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Big winners & losers after the Budget

Several stocks are riding high on the back of friendly proposals in the recent Budget; others have taken a beating and are sliding down

The Budget announced in late February has given a definite direction to the stock markets, at least for the short term. The markets have taken kindly to the Budget, and are in a strong uptrend. Indeed, market sentiments have improved drastically from the pre-Budget days. Several stocks have benefited from the Budget proposals and are riding the wave of optimism.

The biggest gainer post-budget is Ferro Alloys Corporation Ltd, which has surged 75%. It closed at Rs11.14 on 25 February 2010 and was at Rs19.51on 5 March 2010. With the 2% hike in Central excise duty, steel prices are set to rise further, which will boost the revenues of Ferro Alloys Corp.

Sulzer India was trading at Rs785.50 on the day before the Budget. It rose to Rs1243.65 on 5th March, registering a phenomenal rise of 58% in one week. The manufacturer of mass transfer devices has gained on account of its delisting plans. Its parent company, Sulzer, which currently holds 80% stake in its Indian arm, wants to acquire the remaining 20% at Rs870 per share.

The excise hike has also benefitted Lloyds Steel Industries Ltd and Surana Industries Ltd, which have gained 29% and 24% respectively.

Narmada Gelatines Ltd has witnessed a rise of 40% while ADF Foods has surged 28% over this period.

Software and IT services companies Tricom India Ltd and Zenith Infotech Ltd have witnessed a 27% gain each post-Budget. Shares of Tricom India, a non-voice business outsourcing company, surged on the anticipation of bagging multi-year contracts. Deutsche International Trust Corporation picked up 0.348 million equity shares of the company last week.

Mukand Engineers Ltd and Petron Engineering Construction Ltd have gained 27% and 26% respectively. Amrutanjan Health Care Ltd has jumped 25% from Rs560.35 to Rs699.95.

On the other hand, some stocks have lost out after the Budget announcement. Kernex Microsystems (India) Ltd and Kalindee Rail Nirman (Engineers) Ltd have taken a negative view of the lacklustre Railway Budget. While Kernex Microsystems has lost 17% post-Budget, Kalindee has fallen 10%.

Steel products manufacturer Zenith Birla (India) Ltd and telecom solutions provider ADC India Communications Ltd (formerly KRONE Communications) have slipped 14% and 12% respectively.

Shree Ashtavinayak Cine Vision Ltd and Delton Cables Ltd have fallen 11% each. Amongst the other losers are STI India Ltd (-9%), Gemini Communication Ltd (-9%), Indian Acrylics Ltd (-8%) and AI Champdany Industries Ltd (-8%).

Between 25 February and 5 March 2010, each BSE index (BSE 100, BSE 200, BSE 500 and BSE Sensex) has registered a gain of 5%. The Sensex has risen from 16,254 to 16,994. The average gain in the Moneylife sample of companies is 6%.

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Low MF assets speak volumes on investor apathy

Despite a booming economy and vibrant equity markets, equity assets under management at many mutual fund houses remain abysmally low 

At a time when the Indian economy is being lauded for its relentless growth and Indian companies are in the process of raising thousands of crores in the primary markets, the mutual fund industry is standing out like an eyesore. The sorry state of affairs in the mutual fund industry is evident from the miniscule corpus many of the fund houses are managing.

Here are the unpleasant facts. 18 out of 37 Asset Management Companies (AMCs) have less than Rs1,000 crore as assets under management (AUM) in their equity schemes. From these, 13 funds have less than Rs500 crore of AUMs. On an average, these 18 fund houses have Rs355.99 crore in equity MF schemes. Between them, they are managing a ridiculously low corpus of Rs6,407.80 crore.

Reliance Mutual Fund, the largest fund house, has AUM of Rs35,204 crore. HDFC Mutual Fund manages a corpus of Rs22,657 crore. These amounts might seem princely when compared to the small fund houses, but compared to international fund houses, even these are paltry.

Shinsei Mutual Fund is the smallest among the 18 funds, having a corpus of Rs19.47 crore as on 10 February 2010 while Escorts Mutual Fund and Benchmark Mutual Fund have Rs28.32 crore and Rs48.88 crore respectively in their kitty.

Quantum Mutual Fund and Baroda Pioneer Mutual Fund have AUM of Rs48.96 crore and Rs66.14 crore respectively.

Some of the bigger names in the industry like Bharti AXA Mutual Fund (Rs308.37 crore), AIG Mutual Fund (Rs612 crore) and Axis Mutual Fund (Rs874.11 crore) also appear in the list of funds having less than Rs1,000 crore.

