MUTUAL FUND

DSP BlackRock's World Mining Fund

aims to cater to this segment of investors. The fund is an open-ended fund of funds scheme, investing in international funds, primarily into the units of BlackRock Global Funds — World Mining Fund (WMF). WMF aims to seek capital appreciation by investing mainly into equity securities of mining and metals companies whose predominant economic activity is the production of base metals and industrial materials such as iron ore and coal, along with other precious metals.

WMF was launched in 1997 and has delivered 17.80% compounded rate of return as on October 30, 2009. The benchmark — HSBC Global Mining Index — could deliver 12.70% over the same period of time. The superior performance of the fund is an outcome of pursuing the ‘best ideas’ in the sector. The fund runs neck to neck with the benchmark if we see the performance for three and five years. It is but obvious that WMF is rated highly by many fund rating agencies worldwide.

The fund has a globally diversified portfolio with an exposure across commodities. This is expected to cap the commodity-specific risk, along with the country-specific geo-political risk. Investments across global assets may help on the currency risk management front. Investors, however, must understand that being a sectoral offering, the fund’s fate is tied up with the mining cycle. Any adverse wave in the mining sector due to any global slowdown, or any other factor, can mar its performance.

Those who intend to invest in the fund with the sole intention to diversify may do so with the minimum investment amount of Rs 5,000. The fund offers two investment options — growth and dividend. To curb the short-term traffic, the fund charges an exit load of 1% if the investor exits before 12 months from the date of investment.

WHY INVEST: A fund with a global footprint and one of the best trackrecords in the industry.

RISKS: Being a sector fund, it is tied with the fortunes of mining sector as a whole. Currency risks and geo-political risks are associated with it.

MUMBAI: Sundaram BNP Paribas Mutual Fund on Wednesday announced the launch of Public Sector Undertakings (PSU) Opportunities Fund.Sundaram BNP Paribas PSU Opportunities is an open-ended equity scheme. The benchmark for this fund is the CNX PSE Index. The issue of units is at Rs 10 each during the new fund offer period. The issue opened for subscription on November 25 and will close on December 23.

The investment objective of this fund would be to seek capital appreciation by investing in equity and equity-related instruments of PSU companies across size and sectors, Sundaram BNP Paribas PSU Opportunities Portfolio manager J Venkatesan told reporters in Mumbai.

"As an asset class, PSUs have a dominant share in four sectors--energy, financials, utilities and materials. We think that these four sectors would form a major portfolio allocation in our scheme," Venkatesan said.

The market cap of the PSU universe has risen from about Rs 90,000 crore to Rs 15,10,254 crore in this decade as PSU stocks outpaced the broad markets as well as private sector players.

Sundaram BNP Paribas Mutual Fund has assets under management (AUM) of Rs 14,000 crore, which include Rs 9,000 crore in equity and Rs 5,000 crore in debt schemes.

Our Bureau
Mumbai, Nov. 25 From November 30, investors will be able to transact in mutual funds units via the National Stock Exchange’s fully automated online system. The exchange has issued elaborate guidelines in this regard.
Investors can place subscription and redemption orders online through their demat account as they currently do while trading in the secondary market for equities. Investors not having demat account can place orders in the physical mode through an AMFI certified broker by providing specific KYC documents.
In the case of physical mode of placing order, investors are required to submit redemption request stating the folio number and PAN card.
The system
Investors can connect to the NSE’s trading platform through brokers’ telecom network.
“A fully automated online order collection system called National Exchange Automated Trading-Mutual Fund Service System (MFSS) will be provided to the participants (brokers).
The settlement of the units will be through the depository in the demat mode for the demat account holders whose designated bank account will be debited/credited for the order placed on T (trading day) + 1 day.
In case an order is placed through the physical mode, the Registrar and Transfer Agent (RTA) will provide final redemption information to the exchange on T+1 day; the payout, however, will happen according to the scheme’s provisions and within the timelines.
The new MFSS will operate on all business days of the capital market segment between 9 a.m. and 3 p.m.
To start with, depository settlement will be available only for DP account holders in NSDL.
The value for a single transaction, according to NSE, should be less than Rs 1 crore.

