MUTUAL FUND

L&T Mutual Fund launches daily investment plan

NEW DELHI: L&T Mutual Fund said it has launched a scheme -Daily Investment Plan- which will offer investors an opportunity to transfer a fixed amount on a daily basis to eligible open ended equity schemes of the company.

"The plan offers investors the opportunity to transfer a fixed amount on a daily basis to the eligible open ended equity schemes of L&T Mutual Fund with effect from March 5," it said in a statement.

The daily investment in the equity schemes of the company enables investors to get benefits of the fluctuation in the equity markets, L&T Mutual Fund said.

The minimum investment amount in the fund offers growth option with minimum application amount of Rs 10,000. It would be open for subscription from tomorrow.

The plan "is an attractive option for the investors as it gives the freedom to put in as little as Rs 50 on a daily basis in an eligible equity scheme," L&T MF CEO Sanjay Sinha said.

"This facility is designed to help the investors in coping with the market volatility and take the advantage of rupee cost averaging," Sinha added.

After flagging equity sales and shrinking margins, mutual fund distributors are facing another challenge — maintaining know-your-customer (KYC) documents with Registrar and Transfer Agents (RTAs). The Securities and Exchange Board of India’s (Sebi’s) deadline for this is April 1.
Sebi had said on December 11 that all documents related to an investor, including KYC and power of attorney details in respect of transactions/requests made through MF distributors, should be available with RTAs and asset management companies. It had asked fund houses to confirm if they were maintaining all investor-related documents.
Distributors said this had increased their work, affecting investments. “A lot of effort goes into searching data and documents. Submission and confirmation is another task. It is cumbersome to dig out documents of clients who have been investing for the past five-eight years. There is no clarity on what has to be done in case the KYC documents have been lost. So, rather than sales, most of our time is invested in complying with the order,” said Rakesh Goyal, head of mutual fund distribution at Bonanza Portfolio.
Sebi has banned payment of commissions and brokerages till its order is complied with. “No further payment of commissions, fees and/or payments in any other mode should be made to such distributors till full compliance/completion of the steps,” it had said.
As a result, fund houses haven’t been paying commissions to distributors for two months. With commissions already shrinking after the entry loan ban, this has made things worse for distributors.
After an investor gives the documents, the fund house will have to independently confirm with all the three RTAs, CAMS, Karvy and Intime Spectrum. Only then can it pay the distributors.
“It is true that mutual funds are not paying any brokerage till intermediaries provide all KYC documents to RTAs. The power of attorney documents, which include account opening documents and previous transaction records, also have to be provided. We have been trying to meet the deadline. In our case, the documents are available in a digitised format, so it is not much of an issue for us. However, submitting KYC papers to RTAs will be an additional burden for ongoing fresh investments,” said Vinit Arora, head of products and distribution at ICICI Securities.
Sebi's move came as KYC documents for online investors were not being given to RTAs. “The step is in the interest of investors and there is no option but to comply. Whatever documents are not there, we are trying to procure,” said Nandeep Vaidya of India Infoline.

