Escorts Mutual Fund

NEW DELHI: UTI Fund today said it has declared tax-free dividend of 22 per cent on its banking sector scheme. "The fund is positioned to capitalise opportunities emerging in the banking sector and is basically focused on large cap stocks," UTI Banking Sector Fund Fund Manager Arun Khurana said.

UTI Banking Sector Fund declares tax-free dividend of 22 per cent or Rs 2.20 per unit on face value of Rs 10 a share.

Pursuant to the payment of dividend, the Net Asset Value of the dividend option of the fund would fall to the extent of payout and statutory levy if any, the company said in a statement.

All unit holders registered under the dividend option of UTI Banking Sector Fund as on September 4, would be eligible for this dividend. Also investors who join the dividend option of the fund on or before the record date will be eligible for the dividend.

UTI Banking Sector Fund is an open-end equity oriented scheme, the release added.
http://economictimes.indiatimes.com/Personal-Finance/Mutual-Funds/UTI-Fund-declares-22-pc-dividend-on-its-banking-sector-scheme/articleshow/4955650.cms

CHENNAI: The net asset value (NAV) appreciation of nearly 480 funds or nearly one out of every two funds has bettered the sensex returns of 9% in

Around 100 funds have at least doubled the 30-share index’s gains. The ones like IDFC Small & Midcap Equity (42.92%), Tata Life Sciences & Tech (39.79%), UTI Transportation and Logistics (37.96%), Canara Robeco Equity Tax Saver (36.25%), Birla Sun Life Dividend Yield Plus (35.69%), ICICI Prudential Gilt Investment PF (35.23%) and Reliance NRI Equity (33.99%) returned eye-popping 3x times sensex’s returns. Overall, there are at least 23 funds which more than tripled the benchmark’s gains in the period starting August 31 2008 and ending this August 30.

‘‘Mutual funds have always showed the ability to beat popular benchmarks. While investors remain cautious especially after SEBI regulations on loads, the fact remains that most funds have good track records. We (the industry) have delivered always alpha (a measurement of risk-adjusted performance),’’ said the CEO of a top mutual fund.

Interestingly, many funds which sported NAVs of less than Rs 10 have proved to be real gems and may have helped systematic investment plan (SIP) users. Take for instance Religare Contra fund which had an NAV of Rs 9.78 on August 30, 2008.

The market rally has helped the same fund’s NAV to almost touch Rs 13 per unit, gaining 32.52% in 12 months. Others ‘beaten-down’ funds which have outperformed sensex include Taurus Infrastructure (29.09%), Mirae Asset India Opportunities (25.29%), AIG World Gold (20.27%), HSBC Tax Saver Equity (19.86%) and Morgan Stanley ACE fund (18.81%). ‘‘Many themes may not have done well in the past few months. Take for example international funds. While performance is one of the metrics, it’s important for the investor to allocate some portion of their MF assets to them. They might do well when global economies rise,’’ S Naren, CIO of ICICI Prudential AMC said in a recent interview.

Numerous exchange traded funds (ETFs), which track a specific index or commodity, find their place in the market-beater list with those tracking gold like Gold Benchmark ETF (26.69%) or banks such as Kotak PSU Bank ETF (31.8%) doing exceedingly well.

Monthly income plans, best suited for getting specified monthly payment to investors like senior citizens and retired persons, also make it to the sensex-beater list. Funds like Reliance MIP (27.61%), HDFC MIP Long-term (22.08%), Principal MIP Plus (13.87%), Templeton MIP-G (11.74%) and LIC Floater MIP (10.4%) are some examples.

INSURANCE

Higher lock-in for ULIPs seen helping tax funds

NEW DELHI: India's tax funds are poised to improve market share as the proposed hike in lock-in period for rival unit-linked insurance plans (ULIPs) make mutual funds the most liquid equity tax-saving instrument.

However, a large scale shift from ULIPs to mutual funds is unlikely immediately as advisers continue to promote insurance products which earn double-digit commissions on at least the first premium as against about 50-100 basis points from funds. India's insurance regulator is considering a plan to increase the lock-in period for investments under ULIPs to five years from three years now, said R. Kannan, member actuary of Insurance Regulatory and Development Authority.

"Probably in another one month we will do this job," he told Reuters, adding the change should make ULIPs a better long-term investment vehicle. However, the step would reduce liquidity of ULIPs, which analysts see working in favour of tax planning mutual funds, popularly known as equity linked savings scheme (ELSS), that will continue to offer a three-year lock-in.

"ELSS products will become more competitive in a way, in terms of returns, costs and holding period," said Chintamani Dagade, senior research analyst at Morningstar India, adding that such funds will attract more inflows. "That's a good thing to happen to (fund) industry," he added. ULIPs, which combine investment and insurance, have emerged as a popular investment product offering market-linked returns.

