Mutual Fund Newsletter June 02 to 06, 2014


June 07, 2014 12:47 IST | India Infoline News Service
Top Stories

Industry should step up to strengthen capital markets: UK Sinha
“Corporates should run their own Pension Funds for their non-EPFO category employees and invest funds in the equity market”, urged UK Sinha, Chairman, Securities& Exchange Board of India while speaking at CII’s 5th Capital Markets Summit. Sinha suggested that this would make reliable, long-term capital available for investment. He further explained that it is not easy for the Government to make drastic changes and requested industry to come forward and take steps to improve market depth. While acknowledging regulatory hurdles to IPOs, Chairman also pointed out that reluctance on part of companies to comply with prescribed governance norms is equally responsible for the lack-lustre IPO market. He advised companies not to push back but project best practices to attract domestic and international investors... Read more

Assets of MFs cross Rs10 trillion-mark in May
On account of fresh inflows and sharp rally in equity markets, the assets under management of mutual funds rose 7% to Rs. 10.11 trillion in May 2014 from Rs. 9.45 trillion in April 2014. The assets of mutual funds rose by 22.5% to Rs. 1.85 trillion over the last two months, according to SEBI (Securities and Exchange Board of India) data. HDFC Mutual Fund stood first in terms of AUM in the quarter ended March 2014, followed by ICICI Prudential and Reliance Mutual Fund.

RBI to introduce cap on percentage of MF sales
The RBI (Reserve Bank of India) is planning to introduce a cap on the percentage of mutual fund products of group asset management companies (AMCs) that banks can sell to investors, according to a media report. At present, there are no restrictions on the percentage of MF sales that can come through a bank nor are there guidelines on the number of fund houses' products they need to sell. Thus, a bank can sell a high percentage of MF products of its group AMC, the report added.

Leader Speak

By next March, market should fetch 10%-12% return: LIC Nomura MF
Indian Economy is heading for a robust growth. India will be a favored destination for FIIs. Inflow of USD will increase, capital formation will increase, employment opportunities will grow and domestic saving rate will go up, Nilesh Sathe, Director & Chief Executive Officer, LIC Nomura Mutual Fund, says... Read more

Domestic News

Banks should act on willful defaulters: FM
The Ministry of Finance on Tuesday asked public sector banks to raise funds on their own, as it may not be in a position to allocate additional funds for recapitalisation in the coming Budget, according to a media report. A provision of Rs 11,200 crore was made by the ministry in the interim budget, the report added. The ministry has asked the public sector banks to meet their capital requirements by selling government equity and issuing bonds... Read more

RBI puts the ball in Govt’s court
Instead of calling the tone of the Bi-monthly Monetary policy statement hawkish or dovish, we would like to believe that it indicates continuity in the RBI’s view on both inflation as well as growth. What however, appears a bit out of syllabus could be the RBI’s confidence in the rupee, reflected in allowing higher remittance as well as allowing additional exposure in the domestic currency derivative market by foreign investors. Besides, the cut in the SLR by 50 basis points suggests that the RBI is signalling banks to stay ready to lend, in the event of a revival in the economy and a consequent increase in credit demand... Read more

Bond yields may remain range-bound: ICICI Pru MF
The Reserve Bank of India (RBI) left its key policy interest rates- repo rate under LAF unchanged at 8%, CRR unchanged at 4%; however, the bank reduced the Statutory Liquidity Ratio (SLR) by 50bp to 22.5% of banks’ net demand and time liabilities, from 23% previously along with a minor tinkering in the liquidity facility provided to the banking system. Taking cognizance of the fact that CPI inflation (ex. Food & energy), has moderated but is still elevated as per RBI’s target, the repo rate has been kept unchanged. There are concerns regarding El Nino, which may impact the monsoon, and in turn the food inflation but the risk to RBI’s medium-term target of CPI inflation- 8% by Jan 2015, and 6% by March 2016, is likely to be balanced by government’s efforts towards fiscal consolidation and better food supply management... Read more