Equity mutual funds lose on energy, consumer bets

Equity mutual funds recorded a drop in net values in February, contrasting a positive return from local shares as their bets on small and medium sized firms and those mainly in the energy and consumer sectors tumbled.
Actively managed diversified stock funds, the biggest mutual funds category by number and assets, saw an average 0.3% loss, according to data from global funds tracker Lipper.
Seven of every 10 such funds underperfored the 0.44% gain in the BSE Sensex, the data showed.
These funds have had higher exposure to mid and small caps, which underperformed the large cap indices," Chintamani Dagade, a senior research analyst at Morningstar India, said.
"Additionally, their exposure to energy and fast moving consumer goods stocks dragged down their returns," he added.
Indian equity mutual funds heavily rely on relatively illiquid small and mid-cap stocks to generate outperformance.
They held 44% of their equity investments in shares of such firms at February-end, suffering a blow from a 1.7% drop in the BSE Mid Cap and 2% fall in BSE Small Cap indices, data from fund tracker ICRA Online showed.
The funds also invested 16% of their assets in shares of energy firms, making it their second biggest sectoral bet, and suffered as the BSE Oil & Gas index fell 3.45%.
Shares in the Indian energy major Reliance Industries, the biggest bet of Indian fund industry, fell 6.6% over the month, cutting returns from equity funds.
The index heavyweight fell as investors feared the firm would overpay for LyondellBasell. Shares recovered on Wednesday, however, on reports bankrupt Lyondell had rejected Reliance's offer
A 7.5% exposure to consumer non-durables also hurt returns as the BSE FMCG index fell 2.3%. ITC, one of top-10 preferred stock of the funds industry, fell 7.3% as the government raised the excise duty on cigarettes.
Gold, bond funds
Funds investing in share of healthcare, technology and financial firms bucked the trend to post gains in February with those betting on gold leading the pack.
A globally-focussed fund, AIG World Gold managed by AIG Global Asset Management, was the top performer among Indian equity funds in February, with returns of 5.06%.
The gold exchange-traded funds gained an average 2.4% during the month as the yellow metal rose.
On the continuous charts , gold futures closed at Rs 16,789 per 10 grams, up 2.9% in February, as domestic physical traders picked up bargains at lower levels.
Fixed income funds betting on government bonds lost 0.2% as the benchmark 10-year bond ended the month up 27 basis points at 7.86% on borrowing concern and accelerating inflation sparking fears of an aggressive rate hike.
Finance Minister Pranab Mukherjee in his budget speech last week raised gross market borrowing by 1.3% in 2010/11 to Rs 4.57 trillion. Net borrowing in 2010/11 is seen at Rs 3.45 trillion.

Top Indian mutual fund gainers in February

The average monthly assets managed by domestic mutual funds rose 2.6% to Rs 7.8 trillion in February, data from the Association of Mutual Funds in India showed on Wednesday.
The assets had dropped 4.14% to Rs 7.6 trillion in January.
Here are some of the top gainers for the month of February
AIG World Gold leads stock funds - A globally-focussed fund managed by AIG Global Asset Management was the top performer among India-registered equity funds in February, data from Thomson Reuters fund research firm Lipper showed.
AIG World Gold returned 5.06 over the month, beating an average 0.14% loss for India-registered equity funds tracked by Lipper.
* Reliance leads mixed asset funds - An India-focussed fund managed by Reliance Capital Asset Management was the top performer among India-registered mixed asset funds in February.
Reliance Regular Savings returned 3.53% over the month, beating an average 0.05% loss for India-registered mixed asset funds tracked by Lipper.
* Baroda Pioneer Income leads bond funds - An India-focussed fund managed by Baroda Pioneer Asset Management was the top performer among India-registered open-end bond funds in February.
Baroda Pioneer Income returned 0.66% over the month, beating an average 0.09% gain for India-registered fixed income funds tracked by Lipper.
Lipper, a Thomson Reuters company, is a fund research and analysis organisation, providing independent insight on global collective investment including mutual funds, retirement funds, hedge funds, fund fees and fund expenses to the asset management and media communities.
Lipper data covers 196,000 share classes and more than 108,000 funds in 57 registered-for-sale universes. It provides the free Lipper Leader ratings for mutual funds registered for sale in 27 countries

Aegon Religare Life Insurance (ARLI), a joint venture of the Netherlands-based Aegon and India’s Religare Enterprises Limited, has targeted a premium amount of Rs 240 crore in the current financial year, which is its first full year of operations.
The company, which started operations in July 2008, has a capital base of Rs 550 crore. It has over 50,000 customers and 7,000 insurance advisers.
According to chief operating officer Yateesh Srivastava, the company’s Star child plan, which is aimed at encouraging parents to plan their child's education, will account for 10 per cent of ARLI’s total premium.
He told mediapersons here on Wednesday that ARLI had launched a scholarship scheme for the children of Star child plan subscribers as a part of its advertising campaign. The company had set up a corpus of about Rs 8.2 lakh for the scheme under which five “lucky” children would be given a scholarship of Rs 2,000 a month each till they attain the age of 18 years or finish Class 12, whichever was earlier.
A 12-year-old boy from Hyderabad, Naushad Ali, is among the five children selected for the scholarship this year. Starting from April 2010, Ali, son of a mechanic, would receive Rs 24,000 a year for a period of six years from ARLI, Srivastava said.