These plans, launched in 2001, have been the favourite of insurance seeking investors who wanted to ride the stock market, and among insurance advisers for their higher commissions. This was evident from the success of the insurance industry when firms rode a surge in the equity market until 2007 as household savings were increasingly diverted into ULIPs, swelling insurers' new business premiums.

However, of late, the insurance regulator has initiated steps to moderate the rush to sell ULIPs. Earlier, on Aug. 20, it directed insurers not to charge any fees on surrender of such plans after five years, and in July it imposed a ceiling on some charges that ULIPs would levy from October onwards. A higher lock-in will reduce their attractiveness, at least among savvy investors, but reversing the trend will not be easy for mutual funds, particularly after a recent regulation that restricts them from paying upfront fee to agents.

"Mainly because of the commission issues, ULIPs will be targeted by distributors... it's a sellers' market," said Dagade.

http://economictimes.indiatimes.com/Personal-Finance/Insurance/Higher-lock-in-for-ULIPs-seen-helping-tax-funds/articleshow/4954872.cms

The Insurance Regulatory and Development Authority (Irda) is likely to hasten the file and use procedure for unit-linked insurance plans (Ulips).
At present, Irda takes 30 days to approve any product. Insurers expect it to come down to three days in case of the existing products. After the cap on the overall charges, 22 life insurance companies will together re-file around 150-200 unit-linked products. “As far as products are in line with the new norm, we will approve it in less than the normal time since there are more than 200 Ulips of the 22 life insurance companies,” said Irda Executive Director K Subrahmanyam.
The regulator has called for a meeting with the appointed actuaries on September 9 to assure proper implementation of the new norms. Irda has formed a committee headed the Life Insurance Council Chairman S B Mathur, chief actuaries of few insurance companies and chief executives of a few life companies. An actuary of a life insurance company said that insurers would take the issue to the regulator and it was likely to reduce the timeline of process as it did in 2006 when it came out with fresh guidelines on Ulips.
In 2006, when Irda had changed Ulips guidelines mainly imposing sum assured at five times the premium and three-year lock-in period, it approved products in 15 days. All existing unit-linked products will have to comply with the revised guidelines from January 1, 2010, and therefore, these products will have to be re-filed by December 31, 2009.
“Last time, when Irda had changed the norms, it had asked insurance companies to file Ulips and use it after certifying it with appointed actuary. It involved risks and the regulator had later asked insurers to withdraw or change those products, which did not meet new rules,” said Future Generali Chief Actuary GN Agarwal.
“Irda will look at quick approvals as there are so many products. The numbers of companies and Ulips have doubled from 2006 when the guidelines were laid down. The regulator will speed up the process. Since it approved products in 10-15 days in 2006, it may start clearing the existing products in three days,” said SBI Life Chief Actuary Sanjeev Pujari.
According to the new norms, the difference between the net and the gross yield is capped at 3 per cent and the fund management charges are capped at 1.35 per cent. While mortality and morbidity is kept out of the ambit of the overall charge, Irda said there can be no surrender charge after fourth year.

Insurance sector regulator Irda On Monday said it is likely to come out with initial public offer (IPO) guidelines by October. “We had two meetings with the Securities and Exchange Board of India (Sebi) and couple more are required (to decide on final guideline on IPO),” IRDA Chairman J Hari Narayan said at a CII event

“If I take an optimistic frame, probably by October,” he said, when asked by when guidelines would be finalised. There are 22 life insurance firms and 21 non-life insurance companies operating in the country currently.
To facilitate fair valuation of an insurance firm, the regulator is likely to come out with guidelines over the next 15 days. “Guidance note on valuation has to come from the Institute of Actuaries and this is likely to come in the next 10-15 days.” These will standardise the norms for calculation of embedded value of the companies, he said, adding, once the institute comes out with guidance note, then the insurance companies have to follow.
IRDA is also working on disclosure norms for insurance companies that will work in the larger interest of the public, he said. Asked whether disclosure norms would come before IPO guidelines, he said, “that should seem very logical way of doing it.” He said, “There are two things, one is disclosure for IPO which is called draft red herring prospectus, and the other is the disclosure on systematic basis by listed companies. For example, their balance sheet details, quarterly or semi-annual disclosure.”

