Escorts Mutual Fund

NEW DELHI: Reliance Mutual Fund, a part of the Anil Dhirubhai Ambani Group, on Tuesday announced dividends for three mutual fund schemes including its banking fund.

The Reliance Banking Fund holders will receive 20 per cent dividend, while the investors of Reliance Pharma Fund will get 15 per cent, the company said in a statement.

Further, the company has also declared a dividend of 15 per for its Tax Saver (ELSS) fund.

"Our aim has always been to maintain positivity of results and ensure that we focus on long term wealth creation for our investors through prudent investment, monitoring of trends and higher safety," Reliance Mutual Fund CEO Sundeep Sikka said.

MUMBAI: HDFC Bank, one of the largest mutual fund distributors, has decided to waive charges on any investment done through the systematic investment plan route. This could force some of the other distributors to take a relook at their fee structure.

Earlier this month, ICICIdirect had revised its transaction charges for investment made under SIPs. The distributor had said it would charge Rs 30 per transaction, or 1.5%, of the transaction amount, whichever is lower. Since the beginning of this month, distributors have been receiving their commissions directly from the mutual fund investor, a sum arrived at after negotiations between both parties. Most big distributors are charging a fee based on the amount that the investor wants to deploy.

For physical applications, where there is no advisory, HDFC Bank will charge Rs 200 per transaction. If the same application is made online, the only charges would be for account maintenance.

For its private banking clients, HDFC Bank is giving an option between paying a one-time exit load on advisory or going in for a transaction-based fee, which would be linked to AUM.

People familiar with the development told ET that the first option will be a slab-based fee structure and be available to all those clients who seek to be advised on mutual funds but transact online. This is expected to bring down the churn significantly among the high net worth investors.

“If a client buys mutual funds of Rs 75 lakh via the bank, he can sign a contract stating he will pay a fee at the time of exit which in this case would be around 1.75%. Any investment below Rs 2 crore would attract an exit load of 1.25% while Rs 4 crore and above it would be 0.75%. Essentially, the client will get a chance to judge the bank on its advice and then pay up,” said an official familiar with the development.

The second option is that of a transaction-based fee structure, which would be linked to assets under management. On assets of Rs 12-15 lakh, the bank may charge a transaction fee of 1.5%. The higher the AUM, the lower the charges. The bank also has a third option. In case there is no asset under management but a client wishes to do a Rs 10-lakh transaction and be advised, the bank will charge a flat fee of 1.75%.

I want to start a SIP (Systematic Investment Plan) in a good debt fund which has given more than 10 per cent returns in the past one year. Please suggest.
-Ayan Dutta
For the year ending August 13, as many as 29 of the 48 medium-term debt funds have given returns of more than 10 per cent. There is an inverse relationship between interest rates and bond prices; debt funds gain when the interest rates are falling and vice versa. The high returns of debt funds in the past one year are mainly because of the continuously falling interest rates towards the end of 2008.
There are lesser chances now that rates will see a similar fall in the coming future. Moreover, with the government borrowing to finance its rising expenditures, bond prices are more likely to see a fall. Debt funds are going to be volatile in the coming times and one should not expect them to deliver such returns.
Some top rated funds that have delivered returns of more than 10 per cent in the past one year are Canara Robeco Income, ICICI Prudential Income, Fortis Flexi Debt Regular, IDFC Dynamic Bond Plan A, Sahara Income and Birla Sun Life Dynamic Bond Retail.
I have recently redeemed my investments in Canara Robeco Income Fund. While the exit load quoted on their website at the time of redemption was 0.5 per cent, they charged me 1 per cent. The same load percentage was quoted on AMFI's website and ICICIDirect.com. Is this not cheating the investors?
-Narendra Parmar
Redemptions from a fund are subject to the exit load applicable at the time of investing and not the prevailing exit load. The fund had been charging an exit load of 1 per cent between January 5 and May 12, 2009. If you had invested during this period, a 1 per cent exit load will apply.
The benchmark of the DSPBR Equity Fund is S&P CNX Nifty. Why, then, has it been classified as a mid-cap fund on Value Research?
-Vinayak Nadgauda
An equity fund chooses the benchmark which it believes will most closely resemble its investment style and returns. It helps investors compare the scheme's performance with that of the benchmark index and justify the additional risk taken.
At Value Research, we classify funds into various capitalisation ranges based on their portfolio, which in turn decides its market cap. The largest 10 per cent of funds by their market cap are classified as large-cap, the next 20 per cent as mid-cap and the remaining 70 per cent as small-cap.
So, while a fund invests in all large-cap companies, its relative market cap in its peer group will determine how it will be classified.I have invested in HDFC Capital Builder through an SIP since June 2006, for around two and a half years. When a new manager took over in 2007, it did seem to be doing well for a little while. But should I now swap my units from HDFC Capital Builder to HDFC Equity?
-Shaanto
For HDFC Capital Builder Fund, more than the fund manager pushing up the returns, it was the market rally that helped the fund gain in 2007. Its returns in 2009 have been 58.77 per cent, ranked 88th among 213 funds, compared to the category average of 56.80 per cent. In 2008, its fall was similar to the category average and was ranked 99th among 193 funds. The returns of this fund do not put it in the top ranks. You may consider other top rated large-cap funds such as Birla Sun Life Frontline Equity, DSPBR Equity, DWS Alpha Equity, HDFC Top 200 and Magnum Contra.
Value Research