Serious political differences and time constraints will prevent the Manmohan Singh government from passing the contentious Insurance (Amendment) Bill in the current session of Parliament. The bill seeks to raise foreign direct investment limit in the insurance sector to 49 per cent from 26.
The Insurance Bill was introduced in Rajya Sabha in December 2008 by the first UPA government — by the then Finance Minister P Chidambaram — as part of the UPA’s financial sector reforms. It is seen as crucial by foreign investors to India’s commitment to reforms in this sector.
When asked if he expects the bill to be passed in the Budget session, Finance Minister Pranab Mukherjee last night said traditionally little legislative business is done during the Budget session. The Parliamentary Standing Committee on Finance, to which the bill has been referred, has held two meetings so far and is unlikely to finalise its report before April. At these meetings, sources say, not just the BJP and the Left parties, but even UPA allies like the Dravida Munnetra Kazhagam (DMK) have opposed the government’s move to expand the scope of foreign capital in the insurance sector.
“Our party asked why, when several big insurance companies have failed on foreign soil, the government is so keen to open up India’s insurance sector further to allow them to recover their losses from the Indian masses,” Moinul Hassan, CPI(M) member in Rajya Sabha and member of the Standing Committee on Finance told Business Standard.
Another key bill — the Life Insurance Corporation Amendment Bill that seeks to raise the minimum capital of LIC to Rs 100 crore from the current Rs 5 crore — will face hurdles from the finance standing committee as well.
According to sources, the committee may not approve the government’s plan to raise LIC’s capital base. The committee, which met last month, has convened another meeting on March 10 to discuss its draft report on the LIC bill. The committee, led by BJP’s Murali Manohar Joshi, will challenge the government’s argument for expanding LIC’s capital base.

HDFC Bank, ICICI, Kotak hike rates for home, car loans

MUMBAI: HDFC Bank, ICICI Bank and Kotak Mahindra have raised rates on home and auto loans, reflecting the stiffening market that may lead to the Reserve Bank of India (RBI) hastening with a lift in its policy rates from record lows to fight inflation.

These private banks have raised lending rates by as much as 100 basis points, following the hardening of market rates even as the central bank holds on to low rates to avoid derailing the economic growth. A basis point is 0.01 percentage point. RBI has started slowly rolling back some liquidity-boosting measures and has indicated it may not hesitate to raise rates. It raised the cash reserve ratio by 75 basis points in the last review.

“Auto loan rates have been marginally increased by 50 bps,” said Pralay Mondal, country head (retail assets & credit cards), HDFC Bank. “The increase in the cost of funds is being passed on to customers. It has been done to protect our margins.”

Banks are raising lending rates to maintain their profitability after they increased deposit rates in the last few months to attract funds that were beginning to go to higher-yielding stocks and real estate. Investors are seeking higher returns instead of safe bank deposits since prices are running far ahead of the interest rates that banks are offering, leading to negative real returns. With the partial rollback of tax cuts in the budget, cars, televisions, petrol and travel have become expensive, which could fuel inflation further. Food prices are rising at 18%.

The first signs of interest rates hardening came from the bond markets where yields on the benchmark 10-year bond have risen 10-12 bps since the budget. Since the RBI announced the 75 basis point hike in cash reserve ratio requirement, yields have gone up by 40 bps. The yield on the 10-year government securities are close to 8%, up nearly 3 percentage points from their lows last year. Times of easy money are slowly becoming history.

“We had increased fixed deposit rates by 75 bps in the past couple of months. The increase in lending rates is to align it with the rise in deposit rates,” said Kamlesh Rao, head (retail assets), Kotak Mahindra Bank.

