Mutual Fund Newsletter – October 21 to 25, 2013

The sharp decline in retail folios was mainly in the equity category which has been impacted by the ongoing volatility in the segment.

October 25, 2013 6:54 IST | India Infoline News Service
Top Stories

Mutual funds lose 8% retail folios in H1FY14: CRISIL

Mutual funds lost a record 8% or nearly 35 lakh retail folios over the past six months ended September 2013 as per the data released by the Association of Mutual Funds in India (AMFI). This was the sixth consecutive half yearly decline in retail folios as per AMFI’s disclosure. At the overall level (including institutional and high net worth individuals’ folios), a gain in folios of high net worth individuals (HNIs) capped the fall at 15 lakh folios. The industry currently has 4.13 cr folios.

The sharp decline in retail folios was mainly in the equity category which has been impacted by the ongoing volatility in the segment. The CNX Nifty has risen a meager 1% in the past six months and declined nearly 3% in the calendar year until September 2013. Macroeconomic weakness in the domestic market coupled with some mixed cues from the global market led to the decline in the local market. Balanced funds (an equity oriented hybrid category) too saw a decline of over 2 lakh retail folios over the past six months... Read more

MFs get ready for FATCA rules
Asset management companies (AMCs) are keenly watch on the Foreign Account Tax Compliance Act (FATCA). FATCA requires foreign financial institutions, including mutual funds, to register with the American tax authorities and provide details on any assets held by American citizens.

Despite the fact that it is US legislation, FATCA has global implications for all financial institutions. US financial institutions, acting as withholding agents, need to be compliant by July 2014, while financial institutions operating outside of the US – termed Foreign Financial Institutions (FFIs) – should implement new procedures for account opening and existing account review by July 2014, but will begin reporting by March 31, 2015.

Institutions need to adopt procedures, processes, and systems necessary for U.S. account and US owner identification. The new rules require more stringent compliance practices and is likely to increase costs for the mutual fund industry, roughly half of whom are currently running losses, according to a media report.

MFs can hold gold certificates in physical form: SEBI
Capital market regulator SEBI (Securities and Exchange Board of India) on Friday allowed mutual funds to hold gold certificates issued by banks in the physical forms, in addition to the ones in demat form for investments made in gold deposit schemes.  Till now, MFs were allowed to hold such gold deposit certificates only in dematerialised or electronic forms.

"Gold certificates issued by Banks in respect of investments made by Gold ETFs in GDS can be held by mutual funds in dematerialized or physical form," SEBI said in a circular on Friday.

Special Stories

NSE to conduct 75-minute muhurat live trading on Diwali
The National Stock Exchange (NSE) said a special muhurat live trading session will be held on November 3, on account of Diwali. The stock market would open from 18.15 hrs on November 3 and would close at 19.30 hrs, the NSE said in a circular. "All trades executed in this Diwali muhurat trading session shall result in settlement obligations," it said.

Depositories to jointly create database for bonds: SEBI
Market regulator SEBI (Securities and Exchange Board of India) said that National Securities Depository (NSDL) and Central Depository Services (CDSL) will jointly create and co-host centralised database for corporate bonds and debentures by 1 January 2014. “It has been decided to create a centralised database regarding corporate bonds which are available in demat form for public dissemination. Both the depositories -- NSDL and CDSL, jointly, will be the repository of information pertaining to the corporate bonds/debentures,” SEBI said in a circular on Tuesday.

“Depositories will have adequate systems and safeguards to maintain the integrity of the data and to prevent manipulation of the data. Depository will synchronize the database in consultation and sharing with other depository,” SEBI added... Read more

NPS subscribers can withdraw full amount on retirement
With the Ministry of Finance approving some changes in rules, the New Pension Scheme (NPS) holders can withdraw the entire fund on retirement if the total amount is Rs 2 lakh or less.
“When, on superannuation, a request is received from a subscriber, other than the subscriber under NPS-Lite Swavalamban Scheme, having pension wealth of Rs 2 lakh or less, he/she may opt for withdrawal of total pension wealth,” a notification issued by the Ministry of Finance said.

