Mutual Funds Newsletter June 23 to 27, 2014

Indian asset management presently addresses only a subset of the investors that its global counterparts do

June 27, 2014 11:31 IST | India Infoline News Service
Top Stories

Indian MF industry: Challenging the status quo; setting the growth path
Globally the asset management industry footprint covers diverse investors such as insurance and pension fund managers, high net-worth individuals, as well as mass affluent or retail. The ability to tap such diverse pools and to better leverage the costs has been a key to growth. Indian asset management presently addresses only a subset of the investors that its global counterparts do. The regulatory mandates in place in evolved economies allow access to the insurance and pension sectors. The industry structure possibly looks to create and harness core competencies in asset management. Mutual fund penetration in India is low as compared to global and peer benchmarks. The AuM to GDP ratio stands at 7 to 8% as compared to a global average of 37%. The two-pronged approach of increasing awareness of and access to financial products and services has and will go a long way in increasing the penetration of mutual funds in the country... Read more

Branding is key to mutual fund industry expansion: UK Sinha
In the last decade the Mutual Funds industry has seen tremendous growth and successfully faced challenges. Yet, it has still not found mass acceptance because a grassroots investor does not know the place of Mutual Funds in the hierarchy of his savings. It is time for the industry to consciously brand itself as a different asset management class altogether and as a long-term investment destination to enter the mind of the people by finding a place in the hierarchy of savings, said Mr. U K Sinha at the 10th CII Mutual Fund Summit 2014, a flagship Confederation of Indian Industry (CII) Summit now in its 10th year. The theme for this year is, Indian Mutual Fund Industry: Challenging the Status Quo- Setting the Growth Path. Sinha also informed that the year 2014 marks the 50th anniversary of the Indian Mutual Fund industry because it was in 1964 that the industry began with the birth of UTI. Today the industry has reached Rs. 10 lakh crore of assets under management with around 4 crore accounts in the 50th year and that too at the time of the 10th edition of CII Summit is cause for satisfaction, he said... Read more

SEBI Board meeting: Announces a slew of reforms
SEBI approved the draft SEBI (Research Analyst) Regulations, 2014 in its Board meeting on June 19, 2014. These regulations will come into force on the 19th day from the date of their publication in the Official Gazette. The Board undertook a review of the extant regulatory framework in the primary market and approved certain reforms to revitalize the market. The salient features of these regulations are as follows:

Revisiting the minimum offer to public norm:
In order to make regulatory requirements consistent across the companies irrespective of post issue capitalisation and to facilitate mid size issuers who may not be in need of large funds, SEBI has decided to take up the following proposal with Ministry of Finance to carry out suitable amendments to SCRR... Read more

Domestic News

Need to focus on retail buyer: UK Sinha
SEBI Chairman UK Sinha said that the regulator has recommended tax measures for mutual fund industry to the government. We want PSUs and banks to park excess funds with mutual fund industry, Sinha added. SEBI is careful about regulations being implemented by mutual funds and not too many violations are being committed by mutual funds, Sinha further said. Speaking at a Mutual Fund Summit in Mumbai, SEBI has given soft warnings to mutual funds in the event of violations.

AMCs to maintain Rs. 20 cr assets in debt funds: SEBI
SEBI has asked fund houses to maintain a minimum of Rs. 20 crore AUM (assets under management) in debt funds on half yearly rolling basis in all open ended debt oriented schemes.

SEBI has also asked fund houses to keep the minimum subscription amount in debt and balanced schemes at Rs. 20 crore during a new fund offer. For other schemes, it said the minimum subscription amount should be Rs. 10 crore.

It has been observed that many debt oriented schemes are operating with a very low AUM. In the interest of investors, it is important that debt oriented schemes have an adequate corpus to ensure adherence to the investment objectives, stated SEBI circular on Friday.
The regulator has given one years time for existing schemes to comply with SEBIs new rules.

AMFI urges govt to dedicate tax slabs for MF investments
The Association of Mutual Funds of India is seeking dedicated tax slabs for mutual fund investments in the upcoming Budget, according to a media report. AMFI has also urged the government to increase the income tax slabs for individual investors in the Budget which is expected to be in the first week on July, the report added. Within the total slabs, AMFI has requested the Government to dedicate some amount for the MF investment only, the report further said.

Soft warnings given to MFs for violating norms: SEBI
Securities and Exchange Board of India (SEBI) said that the regulator can take stringent action against fund houses which are found violating debt fund norms. Speaking at the 10th CII MF Summit in Mumbai, SEBI chairman UK Sinha said that the regulator has found some schemes violating norms which require debt funds to have a minimum of 20 investors with no single investor holding more than 25% of the net assets of a scheme. In some cases it was a passive violation when investors moved out of schemes during quarter end which resulted in higher concentration of existing investors, Sinha said. There are 69 schemes which have violated the norms. In one of the cases, SEBI found that a single investor had 98% concentration in a scheme... Read more

Govt to allow pension money in MFs: SEBI
Securities and Exchange Board of India (SEBI) has asked the government in the forthcoming budget to allow domestic pension funds to invest in equities through asset management companies. The new government will announce the budget on July 10. Speaking at the 10th CII MF Summit in Mumbai, SEBI chairman UK Sinha said that the mutual fund industry has followed the regulator's diktat of limiting sectoral concentration in debt funds very well. Over 85% of equity funds have outperformed their benchmark during the last three years, while 88% of equity funds have outperformed their benchmarks in the last five years, Sinha added... Read more

Sebi plans to introduce municipal bonds
In order to attract investments from public and institutional investors, SEBI is working on new guidelines for municipal bonds. The municipal bonds also known as 'muni bonds', are a popular financial product in developed countries like the US, where muni bonds have attracted investments totalling over $500 billion and are among preferred avenues for household savings. These bonds are issued by urban local bodies to finance infrastructure such as water supply and sanitation. They serve as an efficient tool for local bodies to raise funds and can be extensively tapped to meet funding needs of urbanisation.

BSE StAR MF crosses turnover of Rs. 282 crore
BSE StAR MF distribution platform is now the largest distribution framework for Indian Mutual Fund, and attains a remarkable trading volume of Rs 282 crore on a single day. Commenting on the development, Shri Ashishkumar Chauhan, MD & CEO, BSE said, We are delighted to have reached this milestone. We believe BSE StAR MF has the potential to completely change the distribution framework of Indian MF industry by reducing the cost and increasing the predictability of processes. Due to the same, almost the entire MF industry has supported the BSE StAR MF platform... Read more

International News

US equity funds estimate $914mn outflow in latest week: ICI
Total estimated inflows to long-term mutual funds1 were $4.31 billion for the week ended Wednesday, June 18, the Investment Company Institute reported. The US equity funds had estimated outflows of $914 million for the week, compared to estimated inflows of $217 million in the previous week. Domestic equity funds had estimated outflows of $2.19 billion, and estimated inflows to world equity funds were $1.28 billion. Hybrid funds, which can invest in stocks and fixed-income securities, had estimated inflows of $1.06 billion for the week, compared to estimated inflows of $1.16 billion in the previous week. Bond funds had estimated inflows of $4.16 billion, compared to estimated inflows of $2.07 billion during the previous week. Taxable bond funds saw estimated inflows of $3.74 billion, and municipal bond funds had estimated inflows of $419 million.


How to file income-tax returns online
Individuals prefer to file their tax return through experienced accountants or professionals due to lack of knowledge or the fear of making mistakes. The below article provides the basics of electronic tax return filing that could help you complete the process on your own... Read more

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