Escorts Mutual Fund

Mutual funds (MFs) sold shares worth a net Rs 361 crore on Monday, 26 October 2009, higher than Rs 308.80 crore on Friday, 23 October 2009.
MFs' net sales of Rs 361 crore on 26 October 2009 was a result of gross purchases Rs 442.80 crore and gross sales Rs 803.80 crore. The BSE Sensex fell 70.31 points or 0.42% to 16740.50 on that day.
MFs sold shares worth a net Rs 5454.60 crore in October 2009 (till 26 October 2009). MFs had sold shares worth a net Rs 2334.60 crore in September 2009.

http://profit.ndtv.com/2009/10/27173718/Mutual-funds-continue-selling.html

Longer trading hours likely to add to Mutual woes

MUMBAI: The prospect of extended stock market hours soon is giving mutual funds some nervous moments. The anxiety is over the additional pressure that the extra trading hours will put on the mutual funds and custodians to meet the daily deadline to submit the net asset values (NAV) of equity schemes.

As per existing norms, the NAVs have to be uploaded on the Association of Mutual Funds of India (AMFI) website before 9 pm everyday. While custodians, who manage the back-office operations of mutual funds, just about manage to meet the deadline at the moment, mutual fund and custodian officials said the extension of trading hours will make it difficult for them to meet the deadline.

“Even when the markets closed at 3.30 pm, we just about managed to submit the NAVs before deadline. Now, at 5 pm, we do not know how will we meet it, especially with the quality checks that need to be followed,” said a top official with a leading private mutual fund.
Last week, capital market regulator Sebi, in a circular, permitted stock exchange to begin the day as early as 9 am and keep the market open for trading till 5 pm.

Mutual fund officials said the deadline to submit NAVs will need to be extended by at least an hour-and-a-half, if the stock market’s close is stretched to 5 pm.

A top Sebi official told ET that the matter will be considered once the new timings are implemented by exchanges, though he added that the industry is yet to approach the market regulator to extend this deadline.

One of the hindrances to uploading the NAVs on time is the delay by stock exchanges in releasing the final data on futures and options, which are a part of the portfolio of several equity schemes today. Currently, the final derivatives data arrives at around 6 pm.

Mutual funds are worried that setting up new systems, including more manpower, will result in escalation of costs, especially when business has been hit following the new fee structure for distributors in August.

Custodians said insurance companies also may be burdened with higher costs, as they need to adhere to similar deadlines to submit NAVs for the unit-linked Investment Plan (Ulips), which constitute a sizeable chunk of their assets.

http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/Longer-trading-hours-likely-to-add-to-Mutual-woes/articleshow/5166513.cms

Mutual funds offload stocks worth over Rs 5000 crore this month
(MFs) sold shares worth a net Rs 308.90 crore on Friday, 23 October 2009, lower than Rs 558 crore on Thursday, 22 October 2009.
MFs' net sales of Rs 308.90 crore on 23 October 2009 was a result of gross purchases Rs 618 crore and gross sales Rs 926.90 crore. The BSE Sensex rose 21.07 points or 0.13% to 16810.81 on that day.
MFs sold shares worth a net Rs 5093.70 crore in October 2009 (till 23 October 2009). MFs had sold shares worth a net Rs 2334.60 crore in September 2009.

Insurance company, Max New York Life Insurance Co. Ltd, launched its product 'Secure Dreams' in Gujarat today, The product provides an alternative investment option for those who do not want to bear risk pertaining to the inherent volatile nature of the stock market.
According to Anisha Motwani, executive vice president — marketing and chief marketing officer, Max New York Life Insurance, "With dramatic shift in both global and Indian economic scenario in past 18 months, the customer is now looking for guarantees on investment, reasonable return and transparency in product design. Our new offering 'Secure Dreams', built on Universal Life platform, is an attempt to answer these concerns of the customer. Secure Dreams offers the customer a guaranteed return of at least 3.5% per annum ensuring increase in their account value irrespective of market volatilities. For the first three months from the date of launch, we are providing the customers with a minimum guaranteed interest of 6.5 per cent."
Universal Life is a life insurance plan where premiums are deposited into a fund and charges for insurance and other expenses are deducted from these funds. A minimum guaranteed interest rate applicable throughout the term of the policy would serve as a viable alternative for a consumer with a conservative risk profile.
Max New York Life Insurance is a joint venture between Max India Ltd., a multi business corporation and New York Life, a Fortune 100 company.