Ultra-short term rates to remain volatile: Baroda Pioneer AMC
RBI kept the repo rate and CRR unchanged at 8% & 4% respectively, which was in-line with market expectation. However, RBI cut the SLR by 50bps to 22.5%. The Liquidity facility under the export credit finance reduced from 50% to 32%, which is compensated by special term repo of 0.25% of NDTL.  This policy reiterated RBI’s anti-inflation stance but the tone changed to neutral as there may not be any need for a rate hike if CPI inflation is on its easing path. However, RBI may soften rates if inflation excluding base effect falls faster than anticipated. RBI expects possible strong government action on fiscal, food to balance CPI risk and past rate hike to ease inflation pressures. RBI is expecting a GDP growth at 5.5% in FY 15 and expects investment demand and credit to pick up as the economy seems to be on recovery path... Read more

RBI policy indicates a more ‘neutral’ tone: FTI
With the positive election results, the new incoming government will have strong authority and stability to pursue their pro-growth policies. The RBI also highlighted that the decisive election result, together with improved sentiment should create a conducive environment for comprehensive policy actions, as well as a gradual recovery of growth during the course of the year. However, headwinds like inflation, fiscal deficit and a large government borrowing linger. Consumer price index (CPI) inflation has moderated from its highs, although it recently reversed its downtrend due to a pick-up in food inflation. El-Nino and others risks as pointed out by the RBI also remain, although the central bank has said that these upside risks are broadly balanced by the possibility of stronger government action on food supply, better fiscal consolidation, as well as the pass through of recent exchange rate appreciation. CPI core inflation has stabilized, but still remains quite elevated, even though economic growth has slowed... Read more

Deutsche MF launches Fixed Maturity Plan–Series 70 and 71
Deutsche Asset Management has launched two FMPs. DWS FMP–Series 70 NFO opened for subscription on 2nd June and will close on 11th June 2014. DWS FMP–Series 71 NFO opened for subscription on 9th June and will close on 20 June 2014. The objective of the above schemes is to generate income by investing in debt and money market instruments maturing on or before the date of the maturity of the Scheme. The schemes will invest predominantly in Non Convertible Debentures (NCD)/Bonds. The benchmark, minimum investment and entry & exit load are the same for all above mentioned schemes. The benchmark is CRISIL Short Term Bond Fund Index. Minimum investment: Rs. 5000 per application. There is zero Entry and Exit Load during the NFO period... Read more

International News

US equity funds estimates outflows of $2.45bn for the latest week: ICI
Total estimated inflows to long-term mutual funds were $717 million for the week ended Wednesday, May 28, 2014, the Investment Company Institute reported. Equity funds had estimated outflows of $2.45 billion for the week, compared to estimated inflows of $701 million in the previous week. Domestic equity funds had estimated outflows of $2.60 billion, and estimated inflows to world equity funds were $149 million. Hybrid funds, which can invest in stocks and fixed-income securities, had estimated inflows of $1.09 billion for the week, compared to estimated inflows of $1.11 billion in the previous week... Read more

Special Stories

Expert views: RBI keeps rates on hold, cuts SLR by 50 bps
The Reserve Bank of India (RBI) in the bi-monthly monetary policy review on Tuesday kept the repo rate unchanged at 8%. The Cash Reserve Ratio (CRR) was also unchanged at 4% of net demand and time liabilities (NDTL). However, the Statutory Liquidity Ratio (SLR) was reduced by 50 basis points to 22.5% of banks NDTL with effect from the fortnight beginning June 14. The central bank also reduced the liquidity provided under the export credit refinance (ECR) facility from 50% of eligible export credit outstanding to 32% with immediate effect. The SLR cut will be effective June 14... Read more

SEBI relaxes short selling norms
Securities and Exchange Board of India (Sebi) said that the Authorised Intermediary (AIs) shall sign an agreement with Clearing Members (CMs) for the purpose of facilitating lending and borrowing of securities. Securities Lending and Borrowing (SLB) framework was introduced in 2007 which has been modified from time to time. With regard to the requirement of an agreement between Clearing Member and client for the purpose of lending and borrowing of securities, representations were received from market participants, SEBI said in a circular on Wednesday... Read more

Changes in IPO norms to be announced before month-end: SEBI
SEBI chairman UK Sinha said that the regulator is in discussion with the government on tax treatment of real estate funds. SEBI will issue final norms for REITS funds once tax structure is in place, Sinha added. Sinha also said that changes in IPO norms will be announced before month end and quota for anchor investors in IPO to be increased soon. The regulator will come out with new delisting insider trading norms soon. Sebi will also issue new norms for ESOPs.

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