Mutual Fund Newsletter - August 05 to August 08, 2013

Normally, the industry sees outflows towards the end of the quarter from corporates and banks in short maturity fixed income categories

August 08, 2013 6:32 IST | India Infoline News Service
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MF AUM below Rs 8 trn on outflows from liquid funds: CRISIL

The Indian mutual fund industry’s month-end assets under management (AUM) fell by over 6% month on month or Rs 506 bn to end below the Rs 8 trillion mark (first time since March 2013) at Rs 7.61 trillion in July as per the monthly numbers released by the Association of Mutual Funds in India (AMFI). Most of the outflows were from liquid funds which witnessed volatility in performance following the Reserve Bank of India’s (RBI’s) liquidity-curbing measures to strengthen the rupee.

Rare outflows seen in the first month of the quarter, last such occurrence seen in October 2010

The mutual fund industry witnessed outflows of Rs 501 bn in July (mainly from liquid funds) as against Rs 484 bn in the previous month. An outflow in the first month of the quarter is rare and was last seen in October 2010 (though much smaller at Rs 57 bn). Normally, the industry sees outflows towards the end of the quarter from corporates and banks in short maturity fixed income categories. Corporates withdraw to meet their advance tax requirements while banks withdraw to meet their quarter-end capital adequacy requirements. However, these outflows usually see a reversal over the subsequent two months.

Liquid funds faced heavy redemption pressure

Liquid funds’ AUM fell by 21% to Rs 1.29 trillion primarily due to outflows of Rs 453 bn. The category witnessed large-scale redemption following the recent liquidity-tightening measures by the RBI to strengthen the rupee. The category (represented by CRISIL – AMFI Liquid Fund Performance Index), gave 0.37% returns in the month. Read More

FM seeks support on Insurance, Pension Bills

India's largest opposition party BJP wants foreign direct investment in insurance and pension funds to be capped at 26%. In the insurance sector, the government proposes to increase the FDI (foreign direct investment) cap to 49% from 26%, which the BJP is opposing. The major opposition party is also against raising the FDI limit in the pension sector to 49%.  The objective of the government is to attract foreign investments in India. Read more...

Ban on e-series: What happens to your e-gold

The ban on trading in e-series contracts in precious and base metals by crisis-hit National Spot Exchange (NSEL) has forced investors to convert their demat certificates into physical delivery.  The NSEL on Tuesday announced discontinuation in trading e-series contracts till further notice. The government is finalising a notification empowering the commodity futures market regulator, the Forward Markets Commission, to resolve the NSEL payment crisis.  Investors are unable to sell their demat certificate after NSEL stopped its trading, the only option is to convert it into delivery. The Ministry of Consumer Affairs wants NSEL to settle around Rs. 56 billion dues to investors. Read more...  

Balanced Funds: A good asset allocation in volatile markets

Indian fixed income markets were impacted, in the recent weeks, by the series of liquidity tightening measures by the Reserve Bank of India to strengthen the Rupee. With debt markets turning volatile after a steady run over the past year, investors are in a dilemma over their allocation in key asset classes, viz., equity and debt. Balanced Mutual Funds offer a simple solution to this dilemma as they invest 65-80% into equity and the balance in debt instruments. Equity has the potential to deliver superior long term returns while debt provides stability to the portfolio. This diversification protects the portfolio from downside risks if either equity or debt enters a bearish phase. Read more...

Domestic News

EPS to be merged with NPS: FM

The finance ministry has asked Employees’ Pension Scheme (EPS), run by the Employees’ Provident Fund Organisation (EPFO), to close down and shift its subscribers to the National Pension System (NPS), according to a media report. NPS is run by the finance ministry, with no contribution from the government or any guaranteed benefits to subscribers. Read more...

ICICI Prudential Mutual Fund launches CNX 100 ETF

ICICI Prudential AMC announced the launch of ICICI Prudential CNX 100 ETF, an open ended Index Exchange Traded Fund that constitutes 100 most liquid large cap stocks listed on the NSE. The investors in this fund will also benefit from the tax exemptions under section 80CCG of the Income Tax Act, 1961, as this fund qualifies for RGESS. The NFO period opened on 19th July, 2013 and is open till 16th August, 2013. The minimum amount that investors can invest in this fund is Rs 5,000/- and multiples of Re.1 during NFO.  The fund will aim to keep a low expense ratio.Read more...

SBI Mutual Fund unveils unique investor education campaign

SBI Mutual Fund, one of the oldest and trusted mutual fund brands, donning the mantle of an industry leader and attempting to rebuild overall affinity towards the mutual fund asset class, announced the launch of SBI Fund Guru, its unique, pan-India, multi-lingual multi-media investor education campaign, considered to be the first in the asset management industry in recent times. Read more...

India ranked lowest in basic money mgmt skills: MasterCard

PFRDA defers plan to hire media firm to popularise NPS


What does opportunity cost mean for your finances?

Opportunity cost is a benefit or profit that you pass by to acquire or achieve something bigger. It is mostly used to analyse decisions that require allocation of money by companies or individuals. For instance, you have a finite sum X which you need to invest among four stocks A, B, C and D. Let's say after a proper due diligence, you invest in stock A. After a month, prices of all four stocks increase. However, the price of stock C rises the most. Now, you measure your opportunity cost against stock C as its price increased the most. Thus, earlier you had an option to invest in stock C and earn more gains. However, you lost this opportunity. Read more...

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