Mumbai: Driven by better-than-expected corporate earnings in the quarter ended 30 September and recent government announcements on disinvestments, mutual fund managers are showing their optimism by betting on high-growth sectors despite a doubling of stock prices in the past seven months.
The 30-stock Sensex, the bellwether index of the Bombay Stock Exchange, has risen around 10% from its recent low of 15,404 points on 3 November to close at 17,131 on Tuesday. It has gained 77.57% since 1 January.
A Mint analysis of the portfolio data of diversified equity schemes shows that fund managers have significantly higher allocations for automobile, construction and metal sector stocks.
The analysis looked at the month-end portfolio data of diversified equity schemes between 31 March and 31 October. The data was provided by mutual fund tracker Value Research.
The aggressive allocation strategy is a reflection of rising confidence in the economy and businesses, fund managers said.
“Overall economy numbers and other indicators like auto and property numbers are much stronger than expected,” said Suresh Soni, chief executive officer of Deutsche Asset Management (India) Pvt. Ltd, which manages Rs13,795 crore in assets. “However, internationally, central banks are not withdrawing the accommodating monetary policy and have said they will continue the easy monetary policy for a specified period. This has put us in a sweet spot, which is propelling optimism.”
Chennai-based N. Prasad, who runs an independent research firm and is former chief information officer of Sundaram BNP Paribas Asset Management Co. Ltd, said: “Most fund managers are increasing allocation to economy-sensitive stocks in their portfolio. (There’s) nothing wrong with this strategy as most confidence indices are turning positive.”
According to Prasad, the fiscal deficit is no longer a big worry. “The government disinvestment programme is expected to bring it back to FRBM targets.”
The FRBM (Fiscal Responsibility and Budget Management) Act aims to bring down the government’s fiscal deficit to 3% of India’s gross domestic product.
Another important factor that has contributed to the increasing weightages is the movement in stock prices.
Ritesh Sheth, fund manager, SBI Funds Management Pvt. Ltd, which manages Rs38,322 crore in assets, said: “It is not clear whether this increased allocation can be fully attributed to the purchases by fund managers. A lot of it would be due to the price action. For example, a sector like telecom is facing an uncertain period. People are keeping away because there are a lot of ifs and buts. One is not sure on what basis the profitability of these companies need to be calculated in the short term. So, everyone is waiting for the dust to settle.” Allocation to the telecom sector has halved.
Fund managers have also been burnt by a high cash strategy that affected fund returns between March and June. Funds had cash levels of 15-20% and missed the rally triggered by return of the United Progressive Alliance to power at New Delhi in May.
A study of equity funds by Crisil FundServices, a research unit of ratings firm Crisil Ltd, also shows that funds with lower cash holdings have outperformed others in the long run.
While funds with higher cash holdings cut their losses in a falling market, they tend to miss out on a subsequent rally. Further, equity funds with minimal cash holdings fared only marginally lower in a downturn, but benefited considerably more from a rally.
The most notable performance in the downturn came from fully-invested funds that made timely and prudent investment calls in sectors such as pharmaceuticals and consumer goods, the Crisil report said.
“Investing in defensive sectors to negotiate a down market proves to be a more effective strategy as such funds can bounce back faster during a market correction,” said Krishnan Sitaraman, director, Crisil FundServices.
“Investors invest in equity funds primarily because they are perceived as value creators and it helps them diversify from their debt investments. By taking cash calls, funds defeat this very basic objective of investors,” Sitaraman added.
However, Prasad cautioned that valuations could be a dampener for fund managers’ optimism. “Market looks rich largely because earnings are below the long-term trend level of 21%,” he said.
The Sensex, India’s most tracked index, has climbed at least 110% since the lows of March, a rate of growth surpassed only during its rise in the early 1990s during a stock market scam engineered by trader Harshad Mehta.
The index is trading at 20.96 times the estimated earnings for the fiscal year to March. The average range of valuation for the index has traditionally been 14-17 times of earnings.
Soni of Deutsche Asset Management said valuations have to be seen from the perspective that they had been depressed unrealistically when market hit historic lows. “In the near term, it’s a concern. But in the medium term, it’s not.” n.subramanian@livemint.com

INSURANCE

Apollo DKV Health may raise capital base to Rs 500 cr
Apollo DKV Health Insurance is planning to increase its capital base to Rs 400-500 crore by 2012-13, from the current Rs 220 crore. The health insurer, promoted by Chennai-based the Apollo Hospitals Group and Deutsche Krankenversicherung (DKV) AG, also said the company was expected to break-even in 2012-13.
Speaking to Business Standard after launching company’s new health insurance policy — MAXIMA — in Chennai, Antony Jacob, chief executive officer, Apollo DKV Health Insurance, said that the company had set a target of Rs 700 crore in premium income by 2012-13.
Till October, the company had earned a premium of Rs 60 crore and was likely to close the current fiscal with a premium income of Rs 100 crore as compared to Rs 49 crore last year, he added.
The company was planning to increase the number of branches to 55 from the current 24, and the number of agents to 40,000 from the current 8,000, he said.
He added the company was awaiting for an approval from the Insurance Regulatory and Development Authority (Irda) to allow banks to sell health insurance products.
Currently, the company has a co-insurance tie-up with HDFC ERGO General Insurance Company, promoted by HDFC Bank, through which Apollo DKV will design a product and HDFC ERGO will sell it through its agents and the bank.
“We are also talking to three insurers, both life and general, for similar tie-ups.”
The company had entered into a deal with HDFC ERGO in August, and earned Rs 2.5 crore so far, added Jacob.
The insurer is also planning to use Apollo Hospitals’ pharmacy network to reach out to uninsured.
The hospital chain has a 74 per cent stake in Apollo DKV
http://www.business-standard.com/india/news/apollo-dkv-health-may-raise-capital-base-to-rs-500-cr/377670/