Investments came in fortnight ended Aug 14 on low credit offtake
Banks’ investments in mutual funds increased by Rs 17,291 crore during the fortnight ended August 14 to Rs 1,56,910 crore, which is over 20 per cent of the total asset under management of the industry in the period.
With credit growth falling in recent months, banks have resorted to large-scale investment in liquid schemes of mutual funds that offer 4.5-4.75 per cent return, while the reverse repo window earns 3.25 per cent only.
According to data released by the Reserve Bank of India (RBI), bank investments in mutual funds have shot up 7.35 times from Rs 21,348 crore a year ago. At that time, the year-on-year growth in bank credit was estimated at 25.8 per cent, which has now dropped to 14.9 per cent.
In its annual report released on Thursday, RBI has raised concern over high dependence on corporate and institutional investment as one of the problems affecting the mutual fund industry.
But the industry said that they could do little if companies were keen to invest in schemes floated by fund houses to earn good returns. “We are just like an investment vehicle and favour all, whether it is an individual, bank or an institution, with different products,” said AP Kurian, chairman of the Association of Mutual Funds in India (Amfi).
On the other criticism faced by the industry regarding their low penetration outside big cities, the domestic mutual fund industry said that rural areas were the future of the industry but added that it still had a long way to go to generate substantial investments from Tier II and Tier-III cities.
“We accept the fact that we still have to go further, but that does not mean fund houses are complacent with the situation (in which most of the money is coming from institutions and corporates). It is not that the industry is doing nothing. It takes time, efforts and investments to reach out to households, and we are extremely conscious on this front. The RBI’s review does not represent the full truth,” Kurian said.
“However, we have continued to open branches outside the urban centres in Tier II and III cities. Though investments from rural sector is not significant, but it is gaining reasonable size,” said the chief marketing officer of one of the leading fund houses in the country.
Nimesh Shah, chief executive officer of ICICI Prudential Mutual Fund, said, “Though most of the business comes from the top eight cities, but we see future is in the rural sector. That is why we have increased our presence from below 100 locations a year ago to around 200 at present, and are concentrating on these newer towns, going forward.”
Past few years have shown a positive trend in investments coming from Tier II and III cities and their share of investment was rising, said Sandeep Dasgupta, CEO of Bharti Axa Investment Managers. According to him, apart from the institutional segment which comprises 65 per cent of the assets under management, a reasonable share of 15-20 per cent of the balance investment was coming from rural areas.
N K Garg, CEO of Sahara Mutual Fund, said that there was an absolute need to reach out to retail investors. As of now, over 85 per cent of the investments came from the top urban centres, he added further.

The government is committed to financial sector innovations and reforms, a senior government official said.
"The government is working with regulatory agencies to bring about financial sector innovations and reforms," Finance Secretary Ashok Chawla said at the launch function of interest rate futures at the National Stock Exchange today.
Chawla said that growth in the Indian economy was returning.
"Surely, there are signs the economy is moving back to a higher growth path. The move to a higher growth trajectory is well on course," Chawla said.
The GDP growth in Q1FY10 of 6.1 per cent indicate that the economy is back on the higher growth path. Similarly, the Index of Industrial Production (IIP) growth at around 5 per cent and service sector growth at around 8 per cent were also promising, he said.
On the launch of interest rate futures today, the Finance Secretary said that volumes were not the only thing. The manner in which the market develops is very important, he said.
Banks and FIIs can also participate in interest rate futures within the regulatory framework, he said, adding that this is expected to give a push to this product.
Market regulator Securities and Exchange Board of India (Sebi) Chairman C B Bhave said that despite the global economic crisis of the last eight to nine months, the Indian markets withstood the crisis well.
"In the last eight to nine months when the global economic crisis was at its peak, despite the volatility in the equity markets, the (Indian) markets withstood the crisis," Bhave said, adding "we were able to conduct the settlements in an orderly manner."
The market has so far has not faced any difficulties in settlements, he said.
"It will be our effort to bring more products on the exchange traded platform," the Sebi Chairman said.
On the credit market and the squeeze it faced in recent times, Bhave said that one of the main reasons for this was that people were not sure of the value of assets.
http://www.business-standard.com/india/news/govt-committed-to-fin-sector-innovations-reforms-chawla/72222/on

Market regulator, Securities and Exchange Board of India (Sebi), is considering the issue of setting up an exchange for small and medium enterprises (SMEs), a top Sebi official said.
The SME exchange is an issue we are looking at and as and when we feel that necessary conditions are in place, we will allow that," Sebi Chairman C B Bhave said at a function to launch interest rate futures at the National Stock Exchange today.
On extension of trading hours at the NSE, Bhave said Sebi's secondary market committee has discussed the issue.
"Our secondary market committee is looking at it and a committee with exchanges in it has been constituted to look at the practical aspects of this (extension of timing)," Bhave said.
"If we find it practical, we will take it back to the secondary market advisory committee," he said. There has been a suggestion that trading timings should be extended beyond the present 1530 hours period.
To a query on introduction of more products, the Sebi Chairman said, "We want to see how to introduce more products on the exchange traded platform and settle through a central clearing entity which gives settlement guarantee."
Bhave also said the time was not yet ripe for the introduction of interest rate futures in more currencies but Sebi was open to the idea. At present, it is allowed only between the rupee and the dollar.
http://www.business-standard.com/india/news/exchange-for-smes-being-discussed-c-b-bhave/72240/on

