Stocks
Almost Rs3,000 crore more flows out of equity mutual funds in August ‘10; 13-month outflow hits a huge Rs14,450 crore

In August 2010, equity investors pulled out a net Rs2,890 crore from equity mutual funds. Fund companies are staring at a bleak future

According to data provided by the Association of Mutual Funds in India (AMFI), equity schemes have witnessed Rs2,890 crore net outflow or redemption in August 2010, continuing the trend from the last several months. In July 2010, Rs3,400 crore went out of equity funds. Equity linked saving schemes (ELSS) too saw Rs127 crore net outflows. Some say that as the markets reached new highs, equity mutual fund investors have been quick to cash in. A majority of the investors who had put their money at the peak of the markets have started pulling out money from equity schemes, say some sources in the fund industry. But this does not explain why there has been continuous outflow of funds over the last 13 months. Coincidentally, market regulator Securities and Exchange Board of India (SEBI) had banned entry loads on new fund sales and then followed it up with a host of measures to 'tone up' the fund industry.

Canara Robeco Mutual Fund launched its Canara Robeco Large Cap+ Fund in August 2010 which mopped up Rs178 crore. Existing equity schemes mopped up Rs4,750 crore in August. Axis Mutual Fund's Axis Triple Advantage Fund, an open-ended balanced fund, collected Rs428 crore through its new fund offer.

"It has been a continuing trend. As the market has been doing well, many mutual funds have actually performed better than the index. Many people invested when the market was at its peak. All those people have not had any return and have seen their principal in the red for almost three years. Now they are getting an opportunity of getting their principal back. So the level of redemption is high.

Secondly, there are alternate avenues like ULIPs, PMS, real estate and structured products that offer higher revenue to distributors. There has been a trend of funds being pulled out of mutual funds into these products," said a sales head of a private mutual fund.

This, however, does not explain why equity funds have suffered redemption in 10 months out of the past 13 months. Fund companies privately curse the changes SEBI has brought about in the last one year in reducing sales incentives while many distributors have gone out of the fund-selling business altogether, suddenly finding the business unviable.

User

COMMENTS

KUMAR

6 years ago

it is not changes brought by SEBI or any other reason except mutual funds are not performing well or their functioning should be investigated. when market is gained more thna double from 8000 to 19000 , mutual funds scheme returns are merely 5-10% only. how come only 5-10% gain when such schemes portfolios are part of same scrips which has gained more than double???

REPLY

Keshav B Bhat

In Reply to KUMAR 6 years ago

This shows that how people talk about the subject they are not familier with. Are you talking about debt funds or Equity Funds.
Whole Equity Based funds are killed by SEBI and the fund sizes are reducing day by day eventhough same funds have given very good returs beating the bench marks. Kindly go through the fund performance reports before writing something please.
Regards,
Keshav B bhat

r

6 years ago

where are these funds going to...?.. now..?
insurance products...?

REPLY

Keshav B Bhat

In Reply to r 6 years ago

company FDs, Bank FDs and ofcorse some wise oparators like LIMOZENE etc

I think Mr Bhave is the most happy prson now as he and his team has achived their GOAL!

Keshav B Bhat

6 years ago

Dear Sir,

When the entry load ban was imposed by SEBI, the AMCs were happy and whenever we raised this question in meetings the answer we used to get is SEBI has got power and we can not do avy thing against their orders or we can not be in their bad books by raising this question. Further the advisory system with people charging for consultation is the future so u people get equipped with CFP qualification etc.
Hope atleast now the people in the industry realise the mistakes and come forward with some practical ways to deal with the situation instead of justyfying their misdeeds.

Regards
Keshav B bhat

manoj k bharat

6 years ago

It was hard luck for small and new investors, who could not get the services of the distributors for applying in mutual funds, as he would not know the basics, regarding which funds to apply, how to apply and where to go to get and submit application. In the process, small and new investor, for whom SEBI was batting immatuirly, was hardest hit in not getting benefitted from the current bull run.

Similarily, it was hard luck for AMC's, which hve to bear the brunt of wrong policies of SEBI, thus resulting in bringing them on the brink of failure in bringing in the culture of equity investments in the country

Government was totally right in keeping ULIP away from SEBI, otherwise it could have ruined that industry as well.