MUMBAI: Bank stocks took a beating on Tuesday after the Reserve Bank of India (RBI), in its monetary policy, proposed to set provisioning for non-performing assets (NPA) at 70%.

Brokers and analysts tracking the sector say the pressure on bank stocks may continue for a few more days, but they expect them to outperform in the medium term as the economy appears poised for a recovery. Banks were among the best performers during the rally since March this year, leading to these shares being widely owned. That is one of the reasons behind the sharp fall in the banking stocks on Tuesday.

The RBI proposal means that banks will have to set aside a bigger slice of their earnings for a non-performing loan, even if the borrower may not eventually default. Banks with lower NPA coverage ratios will find it difficult to achieve the target, if it becomes a rule, in the stipulated time of four quarters.

According to equity analysts, IDBI Bank, Oriental Bank of Commerce, Canara Bank, Indian Overseas Bank, SBI and ICICI are some of the banks with lower provisioning coverage ratios.
RBI, in its monetary policy on Tuesday, expressed concerns over the wide disparity on NPA provisioning ratios set by various banks. The banking regulator has advised banks to keep the NPA coverage ratio at 70%, including floating provisions. Though it is seen as a suggestion, analysts feel, RBI will eventually standardise the coverage ratio. The NPA provision coverage band among Indian banks is in the range of 30% to 90%, say analysts.

“If the proposal is cleared by RBI, banks with lower provision coverage ratio (lower than 50%) will have to make higher provisions for NPAs,” said Bhavesh Kanani, banking analyst, Sharekhan, adding, “These banks will get only four quarters (September 2010, being the proposed deadline) to reapportion money from their profits and make a provision pool.” According to Mr Kanani, such a step will impact the profitability of banks in the short-term and result in earnings downgrades.

Brokers are advising clients to shift their investments to banks with decent provision coverage ratio. According to them, Bank of Baroda, Punjab National Bank, HDFC Bank and Union Bank of India are some of the banks with higher provisions against NPAs.

The BSE banking index closed 4% lower on Tuesday with ICICI and SBI among the worst hit stocks. Except for Union Bank, which ended 3% higher on talks that it maintains higher coverage ratios, all banks ended 1-8% below their previous closings. “The fall in banking stocks is more of a knee-jerk reaction,” said Vaibhav Agrawal, banking analyst, Angel Broking.

“The overall outlook on the sector is still positive with most banks likely to improve credit growth and business earnings in the coming quarters. Interest rates may go up in about six months’ time, but it will only happen after banks have witnessed sufficient credit growth. In short, credit growth will drive up interest rates,” added Mr Agrawal.

Analysts are expecting credit growth to pick from the next quarter, as banks will consciously move from investments to easy corporate lending. With increasing demand and consumption, corporates are likely to embark on newer projects, which will need debt funding from banks. Experts are expecting credit growth to touch the RBI target of 20% by the year-end; currently credit growth of Indian banks is in the range of 11% to 13%.

With deposits rates hovering at 6%-6.5%, operating margins of banks will also improve over the next few quarters. The 1% rise in statutory liquidity ratio to 25%, needed to be maintained by banks at all times, will not have any major effect as most banks have an SLR of around 27%. “Investors should start buying private banks as they will benefit the most from faster growth than PSU banks,” said Mr Agrawal.

Bank profits could take a knock over the next four quarters, with the Reserve Bank of India (RBI) today mandating a loan-loss coverage ratio of 70 per cent.
This means banks will have to set aside money from the profits they earn over the next four quarters. RBI Governor D Subbarao told Business Standard in an interview that the coverage was around 51 per cent at present.
According to a Kotak Securities estimate, lenders such as State Bank of India, ICICI Bank and Canara Bank will need to step up provisioning, while HDFC Bank, Allahabad Bank, Bank of Baroda, Punjab National Bank, Indian Bank and Corporation and Union Bank of India already have a coverage ratio of over 70 per cent.