BANK

Dhanalakshmi Bank ties up with Crisil for SME rating

Our Bureau
Kochi, Nov. 25 Dhanalakshmi Bank has announced its tie-up with CRISIL, India’s premier rating agency, to introduce CRISIL SSI/SME rating for over 500 of its small and medium enterprise (SME) customers.
Mr PG Jayakumar, General Manager, Credit and Operations, said that the tie-up is a part of the renewed focus of Dhanalakshmi Bank on the SME sector.
The independent rating by a renowned agency will provide the bank an enhanced analysis of SMEs under its portfolio that will further strengthen its internal rating process.
The CRISIL SSI/SME rating is widely accepted and recognised by the industry and is also accepted by most regulatory authority.
The exercise will also help the bank in establishing a defined correlation with its internal credit process and benchmark its portfolio against other banks.
Mr Suresh Balasubramanian, Group Head, Trade and Advances, Dhanalakshmi Bank, said engaging an autonomous rating agency for our portfolio firms, like CRISIL, gives us the enhanced confidence in the credit worthiness of the firms and help us build better relationships.
As a part of the rating exercise, Dhanalakshmi solution managers will educate the SME clientele on the benefits of the rating and will encourage them to obtain a time bound rating.

http://www.thehindubusinessline.com/2009/11/26/stories/2009112652261700.htm

SEBI

Extended hours put on back-burner
Most market participants oppose plan to increase timings of stock exchanges.
Strong opposition from market participants has made stock exchanges put their plans to extend trading hours on the back-burner.
The National Stock Exchange (NSE), which was advocating extension of trade timings, now says the majority of market players are against the move and a consensus is needed for it to go through.
Over 60 per cent brokers, out of the 395 surveyed by the Association of National Stock Exchange Members of India (Anmi), expressed displeasure at the move. Anmi has about 800 members, quite a few of whom are also members of the Bombay Stock Exchange (BSE). The findings of the survey were given to both NSE and the Securities and Exchange Board of India (Sebi).
Sebi had last month approved the extension, if stock exchanges so chose, of trading timings by two-and-a-half hours (from 9 am to 5 pm). The current market hours are 9.55 am to 3.30 pm. Stock exchanges had sought extended timings to integrate Indian bourses with Singapore and other Asian markets in the morning and European markets in the evening.
In Singapore, which is around two-and-a-half hours ahead of India, trading is held between 9 am and 12.30 pm and 2 pm and 5 pm (local time). Due to this mismatch, NSE was losing some derivatives volumes to Singapore, where the Nifty (its benchmark index) is listed. Hedge funds trade Nifty in Singapore prior to the opening of Indian markets.
NSE Managing Director Ravi Narain had said that extension of trade timings would increase volumes in domestic stock markets by 20-25 per cent. However, the move has met with strong resistance from stock brokers and traders.
“Unless market participants seriously want it, the hours should not be extended. The current trading hours are enough. The longer the trading hours, the lesser will be the depth of the market. Post-trading processing remains a major challenge,” said a former chief executive officer of BSE.
However, foreign institutional investors (FIIs) have a different view. “Extension of trade timings will make domestic markets more competitive. Soon, domestic traders will have to get accustomed to global trends as financial markets are becoming more integrated,” said a fund manager of a Singapore-based FII.
“The derivatives trading in US and European markets is conducted on a 24-hour basis. FII money moves Indian markets and a majority of these institutions are in Hong Kong and Singapore. They trade minute by minute and do not wait for Indian markets to open. India is under threat of losing substantial trading volumes in its most liquid contract to the Singapore market and extension of trading hours could be one way of steming this flow of volumes,” said Saurabh Mukharjea, head of equities at Noble, which provides research advice to FIIs.
Domestic stockbrokers say extension of trading hours may put pressure on infrastructure of exchanges as well as market intermediaries and broking companies may have to incur additional costs. Moreover, to obligate margin/collateral requirements of investors, banks/financial institutions may need to keep their offices open for an extended duration.
“The domestic banking system is not on a par with the clearing and settlement system. The concept of real-time gross settlement of payments is not available at a lot of bank branches. All this needs to be upgraded before the hours are extended,” said an Anmi official.
http://www.business-standard.com/india/news/extended-hours-putback-burner/377635/