There are a number of things to check to avoid losses.
It's a close cousin of the mutual fund. Nevertheless, it provides the thrill of stocks, too. The exchange traded fund (ETF), the most exciting investment in the market, is capable of giving sweeping returns.There are three types of ETFs, namely index exchange traded funds, commodity ETFs and bond ETFs. Index funds hold securities and replicate the stock market index. Whereas one company share may cost Rs 21,725 in the stock exchange, an index fund may allow you to buy one share for Rs 285.70, investing in 50 companies.
Among commodity exchange traded funds, there are gold ETFs, whose scintillating presence is familiar to all. In the bond category, there's liquid ETF, which invests in money market instruments. There are more than 100 index-based ETFs, six gold ETFs and one liquid exchange traded fund. How should one choose the right ETF, among these myriad options?
Here are ways to pick the right ETF:
CHOOSE SINGLE PORTFOLIO
Pick an ETF with an undiluted portfolio. For example, if you go in for a gold exchange traded fund, check if it is investing in the glittering metal alone. If a gold ETF is investing a sizable part of the corpus in debt and money market instruments, besides gold, the high returns from the glittering metal would not be seen. A glance at the offer document easily reveals the portfolio allocation facts. Always keep away from smaller exchange traded funds. They don't give liquidity to the investor. Another danger is, they may not be traded at all.
NO, TO NAV GLITCH
It's very important to scrutinise if the ETF is trading at a discount to shares. That is, although shares are doing well on the bourse, the units at the ETF might be traded at less than the market value of stocks. For example, if a unit is Rs 4,500 on Nifty, check if the ETF is showing less, say Rs 4,400. There's no point in selecting an ETF, which sells units at lower prices persistently. The lag becomes bigger. The investor loses, as the difference tots up, gradually. For example, in a gold ETF, he may suffer a loss amounting to Rs 40-50 per gram. The order book of NSE, which displays the prices and quantity of units being sold in the market, must be seen to avoid NAV problems. Also, investigate if the ETF creates new units or at least redeems these to fulfill a demand or supply mismatch in the secondary market. If yes, the NAV discount problem does not surface.
BE ON RIGHT TRACK
To choose an ETF, spot whether tracking error is low. Tracking error is the difference between ETF and market value. That is, a divergence is seen between the NAV and the underlying index. If the index is up 100 per cent, an investment of Rs 100 would not become Rs 200, but show, say, Rs 100 or Rs 150 only. The reason why tracking errors occur are high management fees. A low tracking error, like 0.4 per cent, would not be detrimental. Tracking errors may also occur if the ETF holds cash to meet adjustments for merger, hive offs or dividend payouts.
MOVING OR NOT?
Is the ETF actively traded? That is, has pace been kept with market developments, if any? An inactive ETF would mean you can't exit holdings at the time or price of own choice. When the ETF declared a dividend, bonus or rights in the past, was this reflected in the returns which the investor got? Did it take time to reconcile or was there quick reconciliation?
BID ASK SYNDROME
An ideal ETF has a low bid/ask spread. ‘Bid’ means the investor should know the price at which he can buy units and ‘ask’ means he should know the price at which the seller is willing to give units. The difference between bid and ask should be very little, in an ETF. The fund chart would show both bid and ask figures.
ESCHEW EXPENSIVE ETF
Brokerage is the most important expense an investor incurs while holding an ETF and determines how costly the venture would be, eventually. Whenever units are purchased or sold, brokerage has to be paid. Trading too much or trying to make profit from every small move shoots up costs. One way to cut costs is to scout for discount brokers. They charge less commission and mostly operate online. All in all, the investor should try to keep brokerage expenses at 0.3 per cent. Check if the ETF is charging a host of expenses. These may include high investment management fees, trustee fees, investor communication fees, audit fees, cost of account statements, listing, license, marketing and selling costs and operating expenses. The expense ratio is very important in the ETF scheme of things. Where it's 2 per cent, the meaning is 2 per cent of your NAV is spent on management costs! Annual management fees should not rise above 0.25 per cent.The fund offer document is the place to search for expenses.
A demat account is a must for investing in almost every exchange traded fund. Try a few smart strategies. For example, if you already are investing in stocks, and have a demat account, it can be used for exchange traded fund units, too. No demat account? Open one, but save on money. Look for a demat account that does not ask for annual maintenance charges or one that waives account opening fee. You can also find a demat account that levies a flat fee or imposes brokerage fee only on volume traded. Coming to specifics, in a bond exchange traded fund, the investor must know that profitable returns can be wiped out if he buys and sells units through a third party. Because, trading fees would be imposed. The index fund investor must guard against high tracking errors, as they are more liable to creep in, touching 2.5 per cent. While putting money in a gold exchange traded fund, the benchmark must be known. For instance, if the London benchmark rating is being followed, not MCX, a difference in NAV and market price could result in a loss of Rs 35,200 by the end of day. There is a mistaken notion that if one buys the same specific amount every month, returns would be seen. Called rupee cost averaging, this mode of investing, however, is of no use. In an ETF, it proves expensive. After entry ETF is accomplished, invest for more than one year, not less.