REPLY

Keshav B Bhat

In Reply to manoj k bharat 6 years ago

Dear Sir,
It is not just SEBI to be blamed, even the AMCs thought since they got enough data base of the investors, if the intermediaries are eliminated they will be able to sell the schemes directly.
Further now if a sub broker goes and aproaches any fund house on behalf of any client flately they refuse to help, saying we do not recognise the sub brokers, if you want you can become our broker and we will oblige. But for fund mobilisation they do not see wither the person is aub broker or not even a sub broker/ ARN holder.
As long as this type of attitude remains in the industry no body can do any thing for the small investor or the new investor

regards
Keshav B bhat

Roopsingh Solanki

In Reply to Keshav B Bhat 6 years ago

I agree your point that AMCs are reaping what they sow-they never highlighted the point to SEBI that direct investment should not be allowed-is insurance available directly with deduction of its entry load(agent commission)-IRDA has never supported the idea of direct policy selling with low premium-but our ""wise"'AMC bosses tried for welfare of "poor"investors because brokers were "Looting"investors with 2% huge commission-so no doubt AMC are paying the price for their cunningness with IFAs,they should have opposed SEBI unitedly in all nuisance ideas of SEBI and its boss-but instead they have screwed up whole industry-now with markets reaching highest levels -investors are quiting the markets-thanks to SEBI fatwas-

Keshav B Bhat

6 years ago

it is high-time people start realising the plain truth, No product can be marketed or sold without goeng through marketing process which requires manpower either direct sales force, to who are paid saleries and incentives or intermediaries who are paid commission.
The industry has seen the intermediary comunity is the bestmodel with cost advantage compared to any model.
Regards
Keshav B Bhat

Michael

6 years ago

Well Mr. Bhave, you were trying to clean the rot from the system...

It appears that your efforts are helping clear out the system itself. You might not have any MF industry left to regulate

Cheers!!!

Throwing out the Baby with the Bath water???

REPLY

Hemal

In Reply to Michael 6 years ago

To me the comments here appear to be of MF agents who lost their business.

Anyways, I am a small investor, a typical salaried guy investing for my retirement. I do my own research on MF and apply to schemes on my own.

My question is why should 2% of my investment be reduced at the onset when I don't want any help of the agents. Before this ban on commission even if I do my own study on MF and apply online or by paper, my investment used to lose 2.25% on day one. I am happy now.

Michael

In Reply to Hemal 6 years ago

Friend, If you were doing your "own research" well you would know that there was a DIRECT window for all Mutual Funds with NO ENTRY LOAD and NO COMMISSION payable to anyone many months before SEBI scrapped Entry Load and upfront commissions on all transactions.
Now you will have to be more alert with your "Own research" as if what this articles says continues you may be investing in a fund where many are leaving and that is bound to affect the returns. Happy Investing...

Hemal

In Reply to Michael 6 years ago

I agree with you Michael. Sorry the comment was not directed at you but to the article. I did a mistake of doing a reply. Still a newbie to putting comments on a page:)

I have been availing the DIRECT window.
I am in favor of having both the options open for the investors. 1. A direct window with no entry load and no commission. 2. Or a commission based one, a complete ban is not the right approach.

I am also against pocketing of trailing commissions by the MF when a investors has not availed of any agent.

Five states attract about Rs50 lakh crore investment proposals

New Delhi: Five states, including Gujarat, Maharashtra, Orissa, Andhra Pradesh and Karnataka, attracted about 50% of the total Rs105 lakh crore investment proposals made in 20 states, reports PTI.

"These five states have emerged as the most preferred investment destinations attracting 52.42% of total investment proposals of about Rs105 lakh crore made in 20 states in the past four years," an Associated Chambers of Commerce & Industry (Assocham) study said.

Gujarat received investment proposals worth Rs12 lakh crore, followed by Maharashtra, Orissa, Andhra Pradesh, and Karnataka, Assocham secretary general D S Rawat said in a statement.

Among sectors, which received maximum amount of funds in these states, electricity topped the chart receiving 40.3% investments, followed by services 22.6%, manufacturing 22.1%, real estate 9.9% and mining 2.4%, the study said.

