funds

The domestic mutual fund industry registered a moderate growth of 5 per cent in its assets under management (AUM) in August at Rs 7,57,000, thanks to the good showing by debt funds.
Except for the debt funds, all other categories of funds witnessed net outflows during the month primarily because of the ban on entry load imposed by the Securities and Exchange Board of India (Sebi) from August 1. But the debt category, driven by the ultra short-term segment, registered net inflows during the month under review.
On the returns front, according to a report by Crisil FundServices, equity funds outperformed on the back of a strong performance from mid-cap and small-cap funds, while long-term debt funds suffered losses due to rising yields. “Ultra short-term debt funds saw strong inflows in August with banks parking their surplus funds in these schemes,” said Krishnan Sitaraman, director, Crisil FundServices.
 

He further added that the ban on entry loads seemed to have initially dulled the inflows into equity funds even though fund performances were good for the month.
In its analysis, Crisil covered over 300 equity-oriented schemes, which revealed that more than 250 of them gave better one-month returns than that of the S&P CNX Nifty in August. “Mid-cap and small-cap funds posted better returns than large-cap funds,” said the report.
The month under review saw a net inflow of Rs 32,700 crore across all categories, though debt funds alone witnessed Rs 38,300 crore of net inflows. The overall net inflow was lower than that of the debt funds because of massive outflows in equity funds.
Liquid funds saw the highest net outflows of Rs 5,200 crore among mutual fund categories.
“This was driven by lower returns, which led investors to shift to ultra short-term debt funds,” said the report.
Gilt funds and equity-oriented funds too witnessed net outflows of Rs 450 crore and Rs 250 crore, respectively.

MF asset grow 85 per cent in 9 months; crosses Rs 7 lakh cr mark

NEW DELHI: The average assets under management (AUM) of the country's mutual fund industry grew by over 85 per cent in the past nine months to a record high of Rs 7.50 lakh crore at the end of August, a Crisil report says.

"Mutual Funds average AUM has risen by over 85 per cent since the liquidity crisis in the last quarter 2008 when industry average AUM had dropped to around Rs 4 lakh crore in November 2008," according to Crisil FundServices.

The MF industry's average AUM continued to post new all- time highs for the fourth successive month in August.

The rise 9 per cent in the AUM last month was driven by hefty inflows into the debt schemes, while all the other categories saw net outflows, it added.

However, in terms of giving returns equity funds outperformed other schemes on the back of a strong performance from mid-cap and small-cap funds, while the long-term debt funds saw negative returns due to rising yields.

"Ultra short-term debt funds (in which investors park surplus money for a very short duration, ranging for a few weeks to a few months) saw strong inflows in August, with banks parking their surplus funds in these schemes," Crisil FundServices Director Krishnan Sitaraman said.

At the end of August, the net investment into all the MF scheme stood at Rs 32,700 crore, with the debt fund alone witnessing inflow of Rs 38,300 crore.

http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/MF-asset-grow-85-per-cent-in-9-months-crosses-Rs-7-lakh-cr-mark/articleshow/5015133.cms

Debt funds boost MF assets to Rs.7.57 tn in Aug

MUMBAI: The Indian mutual fund industry’s assets under management touched a new peak of Rs.7.57 trillion at the end of August, thought the growth was moderate at 5 percent over the previous month. The month under review saw net inflows of Rs.327 billion across categories with debt funds witnessing Rs.383 billion of net inflows. All other key categories saw net outflows. Liquid funds saw the highest net outflows among mutual fund categories, to the tune of Rs.52 billion in August. This was driven by lower returns which led investors to shift to ultra short term debt funds.

On the returns front, equity funds out-performed on the back of a strong performance from midcap and small cap funds while the long term debt funds saw negative returns due to rising yields, according to CRISIL FundServices.

“Ultra short term debt funds saw strong inflows in August, with banks parking their surplus funds in these schemes. At the same time, the new rule of no entry loads seems to have initially dulled the inflows into equity funds even though fund performances were good for the month,” said Krishnan Sitaraman, Director – CRISIL FundServices.

CRISIL’s analysis of over 300 equity oriented schemes shows that over 250 schemes gave better 1-month returns than the S&P CNX Nifty in August. Midcap and small cap funds posted better returns than large cap funds and benchmark indices across all periods analysed (1 month, 3 months and 1 year).

“The realty, consumer durables and technology sectors were significant out-performers
in the month which saw benchmark equity indices ending flat reflecting in the S&P CNX Nifty rising 0.6 percent,” Sitaraman added.