Sharvari Patwa
K. Ram Kumar
Mumbai, Aug. 21
Banks collectively invested over Rs 50,000 crore in liquid and ultra-short-term mutual fund schemes in July alone; their total investments in mutual funds as at July end stood at Rs 1.4 lakh crore, according to the RBI data.
Fund managers said this is the highest amount ever that banks have parked with them, and that lacklustre loan offtake had forced the banks to seek out mutual funds.
For mutual funds, their returns or portfolios could get impacted if a chunk of the current investments is redeemed once the credit offtake begins, said Mr Badrish Kulhalli, Senior Fund Manager, Debt, Principal PNB AMC.
All banks have similar risk profiles.
If one redeems then there are chances that others will follow suit, and this becomes a big cause for concern, said Mr Mahendra Jajoo, Head of Fixed Income and Structured Products, Tata Mutual Fund.
There is high concentration of homogenous investors.
In a tight liquidity environment, once banks withdraw money for disbursing credit, corporates too, would redeem their investments, he added.
Banks’ investments in mutual funds typically dip towards the end of every quarter, and rise with the start of the new quarter, however, this July, which is the start of the second quarter, they have been particularly high.
Towards the end of each quarter, banks redeem their mutual funds investments, which carry 100 per cent risk-weight, so that their capital adequacy is not impacted as on the balance sheet date. Post the balance sheet date, however, they again gravitate to mutual funds.
“There is a taciturn ‘investor-investee’ understanding between banks and mutual funds. By investing their surplus funds in the liquid schemes of mutual funds, banks get returns of anywhere between 4.5 and 5 per cent which is superior to the 3.25 per cent they get at RBI’s reverse repo window,” said a senior public sector bank official.
Mutual funds usually are ready for redemptions by banks. The maturity of their investments is synchronised with redemptions, said Ms Lakshmi Iyer, Head of Fixed Income and Product, Kotak AMC.

It would be better to select funds for their ability to match rewards to risk consistently, and not on the basis of their aggression or risk profile.