Axis Bank was the first to cease its teaser loan rates in February after the monetary policy. The bank was offering a fixed rate of 8.25% for two years. Others who pulled out cheap loans are the government-owned Union Bank and Canara Bank.

But bigger ones that are flush with funds such as State Bank of India and Punjab National Bank and even Bank of Maharashtra are continuing with teaser rates, which the RBI has warned against. Teaser rates loans are those where interest rates are low in early years, but progressively climb, making it tough for consumers to repay. This is similar to the US sub prime loan regime which caused the global credit crisis.

The increase in lending rates, which comes just before the end of the financial year, is an indication that lenders are bracing for an end-of-the-year tightening in markets. Liquidity is scarce in mid-March when corporates remit their advance taxes to the government.

http://economictimes.indiatimes.com/personal-finance/loan-centre/home-loans/home-loans-news/HDFC-Bank-ICICI-Kotak-hike-rates-for-home-car-loans/articleshow/5644906.cms
SEBI

Motilal Oswal mutual fund has filed to Sebi for a Nifty based ETF-MOSt Shares M50. It is based on a proprietary MOSt 50 Index, a fundamentally enhanced index, based on the S&P CNX Nifty 50.
This will be India’s first enhanced index ETF and will extend the ETF product set from being pure passive towards a hybrid Active-Passive approach.MOSt 50 Index is a fundamentally enhanced index based on S&P CNX Nifty Index (Nifty).

Our Bureau
Mumbai, March 4
SEBI has rejected First Global (UK) Ltd's application for registration as a foreign institutional investor.
In an order issued on Thursday the stock markets regulator observed that the past behaviour of its (First Global) associate entities may cause prejudice to the interest of investors and the safety and integrity of the securities market.
First Global (UK) Ltd is a wholly owned subsidiary of First Global Stock Broking Private Ltd. Mr Shankar Sharma and Ms Devina Mehra are the common directors in both companies.
SEBI had restrained Sharma from buying, selling or dealing in securities for a period of one year for violation of FUTP regulations by an order dated February 13, 2009.
This order has since been upheld by the Supreme Court as well.
There are also two pending prosecution cases against First Global Stock Broking and its associates including Sharma and Ms Devina Mehra for non-compliance of summons and FUTP violations.
In view of all this, SEBI felt that the applicant did not pass the test of “fit and proper person” to become eligible for registration as “Foreign Institutional Investor.”
“Further the grant of registration is not a mechanical process, but involves consideration on the part of Board whether grant of such certificate will be in the interest of securities market and whether the applicant is a fit and proper person,” SEBI noted.

New Delhi: The food inflation accelerated slightly in late February, defying government predictions that price rises would start to moderate, adding to pressure on the RBI to raise interest rates in April.
The food price index rose 17.87 per cent in the 12 months to Feb. 20 and the fuel price index was up 9.59 per cent.
The rise in the food price index was higher than an annual rise of 17.58 per cent in the previous week.
With food inflation showing signs of impacting the wider economy, the central bank is widely expected to raise borrowing rates at its next policy review given that inflation has already topped its revised end-March forecast of 8.5 per cent.
Farm Minister Sharad Pawar on Wednesday told India's parliament food prices have started easing and would further ease following a good winter crop.
However, the government's decision to raise petrol prices by about 6 per cent and diesel by 7.75 per cent in last week's budget to help increase revenues and cut the budget deficit may prevent food prices from easing.
"Today, truckers have decided to raise the prices. This is basically the second round of impact of the fuel price hike and will have some impact on food prices for the month of February and March," said Sujan Hajra, chief economist with Anand Rathi Securities in Mumbai, before Thursday's data was released.
The government's decision to raise fuel prices for the first time since July has met with anger from both the opposition and ruling coalition allies, underlining the challenge in cutting a near 7 per cent fiscal deficit.
High food prices coupled with a pick in manufacturing and fuel prices are expected to push the headline inflation to double-digits by end-March from 8.56 per cent in January.
In January, the Reserve Bank of India surprised markets with a bigger-than-expected rise in banks' cash reserve requirements, but left the borrowing rates unchanged.

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