It said that electricity sector got the highest share of investments in states like Uttarakhand, Chhattisgarh, Himachal Pradesh, Madhya Pradesh and Bihar.

States like Kerala, Jammu and Kashmir, Punjab and Maharashtra emphasised more on development of services industry, the study said.

For real estate sector, Haryana was a major destination as it attracted 57.8% of the total investment proposals, it added.

Apart from these five states others in the list included West Bengal, Madhya Pradesh, Haryana, Jharkhand and Himachal Pradesh.

User

Technology has failed to reduce banking transaction costs, says RBI

RBI’s deputy governor Dr KC Chakrabarty has said that the industry needs to make a promise to the customer that banking transactions will become cheaper, faster and easier over the next decade

Banks are increasingly adopting new technologies, however, these have failed to bring down transaction costs, said Reserve Bank of India (RBI) deputy governor Dr KC Chakrabarty while speaking at a banking conference organised by the Indian Banks' Association and the Federation of Indian Chambers of Commerce and Industry (FICCI) in Mumbai. Dr Chakrabarty said that the net interest margin of banks has not reduced much especially when the structure of the business has not changed.

He said technology must enable customer facilitation in terms of cost, time and convenience and it should be dovetailed to customer needs and expectations.

About two years ago, the RBI allowed 18 banks, including State Bank of India, ICICI Bank, Axis Bank, HDFC Bank and Bank of India to offer mobile banking services across the country.

However, the volume growth in mobile banking is still very low at 400,000 transactions per month, out of which one bank's contribution is more than 300,000 transactions alone. Some banks have as low as two mobile banking transactions per month, Dr Chakrabarty said.

He said that the intermediation costs of banks in India still tend to be higher than those in developed banking markets, which signals that there is a need to increase the penetration and bring down the cost per transaction.

At the same time, we need to develop effective and robust delivery models that can reach each customer irrespective of his/her location across the country, he added.

Although the discussion was focussed on transactions in the next decade, almost all panellists except Dewang Neralla, director, Atom Technologies and co-founder and director, Financial Technologies Ltd, failed to address the issue of secure and safe transactions.

Mr Neralla said going forward, we need to provide safe and secure environment to end users, which can increase the transaction volume and ultimately can bring down the cost as well. He gave an example of Tata Sky's subscription service activation/recharging through mobiles. He said more than 10% of Tata Sky's total volumes are sold through this model at a much cheaper cost. This shows that if you can create a safe and secure model, customers do not hesitate to adopt it, Mr Neralla added.

Later, commenting on the recent crash of HDFC Bank's Net banking facility, Dr Chakrabarty said that each bank has certified that they do have robust backup systems. However, customers are often left in the lurch due to technical issues at the bank's end.

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COMMENTS

vswami

2 years ago

OFFHAND
Most certainly, the feedback having come from none else than the key person, second in hierarchy, at the helm of affairs in the RBI itself, can by no stretch of imagination, be rightly/sanely brushed aside, or ridiculed, even impudently, as single -track minded or motivated by a double-standard. On the contrary, every single concern of his, well voiced, ought to be a given serious consideration at closest quarters; and effective remedial measures be taken on a war footing.
In relation to none of the essential activities, which banks as service providers are engaged in, for the ultimate benefit of, besides its investing or borrowing customers, the society as a whole, one such measure requiring to be given the topmost priority is this: As commonly agreed, any 'discretion' vested in anyone, right from the top brass, has undeniably the potential to be misused. With that in sharp focus, the factor of 'discretion', of any kind, needs to be eliminated, and should have no role to play. Instead, must be strictly governed by per-determined ideal standards, as laid down by the Regulator , and made applicable uniformly to all its constituents, etc. in any decision-making- be it for lending or any other.
In fact, there are any number of rules to be found in the Code of Ethics And Conduct formulated, and periodically updated, but there is, as experience has shown, a cavernous gap between what the rules book says, and its actual, factual observance, in practice, even on a day to day basis.
May be, competent experts in banking, known for their integrity, might have specific suggestions to usefully offer for bringing about a marked improvement, for the well being of one and all devoutly concerned, even remotely.

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