PFRDA notifies changes in investment norms for pension fund
The PFRDA (Pension Fund Regulatory and Development Authority) on 15 October 2013 has notified changes in the investment guidelines to all pension funds. “Debt securities selected for investments should have a minimum residual maturity period of 3 years from the date of investment by the pension fund,” the PFRDA said in a notification to all pension funds for the government sector. The debt securities must have an investment grade rating from at least two credit rating agencies.  Pension funds should undertake their own due diligence of assessment of risk associated with securities before investments, it said. Credit Default Swaps (CDS) on corporate bonds are also eligible derivative instruments, it said.

Domestic News

SEBI has made many changes to enhance MF distribution
SEBI whole-time member Rajeev Kumar Agarwal said that the regulator is constantly working towards regulations that enable retail investors’ savings to be mobilised into investment. Speaking at the Morningstar investment conference in Mumbai on Tuesday, Agarwal said SEBI has made several changes to the mutual fund regulations to re-energise distribution and attract small investors from Tier-2 and Tier-3 towns. However, the growth in the number of investors has not been significant, it will improve gradually on account of policy action taken in the last one year, he said.

ICICI Pru MF extends NFO period till 31st Oct
ICICI Prudential Mutual Fund on Thursday said that it has extend the NFO period of ICICI Prudential Value Fund – Series 1 till October 31, 2013. ICICI Prudential MF launched Fund Series Fund 1, a close ended equity fund that focuses on investing in stocks that trade at a discount to their true value. The fund aims at adopting the ‘value investing’ approach where low priced stocks with justifiable higher fundamentals are identified and invested in with the aim of long-term capital appreciation... Read more

HDFC MF launches CPO-I-36M October 2013
HDFC Mutual Fund announced the launch of HDFC CPO - I - 36M October 2013, a Plan under HDFC Capital Protection Oriented Fund - Series I, a close-ended capital protection oriented income scheme. The scheme is open for subscription between October 17, 2013 and October 31, 2013. The scheme is focused towards protection of capital.

The objective of the scheme, HDFC Capital Protection Oriented Fund – Series I is to generate returns by investing in a portfolio of debt and money market instruments which mature on or before the date of maturity of the Scheme. The Scheme also seeks to invest a portion of the portfolio in equity and equity related securities to achieve capital appreciation... Read more

BOI AXA launches Capital Protection Oriented Fund-Series 1
BOI AXA Investment Managers on Thursday launched BOI AXA Capital Protection Oriented Fund–Series 1, a 38 months Close-ended Capital Protection Oriented Scheme. The new fund offer opens on October 17, 2013 and closes on October 31, 2013. The scheme aims to seek capital protection on maturity by investing in fixed income securities maturing on or before the tenure of the scheme and seeks capital appreciation by investing in equity and equity related instruments... Read more


Being a loan guarantor can affect your CIBIL score
When you sign a Guarantee, you are agreeing to be responsible for paying the debt in the event of a default. Therefore, it will show up on your credit report just like any other account for which you are liable. If the Borrower defaults on the account, it will have a negative effect on your CIBIL credit score... Read more

International News

Asian ambition threatens European UCITS Brand: Cerulli says
Regulators in Asia are considering ways of facilitating cross-border distribution in the region, either by creating a regional alternative to UCITS (Undertakings for Collective Investment in Transferable Securities) or via bilateral agreements between countries. As Asia is currently the main importer of UCITS outside of Europe, industry practitioners are understandably concerned that these initiatives will one day become a reality, according to the October issue of the Cerulli Edge-European Monthly Product Trends. Cerulli believes such fears are overstated... Read more

60% of institutions' assets consultant-intermediated in 2012
New research from Cerulli Associates, a Boston-based global analytics firm, finds that more than 60% of institutions' asset flows were consultant-intermediated in 2012 with the rest coming from direct sales, according to their recent survey of institutional asset managers. "Given the significance of investment consultants, just over half of the asset managers we polled plan on placing an even greater emphasis on fostering consultant relationships," states Michele Giuditta, associate director at Cerulli.

"This percentage initially appeared low to us, but our discussions with institutional distribution leaders confirmed that many firms are already devoting substantial resources to these efforts and plan on continuing to do so. This explains the high percentage of firms that plan on dedicating the same level of emphasis on the consultant relations effort in the future."... Read more

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