Insurance sector regulator IRDA today said it is likely to come out with initial public offer (IPO) guidelines by October.
"We had two meetings with the SEBI and couple of more is required (to decide on final guideline on IPO)," IRDA Chairman J Hari Narayan said at a CII event."If I take optimistic frame probably by October, he said, when asked by when guidelines would be finalised.
There are 22 life insurance firms and 21 non-life insurance companies operating in the country currently.
To facilitate fair valuation of an insurance firm, the regulator is likely to come out with guidelines over the next 15 days.
"Guidance note on valuation has to come from the Institute of Actuaries and this is likely to come in the next 10-15 days."
These will standardize the norms for calculation of embedded value of the companies, he said, adding, once the institute comes out with guidance note then insurance companies have to follow.
IRDA is also working on disclosure norms for insurance companies that will work in the larger interest of the public, he said. Asked whether disclosure norms would come before IPO guidelines, he replied saying "that should seem very logical way of doing it."
He said, "There are two things, one is disclosure for IPO what is called draft red herring prospectus and the other is the disclosure on the systematic basis by listed companies for example their balance sheet details, quarterly or semi-annual disclosure."
Expressing concern over rising claims in the health insurance segment Hari Narayan said, "One thing very striking for the insurance system which we see in India is that the (health) insurance portfolio has got negative claim ratio of 110 per cent."
For the individual health products the claims ratio is around 80-90 per cent whereas for the group it is 120 per cent, he said.
So obviously, he said, group policy management is not as effective as individual policy management.
Noting that the growth of group policy is close to 60 per cent, he said when every other line is loosing their business in terms of growth, the rising number of group insurance is not a healthy trend.
Recognising the importance of engagement with multiple stakeholders in finding solutions to various challenges, he said, there is need to ensure accessibility, affordability and efficiency in the health insurance system of the country.
It requires sustained and focused efforts on the part of all stakeholders in the health insurance eco-system, he said.
http://www.business-standard.com/india/news/ipo-guidelines-for-insurance-companies-by-oct-irda/72224/on

Mon, Aug 31 10:29 AM
Mumbai, Aug 31 (IANS) Indian equities started the week on a dismal note with a key index falling 1.12 percent below its previous close about five minutes into trade.
The 30-share sensitive index (Sensex) of the Bombay Stock Exchange (BSE) Monday opened at 15,812.15 points, as against Friday's close at 15,922.34 points, and was ruling at 15,744.54 points some five minutes into trading.
At this level, the barometer index was down 183.46 points, or 1.15 percent.
At the National Stock Exchange (NSE) the broader 50-share S&P CNX Nifty was ruling at 4,680.6 points, a loss of 1.09 percent.
Broader market indices were also ruling weak, with the BSE midcap index ruling 0.52 percent lower, and the BSE smallcap index down 0.27 percent.
http://in.news.yahoo.com/43/20090831/846/tbs-indian-equities-markets-start-week-o.html

The Reserve Bank on Friday made it mandatory for builders borrowing funds from banks to disclose their loan details to the home buyers.
RBI has issued directions to banks to include the disclosure clause in their loan agreement with the builders, pursuant to a recent Bombay High Court order.

“While granting finance to specific housing/development projects, banks are advised to stipulate that the builder/developer/company would disclose in the pamphlets/ brochures, the names of the banks to which the property is mortgaged,” RBI said in a notification. A builder would have to publish loan details in advertisements given in newspapers or magazines, and also mention that it has a no-objection certificate from mortgagee banks for sale of the property, it said.

“Banks are advised to ensure compliance of the above terms and conditions and funds should not be released unless the builder/developer/company fulfills the above requirements,” the notification added.

Working Group’s tenure
RBI on Friday also extended the tenure of Working Group to review the Benchmark Prime Lending Rate (BPLR) by one month to end- September 2009. “The Reserve Bank of India has on Friday extended the tenure of the Working Group on Benchmark Prime Lending Rate (BPLR) by one more month, from end-August 2009 to end-September 2009,” RBI said in a release.

The RBI had constituted a six-member working group in June to review the benchmark prime lending rate (BPLR) system and suggest a mechanism for pricing floating rate loans, a move that will improve transparency in the way banks set interest rates on housing loans.

The working group, chaired by RBI Executive Director Deepak Mohanty, comprises J P Morgan India Chief Economist Jahangir Aziz and Indian Institute of Management Ahmedabad Professor T T Rammohan as members.