Indian companies are capitalising on the recent bull-run by raising thousands of crores through IPOs and FPOs. In 2010, 17 companies have come out with public offers, (as on 8 March 2010). Despite the rush for raising funds and the flourishing equity markets, the investing public seems disinterested in vying for a share of the pie. The action in the equity markets has failed to catch on to the mutual fund industry.

Indeed, the lull being witnessed by most equity fund houses is a study in contrast to the growth of the economy. Despite equities being touted as the best asset class for the long term, investors continue to shy away from equities. Even the government’s efforts towards encouraging participation in equity mutual funds have failed to do the trick.
 

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COMMENTS

Yogesh P K

7 years ago

I think mutual fund houses are systematically (read legally) killed by government through AMFI to encourage insurance sector from which government earn a lot of revenue. Many mutual agents have stopped selling mutual fund product as now they earn no commission unless given by customers. Lack of incentive to agents is one of the biggest reason for this situation. Many mutual fund advisors have now started selling ULIP plans where they earn high commission.

mahesh

7 years ago

So we are trying to say that the MF industry is motivated when fat commisions are paid to distributors...What an irony Mf are meant to be an investment engine and not a commision making one ... I agree that banning the entry loads has contributed to demotivation of the distributors ...however it does highlight the fact how gullible an an indian investor is ....just because a distributors wants to make a good commision he will push an X mF to an investors who unfortunately is the one loosing money .....I believe this is the best opportunity for an investor to get himself educated about the tactics that were previously employed by commision hungry distributors to drive sales of an X MF. i believe that reality doesnt hide itself for long...... looking at the sats that are very well highlighted by moneylife we should learn our lessons.....

K B Patil

7 years ago

Investing in mutual funds is not an easy process. Brokers and distributors show interest in purchases only. For redemptions, you have to send requests to the MFs branch and they are mostly situated in urban areas.
Then finally, KYC norms may turn out to be the last nail in the coffin. You can buy shares worth lakhs online. But, now KYC norms are again being tinkered with. Then, MF houses are coming with new funds which are nothing but old wine in new bottle. MFs never wanted to dirty their hands and sweat it out to educate investors in semi urban areas. Now, they are reaping the fruits of their laziness.

Nagesh K

7 years ago

This is because of ban on entry loads. SEBI took a one sided view of the issue. Ample options were available for corrective action on erring distributors which were not utilised, instead it went on banning entry loads. Now other products will be sold by distributors.

Anil

7 years ago

You can not apply online for mutual fund.
If you want to apply for some fund which is not sold by your distributor then you can not buy. I tried to open online transaction account but hardly any possitive responce from banks. Most want to push ULIPs as they offer hefty commision to agents. Idea of ATMF(any time mutual fund) was floated long back but no progress so far. Also if a fund is not serviced by CAMS or Karvy, there are few takers.

Anil

Michael

7 years ago

This is a wake up call to the regulators who took a hasty decision of banning entry loads and thereby advisors commissions. All of us advisors are not the villians in this story please! This is also for the media who also paint us black in print, and the Fund house bosses who silently followed AMFI and SEBI not forgetting our contribution to the industry. These decisions made in air conditioned cabins and board rooms should have taken the pulse of the situation on the ground.

Pradip Kumar Daftari

7 years ago

Mutual Funds industry in India is still in the nascent stage. Rural and Semi Urban people needs to be educated and brought to its fold. Abolision of entry load and Distributor commission is the sole reason for the degrowth. In fact, marketing people needed more incentives to spread the awareness.

MK

7 years ago

I agree with Manoj & VSM, mutual funds are not bought but sold in India. Another typical example is government sponsored NPS, which is yet to take off basically because there is no incentive to those who would like to recommend it to their clients. Direct marketing in India will take ages before it takes off.

VSM

7 years ago

Every products needs marketing. The marketing people will be compensated adequatly. Without remuneration who will work for it. The SEBI and the AMC'S think about it.

Manoj Chaturvedi

7 years ago

Lull in MF industry is not because of investors disintrest rather it is because of abolition of entry load on MF investments by SEBI from 1.8.09 & negligible payouts by AMC to the Distributors.Fact that since August 09, MF Industries AUM in Equity has been constantly faling. MF industry in India has always been compared to MF Industry in the west by SEBI where more than 90% of Investors invest in equity markets as compare to India where less than 10% of Investors invest. Fact is MF Industry in India is in its nacent stage.

Mayuresh Risbud

7 years ago

though the sebi has cut the brokerage the setback has to face to the amc's

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