Please recommend a mutual fund scheme with the highest risk and return potential. I intend to invest Rs 10,000 per month and am even ready to see my capital/investment eroded. But the returns, if any, should be sizeable and quick.
N. K. Vohra
The best way to ensure a relatively high return on your equity funds is to time your investments to low market levels. Investments made during a moribund phase in the stock market may deliver strong returns without your having to assume uncomfortably high downside risks.
Unfortunately, assuming a high degree of risk with your investments doesn’t automatically guarantee high returns. Some of the equity funds that generate high returns do assume considerable risk to do so. But to conclude that all funds which take on risks manage an outsized performance is wholly incorrect.
The recent market cycle has thrown up several instances of sector, theme and mid-cap funds which saw their NAVs drop much more than their diversified peers because they were concentrated in sectors or stocks that were worst hit by the market rout. Not all of these have managed to recoup lost ground as well as their peers in the rebound.
For instance, JM HI-FI Fund, which lost 75 per cent between January 2008 and March this year, gained just 35 per cent in the past five months; its NAV remains at Rs 5.25 per unit. Many mid- and small-cap funds have also faced a similar situation where the fall has been sharper than the market; but participation in the rebound has not.
If one harks back to the dotcom crash of 1999-2000, funds which ended up at the bottom of the pile were the ones which took imprudently high exposure to momentum stocks in the IT sector. With the next bull market led by an entirely different set of stocks, funds focussed on technology remained poor performers. The above instances suggest that any investor would be better off selecting funds, not on the basis of their aggression or risk profile, but on the basis of their ability to match rewards to risk, consistently over market cycles.
Having said this, you can add an aggressive tilt to your portfolio by buying equity funds which have a bigger exposure to mid-cap stocks or those which focus on a particular theme or sector. However, to protect your profits in these funds, it would be best to track them closely and take profits off the table when they deliver returns that beat your expectations.
Sundaram BNP Select Midcap, Birla Midcap Fund and DBS Chola Opportunities are a few funds which we would recommend for an investor who would like to acquire a high Beta exposure to the stock markets. (A fund with a high Beta will deliver higher-than-index returns in a rising market and may fall more if the market declines).
We recommend these funds because of their superior show over a complete market cycle over the past five years. We would also recommend funds such as the Principal Junior Cap or the Junior Nifty BEES Exchange Traded Fund, as they represent good high Beta exposures to the market which may sharply outperform the Nifty, in a bullish market scenario.
We also think commodities funds such as DSP BlackRock World Energy Fund, DSP BR World Gold Fund and Mirae Asset Global Commodity Stocks Fund may be good options for aggressive investors to ride the commodity cycle.

HYDERABAD: Retail investors of unit linked insurance plans, or Ulips, could see a 180 basis point rise in their yields, with the insurance 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.

http://economictimes.indiatimes.com/Personal-Finance/Insurance/Ulip-returns-may-rise-180-bps-as-charges-dip/articleshow/4916853.cms

Insurance agents may have to disclose commission they earn on various policies

NEW DELHI: Insurance agents will soon have to disclose the commission they earn on various policies to clients before selling a product, if a high-level panel of financial regulators has its way.

The panel, set up to suggest ways to increase transparency in the way investment advisors function, hopes this will ensure brokers do not woo people away from customer-friendly products to those yielding more commission, one of its members said.

The panel, comprising officials from RBI, finance ministry as well as the regulators of insurance, provident funds and capital markets, will submit its proposals in September.

Insurers offer up to 40% of the first year's premium of a policyholder as commission to the agent, the panel member said, requesting anonymity.

Agents get their commissions mostly without the knowledge of policyholders.

According to Sashwat Sharma, director-insurance of consultancy firm KPMG, most insurers offer 20-60% of the first year's premium as commission on life endowment and unit-linked policies.

Many financial advisors are luring potential mutual fund customers into insurance policies to pocket high commissions, after the capital market regulator lifted the entry load on mutual funds, government officials said.
Recently, SEBI replaced the commission system in the mutual fund industry with a fee negotiated between the broker and the customer.

This may lead to mutual funds and the New Pension System (NPS) losing investments to insurance products in the short term as, except in metros, a lot of people depend on intermediaries for investment advice, Mr Sharma said. This will change in about 10 years, he added.

NPS, which was opened to all citizens on May 1, has fixed a commission of Rs 40 for initial costs and Rs 20 for subsequent transactions and, therefore, may be discouraged by brokers.

Brokers can be checked to an extent by making it mandatory to reveal their commission for each product to customers upfront, a finance ministry official said.