ITC reviewing options on EIH equity
Counter offer, stake sale being mulled.
Cigarettes-to-hospitality group ITC is reviewing its approach on equity in EIH, which runs the Oberoi chain of hotels.
Speaking to Business Standard, ITC Chairman Y C Deveshwar said, “We are rethinking, which would mean making a counter offer or selling our stake. In both cases, the board will decide. However, I am not disposed towards a hostile takeover.”
Earlier, on the sidelines of the CII-ITC Sustainability Summit, Deveshwar said the company was open to increasing stake in EIH. Asked about investor Analjit Singh’s reported plans to buy another 17 per cent stake in EIH, Deveshwar said, “If somebody else is entering the fray I do not discount, we can do our re-thinking. If any new event takes place, I am not saying that we will stop thinking.”
An EIH spokesperson said the company would not comment on the basis of speculation.
ITC has a 14.98 per cent stake in EIH, a shade less than the Securities and Exchange Board of India (Sebi) threshold limit of 15 per cent, that triggers a mandatory open offer for another 20 per cent.
ITC has been buying EIH shares through its investment arm, Russell Credit, since 2000. Deveshwar announced at ITC’s last annual general meeting (AGM) that the company was not in favour of a hostile takeover for EIH and even suggested joining hands for a joint ownership or marketing, but that was prior to the news of Analjit Singh buying into EIH. Subsequently, EIH Chairman P R S Oberoi responded at his AGM that it was up to ITC to make a proposal.
Last month, news broke that Oberoi had signed a non-disclosure pact for a deal that would see the Oberoi family, which owned a 43 per cent stake in EIH, selling over 17 per cent to Singh for around Rs 1,250 crore.
Singh, who already holds a 5 per cent stake in the hospitality major, would have to make a mandatory open offer for an additional 20 per cent stake. This means Singh’s stake will be more than the Oberoi family’s 26 per cent.
Non-cigarette FMCG biz: PTI adds: ITC said it could take a decade for its non-cigarette fast moving consumer goods (FMCG) business to be profitable as it continues to expand product portfolio, thereby requiring fresh investments in brand building.
The company saw its non-cigarette FMCG business registering a loss of Rs 184.79 crore in the first half of this fiscal, an improvement from a loss of Rs 239.16 crore in the same period last year.

ECONOMY

Oppn demands more sugar concessions from govt

Wants earlier rule on mills having to share extra profit with cane growers restored.
After making the Centre backtrack on the state governments’ liabilities over the state advised price (SAP) of sugarcane, the Opposition today pressed the government to make further changes in the order notified on October 22, to ensure farmers continued to benefit if sugar mills registered “additional profits”. The October 22 order had done away with clause 5(A) of the Sugarcane (Control) Order, which requires the mills to share half their extra realisation at the end of the sugar year with the farmers.
“Since the fair and remunerative price (FRP, which the Centre had introduced as its newly termed minimum support rate) gives adequate consideration for margins on account of profit and risk to the farmers, Clause 5A of the SCO, which provided for sharing of additional profits by sugar mills, has been deleted,” the ministry of consumer affairs, food and public distribution said in a statement dated November 6. The new FRP of Rs 129.84 a quitanl was brought in to replace the earlier statutory minimum price, which was Rs 107.76 a quintal.
In the breakfast meeting today, convened by parliamentary affairs minister Pawan Kumar Bansal, the BJP leadership and Ajit Singh of the Rashtriya Lok Dal (RLD) said the amended SCO would take away the opportunity of the farmers to earn money. “The opposition parties have told us that they will support us only to offset the burden of Rs 14,000 crore (of past dues payable to farmers which the Supreme Court decided had to be paid by government and not the sugar mills) and want us not to meddle with other areas of the Order. We have to take a political call on this issue,” a senior UPA minister present in the meeting told Business Standard.
The government has decided to call another all-party meeting headed by Food Minister Sharad Pawar on Tuesday afternoon. The government may also ask Attorney General Goolam Vahanvati to attend and brief the parties about the various legal implications of the new ordinance and the bill to replace that ordinance.
The morning meeting was attended by the Leaders of the Opposition in both Houses, Lal Krishna Advani and Arun Jaitley. According to insiders, the leaders told the government they would support the government to offset the Rs 14,000 crore burden but the Centre should not use this as a pretext to make any other changes.
Widespread agitation and political opposition against the new ordinance had already forced the Centre to “remove the misgivings” in the amended SCO and make it clear that the difference between FRP and state advised price (SAP) will have to be paid by the mills and not by the state governments.

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