WHO NEEDS TO MAKE MORE PROVISIONS
Bank	Coverage ratio (%)
Canara Bank	27.8
Dena Bank	37.8
SBI	45.1
Indian Overseas Bank	48.6
ICICI Bank	51.9
Bank of India	55.7
Axis Bank	63.2
Note: Data for SBI, ICICI Bank, BoI, IOB pertains to April-June 2009 Source: Kotak Securities

The study said SBI would have to provide Rs 3,800 crore over the next four quarters to meet the stipulated 70 per cent coverage ratio, while ICICI Bank would need to provide Rs 1,758 crore, taking into account these banks’ first-quarter earnings.
Similarly, Canara Bank needs Rs 989 crore additional provisioning, while Indian Overseas Bank will have to set aside an additional Rs 500 crore to comply with the new norms.
Observing a wide heterogenity and variance in the level of provisioning coverage ratio across different banks, RBI has asked the banks to augment their provisioning cushions, consisting of specific provisions against non-performing loans, as well as floating provisions.
Banks have to comply with the new norms by the end of September 2010.
“Our provision requirements according to RBI norms are 40-42 per cent, which means we have a higher percentage of NPAs in the recoverable class.
Over the past four-five ,years we have seen that a large portion of our assets slide into the sub-standard category and slide back into the standard category,” said State Bank of India Chairman O P Bhatt.
“When you execute a write-off, your provision coverage drops drastically, whereas if you don’t write it off and continue to provide for the asset your provision, te coverage remains high,” he added.
Stipulation of higher provisioning would result in 20 basis point reduction in the capital adequacy ratio of SCBs. The ratio stood at 13.2 per cent as of the end of March, rating agency Credit Analysis & Research said.

Retail and corporate loan rates may stay the same as bankers today ruled out any increase in lending rates in the next three to four months, thanks to the RBI keeping almost all key rates unchanged.
“I do not see any change in the interest rates till March. There is no liquidity problem in the system and credit off- take is less than expected,” Corporation Bank executive director Asit Pal said.
The RBI, in its quarterly monetary policy today, has said the credit growth is unlikely to meet 20 per cent target. It has increased the Statutory Liquidity Ratio (SLR), the minimum amount the bank must park in government securities, by one percentage point to 25 per cent. But has retained the repo rate at 4.75 per cent and reverse repo at 3.25 per cent, the rates at which banks borrow and lend funds to the central bank.
Rise in SLR is just a notional issue. As it is, the banking system has over 27 per cent in SLR, Pal said. IDBI Bank executive director Sushil Munhot said the signal is quite clear that the RBI does not want to hurt growth, but wants to check inflation.
PNB general manager treasury SK Dubey said, interest rates would stay stable in the coming months as credit is not picking up. According to ABN Amro Bank Country Head Meera Sanyal, “There would not be immediate increase in interest rates but pressures on rates would start building up in the next few months.”

The Forward Markets Commission (FMC), the commodity markets regulator, says it is willing to discuss the issue of extending trading hours, in line with what the equity markets regulator, the Securities and Exchange Board of India (Sebi), did last week. Sebi has allowed trade timing in equities to be extended, from 9 am to 5 pm; the current hours are 9:55 am to 3:30 pm.
Currently, agri commodities are traded on the exchanges between 10 am and 5 pm. Market participants have urged the regulator on various occasions to extend trading time till at least 7.30 pm, to capture the sentiment of late evening trades. For which, traders now have to wait till the exchange opens the following day.
“So far, no exchange has made any formal proposal to the Commission. If they accumulatively put in a request, we would certainly debate that,” said Anupam Mishra, spokesperson of the FMC.
Earlier, exchanges were keen to have more trading hours in anticipation of higher growth in volume. But, interest waned gradually, as there was no evidence of “missing opportunity” because of the time constraint, said Anil Mishra, chief executive officer of the Ahmedabad-based National Multi-Commodity Exchange (NMCE).
Agricultural commodities’ markets are fragmented. Rajasthan’s climate ensures it tops in guarseed and Maharashtra in sugar, cotton and soybean. The first target of exchanges to set up ticker boards at all 7,500 mandis across the country, which is facing severe challenges.
Most mandis in rural areas do not have an electricity connection. Commodities are kept in the open space. Therefore, sellers require to auction the commodity and buyers to clean, weigh and pack for re-selling. All these have to be done in daylight in most mandis.
Even if trading time is extended, it would not help increase volume, at least in agricultural commodities, as late evening trading in the spot market is not considered a reality, Mishra added.
However, the country’s largest agri commodity exchange, the National Commodity & Derivatives Exchange (NCDEX), is enthusiastic. Said its Chief Business Officer, Vijay Kumar: “More time in globally referentiable commodities, including sugar and soybean, will certainly help exchanges to garner more volume.”
Though, such requests keep cropping up in meetings, no formal request has been made by the NCDEX so far. The Multi Commodity Exchange (MCX), the country’s largest in turnover, however, believes that global development in agri commodities make only a miniscule impact on prices in local exchanges.