But experts feel that it may be difficult to monitor if brokers are playing by the rule, particularly in small towns. A better solution, they say, will be to remove or fix commission on insurance policies. "It is difficult to remove the commission on insurance products completely as it is provided in the insurance law itself," said the finance ministry official.

He, however, said the merits of mutual funds will attract customers. "If the equity market does well, investments will invariably come to mutual funds. If the market doesn't, then there will be less interest in mutual funds anyway. If mutual funds do well, there will be pressure on other segments of the market to reduce commission."

http://economictimes.indiatimes.com/Personal-Finance/Insurance/Insurance-agents-may-have-to-disclose-commission-they-earn-on-various-policies/articleshow/4917219.cms

Individual versus family floater policy

There is more awareness now on healthcare costs and hence also about mediclaim insurance that helps mitigate the risk of such costs. One question that the first-time buyer face is whether to take individual policies for each family member or a family floater?
An individual policy means a separate insurance for each person with defined cover. In contrast, in a family floater, the limit can be utilised by any of member. If you buy a family floater of Rs 4 lakh, then any member can utilise this entire limit.
Suppose a family of three wants to take a mediclaim, depending on the ages of individual members, the family floater plan for Rs 4 lakh is likely to be cheaper than the three individual policies of Rs 2 lakh each. So, in many ways the family floater plan offers flexibility in terms of utilising the overall insurance coverage among the group. This would seem to indicate a floater plan is always more beneficial for a family. However, it may not be so. We have used some examples to understand this better (See table).
The table contains policy for two typical families from ICICI Lombard General Insurance.
As you can see, for the older family there is hardly any cost advantage of taking a family floater. By just paying Rs 1,547 extra, they get the benefit of having the same amount of cover individually and quadrupling the overall family cover. Of course, the younger family has a distinct cost advantage if they decide to go in for a family floater policy, but at the risk of reducing the overall family cover. Since you can only grow older, the visible cost-advantage of a family floater will soon be reduced to almost nothing but your overall family cover will be reduced when you need it the most.
There are other disadvantages to a family floater policy as well. The policy will be renewed only till the seniormost member reaches the maximum age of renewability (in most cases, 65 to 70 years). As it stands today, at that stage, the other family members will need to take a fresh policy without having the benefit of their claim history and pre-existing disease coverage. The same thing applies to children who reach the maximum age (normally 25 years in most cases), after which they will need to buy a separate policy. Most policies also make no specific provision for continuing cover of the surviving members in case of the unfortunate death of the seniormost member. Also, in a family floater policy, the claim from one member will reduce the bonus coverage/premium discount for the entire family.
All in all, since continuous coverage and claim history is critical in this category, and currently there does not seem to be any stated basis for taking these with you when you are forced out of a family floater plan, it is recommended that you go for individual policies.

http://www.business-standard.com/india/news/individual-versus-family-floater-policy/367816/

Risk cover for festivals rises this season

With increased awareness and concern over unexpected events like the 26/11 terror attack on Mumbai, Ganesh mandals (organisers of the Ganapati festival) are seeking higher insurance cover. For instance, Mumbai’s most popular mandal, Lalbaughcha Raja Ganesh Mandal, has bought insurance worth Rs 4 crore.
It is insured by Future Generali India Insurance. The organisers have insured it under three heads: Assets against fire for Rs 2 crore, personal accidents for Rs 1 crore and third party liability for Rs 1 crore. The insurance cover is valid for 10 days starting from August 23. It will cover the events till the immersion on the eleventh day. Last year, the Lalbaugcha Raja Ganesh Mandal was insured for Rs 2.52 crore from Bajaj Allianz General Insurance.
“People are more concerned about insuring their assets after the terrorist attack. Compared to last year the valuations have also become more realistic,” said Future Genrerali India Insurance Chief Operating Officer Krishnamurty Rao.
Lalbaugcha Raja Ganesh Mandal’s committee member and ex-president, Sunil Joshi, said that the cover has gone up as the number of people who attend the festival will go up. Last year, the mandal had 700,000 to 800,000 devotees. “This will cover all the devotees as well as the volunteers who are working with us. It would also take care of the Pandal and all the other arrangements,” said Joshi. The Ganesh idol of the mandal has over 25 kg of gold on it.
Mumbai’s richest Ganesh Mandal, the GSB Seva Mandal, has taken an insurance cover of Rs 5.8 crore. Of this, the jewellery that adorns the Ganesh idol alone has an insurance of Rs 5 crore, while the pandal has been insured for Rs 50 lakh, and the fire insurance is of Rs 30 lakh.
The GSB Seva Mandal is covered by New India Assurance for one year. The policy even covers the period when the jewellery is in the bank. “The gold that the Ganesh idol wears is over 52 kg, besides silver of over 200 kg. The insurance amount is higher this year as the valuation of gold has gone up,” said Dinesh Pai, joint-convenor, GSB Seva Mandal.
“People become aware when large-scale events happen and the organisers know they can face big losses. The impact of such events is local and they start buying when there are large community events. Gujarat has the highest insurance penetration because of the frequent calamities like earthquake. Similarly, after the terrorist attack in Delhi, shop insurance has gone up,” said Optima Insurance Broker Chief Executive Officer Rahul Aggrawal.