Mutual funds’ average AUM has now risen by over 85 percent since the liquidity crisis in the last quarter 2008 when industry average AUM had dropped to around Rs.4 trillion in November 2008.
http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/Debt-funds-boost-MF-assets-to-Rs757-tn-in-Aug/articleshow/5014648.cms

INSURANCE

Income from insurance premium may cross Rs 850 cr: ECGC

NEW DELHI: State-run Export Credit Guarantee Corporation of India (ECGC) on Tuesday said its income from insurance premium is expected to jump by over Rs 100 crore this fiscal to Rs 850 crore, as more and more exporters are facing payment defaults.

"I am confident we will cross Rs 850 crore (in 2009-10)," Export Credit Guarantee Corporation Chairman and Managing Director A V Muralidharan told reporters on the sidelines of FIEO function.

In FY'09, ECGC's income from premium was Rs 745 crore. ECGC provides a range of credit risk

insurance covers to exporters against loss in export of goods and services. It also gives guarantees to banks and financial institutions to enable exporters to obtain better facilities from them.

Exporters have been complaining of payment defaults as buyers in the western markets have been impacted due to the demand slowdown.

The corporation had sold about 14,500 policies in 2008-09 and is expecting a 5 per cent increase in sales this fiscal.

Muralidharan said the US buyers accounted for the bulk of total default claims.

"Highest defaults claims are coming from the US... about 25 per cent of the overall claims are from the US," he said.

He said ECGC had paid Rs 451 crore towards claims in 2008-09 and as per the latest figures it has disbursed Rs 146 crore in the current fiscal.

Providing relief to exporters, the government had extended the insurance cover up to March 2010.

http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/Income-from-insurance-premium-may-cross-Rs-850-cr-ECGC/articleshow/5015204.cms

SEBI

Sebi tightens book reporting norms for listed companies

MUMBAI: In a bid to improve disclosure and accounting norms for listed companies, a committee of the Securities & Exchange  Board of India made a a few proposals.

The market regulator’s committee, in a discussion paper on Monday, recommended changes in the way companies disclose earnings and sought placing greater responsibilities on internal audit committees and firms to ensure compliance with accounting norms.

The implementation of these proposals would require companies to make more efforts to stay listed on the stock exchanges, auditors and lawyers said.

The Sebi committee indicated that the chief financial officer of a listed entity need not be a chartered accountant, but proposed that the appointment should be approved by its audit committee. It said the audit committee, which comprises two thirds of an entity’s independent directors, will be responsible to ensure the top finance officer’s professional credentials.

RS Loona, managing partner of Alliance Corporate Lawyers and former executive director (law) at Sebi, feels the appointment of a chief finance officer should be done by a company’s board, rather than the audit committee.
“The role of the audit committee should be only to the extent of expressing its opinion about the appointment,” Loona said.
The Committee, however, recommended the Sebi’s proposal to make it mandatory that an external audit firm would carry out the internal auditor’s role, “would not be prudent”.

Further, the Sebi committee proposed making disclosure of audited figures on the balance sheet every six months. Currently, companies disclose their statements of assets and liabilities at the end of every financial year. The step will enable investors gain a better perspective about a company’s asset-liability position more frequently.
The committee has recommended to streamline the submission of financial results by companies and reduce the period for their submission to the stock exchanges.

“There is still a need to try and standardise the extent and quality of reporting by various companies; some report audited, some reviewed and some unaudited and unreviewed results which may either be standalone or consolidated,” said V Venkataramanan, Director, accounting advisory services, KPMG. “Introducing a more consistent and comparable format for quarterly reporting should be the medium term aim for listed companies in India,” he said.

While proposing that the audit committee should be responsible for the independence of the audit firm and its partners, the committee also proposed rotating an audit firm’s partner, who signs the audited statements, every five years.

“The objective behind the above recommendation seeks to ensure that the statutory auditors are independent from management. It would also break any continued long-term association of an audit partner with the management of a particular listed entity,” the discussion paper said.

