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.
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.
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.