http://www.business-standard.com/india/news/risk-cover-for-festivals-rises-this-season/367839/

BANK

Banks approach firms for loan default by employees

If you have defaulted on a loan taken in your personal capacity, there is a chance that you might hear from the human resources department of the company you work for.
This is because private sector banks are opting for soft-touch loan collection strategies, after having faced public censure a few years ago for using heavy-handed tactics to recover loans. One of these includes approaching the employer of a customer who has defaulted on a retail loan to act as an intermediary between the bank and the client.
Private sector banks such as the country’s second largest lender ICICI Bank and the third largest private sector lender Axis Bank have adopted this practice which enables them to simultaneously touch all defaulters who share an employer. “This is a wholesale method of collecting retail loans. You don’t need a large army for such collections,” said a senior executive from a private sector bank.
“Some employers do take cognisance of employee defaults. However, this is a limited-purpose strategy for us because most defaulters are either self-employed or are employed with less reputed companies,” said a senior Axis Bank official who declined to be named. “This strategy is usually used by large credit card issuers where the ticket sizes of defaults are small but the number of defaulters is large.”
Often, the banks do not need to actually approach the company of the defaulting customer. The mere prospect of the employer knowing about his or her loan delinquency is enough to persuade an employee to pay up. This soft-touch practice harks back to the days when public sectors used to adopt tactics such as sending staff to chant slogans and hold banners outside shops owned by defaulting clients to compel them to clear their dues.
More recently, private and foreign banks faced public rebuke for the aggressive recovery strategies of collection agents hired by the lenders. In September 2007, ICICI Bank had to compensate the families of two customers who allegedly died due to harassment by the bank’s recovery agents.
However, not all companies are willing to play ball with banks on this matter. “We don’t entertain such requests. Unless the employee has been referred by his company for a loan, what he or she does in his personal capacity is not the company’s business,” said Y V Verma, Director of Human Resources and Management Support, LG Electronics.
“Some banks go to extreme extents. A year ago, a private sector bank’s legal team came to me asking us to clear the personal dues of an employee who had left us six years ago. I went to the bank’s management and complained but I suppose it is tougher for smaller companies to resist the pressure,” Verma added.
When contacted, a spokesperson for Infosys Technologies said, “As a practice, Infosys does not intervene in personal financial transactions made by its employees. However, when the said dealing could also involve a violation of the company’s code of conduct, we would examine such situation on a case-to-case basis and take necessary action.”

http://www.business-standard.com/india/news/banks-approach-firms-for-loan-default-by-employees/367903/