The committee has recommended relieving the auditors of the responsibility of verifying the details regarding disclosure of pledged shares of the company promoters.

http://economictimes.indiatimes.com/Market-Analysis/Sebi-tightens-book-reporting-norms-for-listed-companies/articleshow/5011922.cms

Sebi proposes tighter audits

MUMBAI: A Securities & Exchange Board of India (Sebi) panel has recommended rotation of audit partners, selection of the chief financial officer by a  company’s audit committee and standardisation of earnings disclosure, in an attempt to prevent another accounting scandal such as Satyam Computer. ( Watch )

The committee has also proposed that companies publish their balance sheets, which show the assets and liabilities, halfyearly , against the present annual system. This would help investors know the company’s solvency position, instead of just the profitability which comes out in quarterly results. The committee has invited comments and suggestions on these proposals before a final recommendation.

The Sebi Committee on Disclosures and Accounting Standards (SCODA), made these recommendations after B Ramalinga Raju, the promoter of the then fourthlargest software company Satyam Computer Services, in January said he had falsified accounts of about a billion dollars. That led to charges of lack of transparency, a flurry of investor suits in the US and accusations that independent directors had failed in their duty to protect investors. Probe by various agencies, including Sebi, is on.

New financial reporting norms

“A longer association between a particular audit firm and a listed entity may lead to complacency and defeat the true sense of independence of the auditors,’’ the panel said. But mandatory rotation of firms may not be practical by all companies, it said without detailing. Hence, it recommends mandatory rotation of partners every five years and suggests the audit committee be held responsible for the independence of audit firms and partners.

In the case of Satyam, PricewaterhouseCoopers had been the audit firm for many years and its partners S Gopalakrishnan and Srinivas Talluri have been signing the accounts. All are under probe for their role in the Satyam accounting scandal by differenc agencies.

“The role of the audit committee should be only to the extent of expressing its opinion about the appointment,” said RS Loona, managing partner of Alliance Corporate Lawyers and former executive director (law) at Sebi adding the appointment should be done by the board.

Some lawyers believe the focus on the audit committe is to reduce fears of some individuals who have either quit, or avoid becoming independent directors in companies after the Satyam episode. The committee has also recommended streamlining the submission of financial results and reduce the period for their submission to the stock exchanges.

“There is still a need to try and standardise the extent and quality of reporting by various companies; some report audited, some reviewed and some unaudited and unreviewed results which may either be standalone or consolidated,” said V.Venkataramanan, Director, accounting advisory services, KPMG. “Introducing a more consistent and comparable format for quarterly reporting should be the medium term aim for listed companies in India,” he said.

The panel proposed that companies should be allowed to voluntarily adopt International Financial Reporting Standards as a possible first step towards phased implementation of the new accounting practice starting April, 2011.
http://economictimes.indiatimes.com/Market-Analysis/Sebi-proposes-tighter-audits/articleshow/5012077.cms

TAXATION

Excise duty mop-up soars 22.5% in August

NEW DELHI: In the clearest indication so far that the much-talked-about green shoots aren’t an optical illusion, excise tax collections in August were up 22.5% over the previous month, though still a touch lower than the figure for August 2008.

Given the fact that excise duties reflect what’s happening to all kinds of manufactured goods, this is arguably a more broad-based indicator of industry recovering than the index of industrial production (IIP).

Sources told TOI that central excise duty collections in August were Rs 8,979 crore, about 8.8% below the Rs 9,846 crore collected in the same month last year. What makes that good news is the fact that July collections of Rs 7,332 crore this year were 28.5% lower than last July’s mop up of Rs 10,255 crore. With the much improved showing in August, the government is now hopeful of meeting the target of Rs 2.7 lakh crore set for indirect taxes
in the Budget for 2009-10.
There is some bad news for industry though. A senior official from the Central Board of Excise and Customs (CBEC) said if the upward trend continues for another couple of months, the government may reconsider the tax concessions it had extended in the second half of the last fiscal.

The government has been keen on reverting to the path of fiscal consolidation at the earliest, but has so far been cautious of the fact that this should not hamper industrial recovery.

Last week, finance minister Pranab Mukherjee had said on the sidelines of a meeting of the chief commissioners and director generals of CBEC that the huge shortfall in July as compared to the previous year had been due to the overall slowdown of the economy and the effect of stimulus measures through reduction of excise duty rates.

The finance minister had nevertheless expressed optimism that the indirect tax target was very much within reach as the trends were indicative of a rebound by the third quarter.

The tax base of indirect taxes has grown steadily and as a share of GDP has gone up from 9.2% in 2003-04 to 12.6% in 2007-08.

http://economictimes.indiatimes.com/news/economy/indicators/Excise-duty-mop-up-soars-225-in-August/articleshow/5016863.cms