Banks to hit bond street for capital ahead of festive season

Softer interest rates and expectation on credit buying in the busy season are likely to ensure hectic activity in the bond market in the coming week A host of state-run banks have lined up issues of about Rs 3,000 crore over the next week to 10 days to shore up their capital base. Likely to raise funds are Bank of India, Allahabad Bank, Oriental Bank of Commerce and State Bank of Hyderabad.
“We are planning to raise about Rs 500 crore by way of upper tier-II bonds in the next seven days. With credit likely to pick up in the busy season ahead, it is time to shore up the capital base. In addition, interest rates are also benign now,” said V K R Agarwal, chief financial officer, Bank of India.
Similarly Kolkata-based Allahabad Bank, which had recently raised Rs 450 crore, will once again look at raising about Rs 750 crore shortly.
“We have already raised Rs 450 crore of lower Tier-II bonds recently. We are ready to raise Rs 500 crore of upper Tier-II bonds and Rs 150 crore of hybrid debt only if we get the right price. We have secured all the necessary approvals for the capital raising but are not very hopeful, since bond yields have been going up,” an Allahabad Bank official said.
Punjab National Bank, however, says the bank’s capital adequacy ratio is above 14 per cent and it is in no hurry to raise capital, as the bank feels rates are still high. “We will look at raising Rs 500 crore if the rates become attractive,” said Mohan Tanksale, executive director.
Dealers said State Bank of India may also look to raise at least Rs 1,000 crore through Upper Tier-II bonds. The country’s largest bank had already raised Rs 1,000 crore through a perpetual bond issue last week at 9.1 per cent.Dealers said Punjab and Sind Bank and Oriental Bank of Commerce may also tap the market by issuing tier-II bonds.

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.
Banks 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.

Market regulator Securities and Exchange Board of India (Sebi) today said the Association of Mutual Funds in India (AMFI) has finalised a design on a separate common platform for mutual funds.
"We recently had a meeting with the mutual funds and what the Association of Mutual Funds of India told us is that they have more or less frozen the kind of design that they want," Sebi Chairman C B Bhave today told reporters on the sidelines of the convocation of the Institute of Insurance and Risk Management (IIRM) of IRDA here.
"They will now look to competitive vendors for deciding on what kind of platform needs to be set up," Bhave added.
AMFI is planning to set up a common platform for the MFs which would allow retail investors to trade, switch over and compare the schemes online through a single window.
A common trading platform will not only enable investors to compare the performance of funds, but reduce the costs associated with investments in mutual funds, he added.
The idea is to provide all fund houses and distributors a single platform where investors can have the true sense of choice and an MF investor can access this common platform and choose the scheme that he wants to invest in.
At present, there are 38 mutual fund companies in the country.

Market regulator Securities and Exchange Board of India (Sebi) today said it will consider reducing the allotment period for initial public offers (IPO) to five days, if the alternate system of payment for public issues, that gained strength in the recent NHPC offering, picks up further.
The alternate system-- Application Supported by Blocked Amount (ASBA)-- allows releasing applicants' money only if the allocation is made.
The main difficulty in reducing the period for allotment of public issues is the fact that a lot of physical applications along with the physical cheques have to be cleared in the system, Sebi Chairman C B Bhave told reporters on the sidelines of the convocation of the Institute of Insurance and Risk Management (IIRM) of IRDA.
If ASBA process becomes more popular, Sebi aims to reduce the IPO allotment period to five days, he said.
"So it is our hope that as the ASBA process becomes more popular, this processing will get reduced and then we will be able to reduce the time line," Bhave said.
At present, it takes around two weeks for allocation of public issues and around three weeks for them to be listed after they close.
Bhave said 1.5 lakh applications were made through the alternative system for NHPC IPO, which closed earlier this month.
The Sebi Chairman said, "So, it is picking up. Of course, banks need to gear up, we need to inform investors more about ASBA process and soon. So these issues are there.
"We will handle them as we go along and hopefully as the ASBA becomes the dominant process, we will be able to reduce the processing time. And therefore, issues will get listed faster than before after the date of closure."
In the traditional system of paying for applications for public issues, investors pay the entire money upfront to the registrar/banker and hence stand to lose returns on the money that is locked until the IPO is allocated.
As per the alternative system, banks block the money in investors' account when they bid for public issue and the money is released on the basis of number of shares being allotted.

The Securities and Exchange Board of India (Sebi) Chairman CB Bhave on Friday said the regulator expected stock exchanges to launch interest rate futures in the next couple of months. Interest rate futures are products designed to hedge against risk because of volatility in interest rates.

Market regulator Securities and Exchange Board of India (Sebi) today said that it expects stock exchanges to launch interest rate futures in the next couple of months.
Interest rate futures are products designed as a hedge against risk because of volatility in interest rates.
"My information is that stock exchanges are in a fairly advanced stage of preparation. We should see some results in the next couple of months," Sebi Chairman C B Bhave told reporters on the sidelines of the convocation of the Institute of Insurance and Risk Management (IIRM).
A joint committee of Reserve Bank of India and Sebi has already released its report on interest rate futures. Earlier, Sebi had called for applications from the stock exchanges to start the market in interest rate futures.
The committee had recommended that these products be exempted from the Securities Transaction Tax. It also suggested that these contracts initially be based on the 10-year government security yield.
Earlier on August 19, the National Stock Exchange (NSE) had said it was likely to launch interest rate futures soon after getting approval from Sebi.
"We are working towards the launch of interest rate futures in a few weeks," NSE's Managing Director and CEO Ravi Narain had said in Mumbai.
http://www.business-standard.com/india/news/sebi-expects-trade-in-interest-rate-futures-in-two-months/71425/on

Mumbai, DH News Service & PTI:
The Securities & Exchange Board of India (Sebi), on Thursday, announced a reduction in the rights issue allotment timeframe to 15 days and also made it clear that companies can utilise the proceeds only after the allotment was made.
To this effect, the market regulator has issued a circular wherein it has notified rationalisation of rights issue disclosure norms. In turn, this would encourage listed companies to look at rights issues as a viable form of capital raising by reducing the overall cost of such issuances and also make the process of such issues faster.

“Sebi has reduced the time period taken for finalisation of basis of allotment in the rights issues to 15 days from the earlier period of 42 days from the date of closure of the issue,” the regulator said. Further, Sebi stated that Application Supported by Blocked Amount (ASBA), would be applicable to all rights issue.

Initial public offering

“It has now been decided to make ASBA applicable to all rights issues,” the regulator said. Last September, the Securities and Exchange Board of India had enabled the ASBA facility to rights issue on a pilot basis. At present, it is applicable only to initial public offering (IPOs).

The very objective of introducing ASBA is to ensure that the investor’s funds leave his bank account only upon allocation of shares in public issues. Also, the ASBA process ensures that only the requisite amount of funds is debited to the investor’s bank account on allotment of shares. In this mechanism, the need for refunds is completely obviated.
http://www.deccanherald.com/content/20729/sebi-clips-rights-issue-timeframe.html

New Delhi: Foreign and domestic institutional investors have told the government that the disinvestment programme will sail through smoothly and there will be enough appetite for good quality government stock, officials said. The government has discussed the disinvestment issue with the heads of global and local financial community last Wednesday. Finance minister Pranab Mukherjee had called the meeting to assess the country’s investment climate. The 2009 Economic Survey has suggested that the government can raise Rs 25,000 crore annually through disinvestment.
Officials familiar with the discussions said the market feedback on disinvestment is positive, even though there are concerns regarding fiscal deficit and the country’s rating. The Budget 2009-10 projects the fiscal deficit to touch 6.8 per cent of the GDP by March-end, as the government raised borrowing target to Rs 4.51 lakh crore to spur demand. A head of an FII, who attended the FM’s meeting, said on the condition of anonymity that two critical issues—fiscal stability and the country’s ratings concerns—have the potential to scuttle the disinvestments plan. “But with over $250 billion of forex reserves, the country can use the vulnerability to its advantage,” he said. India’s forex reserves stood at $271.02 billion as on August 14, according to the latest data by the Reserve Bank of India.
Global rating firm Standard & Poor’s in February lowered the outlook on the long-term sovereign credit rating on India to negative from stable. S&P had affirmed its ‘BBB-’ long-term and ‘A-3’ short-term sovereign credit ratings on India. FIIs invested $7.3 billion so far this year in Indian stock market, according to the Securities and Exchange Board of India data.
The government’s decision to gauge the investment mood of institutional investors is especially pertinent in light of the poor debut of Adani Power’s IPO, which got listed last Thursday at a 5 per cent premium but lost steam as the day progressed and closed just 5 paise more than the issue price of Rs 100 on BSE. Adani Power closed at Rs 103.2 on Friday. The finance ministry is hopeful of divesting in 9-10 companies in the next one year, including Oil India’s IPO and Rural Electrification Corporation’s (REC) follow-on-public offer that are likely to be launched soon. These proceeds will ease the pressure on the government’s borrowings.
The government has asked REC, which together with Power Finance Corporation funds almost 60 per cent of the power sector needs, quickly finalise a follow-on-offer.
http://www.financialexpress.com/news/investors-upbeat-on-disinvestment-plans/506118/