The 38 fund houses added just 21,350 investor accounts last month
Even as the stock market is reaching 30-month highs, the mutual fund industry is in the doldrums. Mutual funds suffered a decline of Rs1.27 lakh crore in assets under management (AUM) in June and Rs1,446 crore outflow from their equity schemes. Equity mutual fund folios or investor accounts have dropped by 1,47,745 in June 2010.
Folios are numbers designated to investor accounts. Each investor can have multiple folios.
According to data available with the Association of Mutual Funds in India (AMFI), the 38 fund houses have added just 21,350 investor accounts across all schemes in June 2010. Between November 2009 and May 2010, equity funds have lost 2.87 lakh investor accounts.
Among the heavyweights of the industry, UTI Mutual Fund suffered a decline of 34,351 folios, Tata Mutual Fund saw a drop of 25,195 and SBI Mutual Fund lost 50,268 folios in their respective equity schemes in June 2010 compared to last month. DSP BlackRock Mutual Fund has added the largest number of folios (44,821) from all categories of schemes. Similarly, HDFC Mutual Fund has added 39,151 folios in June.
“The decline in folios is because of profit booking as markets were trading at all-time highs,” said Nikhil Kothari, research analyst, iFAST Financial India Pvt Ltd. However, profit booking may lead to investors withdrawing from the market but not necessarily lead to elimination of folios. There are crores of accounts with zero balances.
The 16% drop in AUM in June was primarily due to liquid funds being liquidated as corporates withdrew money for payment of 3G fees, advance tax payments and an overall liquidity crunch.
The 37 fund houses saw Rs1.19 lakh crore redemption in June while equity schemes witnessed Rs1,446 crore of net redemptions, despite the launch of six new fund offers (NFOs).
In June, six equity schemes were launched — Baroda Pioneer Infrastructure Fund, Birla Sun Life India Reforms Fund, DSP BlackRock Focus 25 Fund, ICICI Prudential Nifty Junior Index Fund, IDBI Nifty Index Fund and Taurus Nifty Index Fund — which together mopped up Rs1,068 crore.
The Sensex is headed for 18,300
The domestic market, which traded for a major part of the session following the lower-than-expected first quarter (Q1) numbers by IT bellwether Infosys Technologies, recovered in afternoon trading to end positive. The Sensex ended at 17,985, up 48 points (0.27%) and the Nifty was at 5,400, up 17 points (0.3%). The indices started the day on a subdued note as the sentiment was weighed down by the lower-than-expected Infosys results. The decline was aggravated by the poor performance of other IT stocks. However, the market recovered in the afternoon, supported by a strong opening by influential European indices.
Asian markets pared early gains to close the session on a mixed note on Tuesday on US aluminium maker Alcoa's muted earnings. Key benchmark indices in Indonesia, Japan, Hong Kong and Taiwan were down by 0.1% to 0.5%. The gauges in Singapore and South Korea rose by 0.06% to 0.16%. China's Shanghai Composite fell 1.62% after the Chinese government quashed speculation that it will abandon real-estate curbs that drove property prices to snap 15 months of gains.
The US market edged higher as investors reserved their bets ahead of the onset of the earnings season. The Dow was up 18.2 points (0.18%) to end at 10,216. The S&P 500 edged up 0.07% to 1,078. The Nasdaq gained 1.9 points (0.09%) to close at 2,198.
Back home, the advancement of the monsoon has increased the sown area of major kharif crops including paddy and coarse cereals. As per official data, paddy sowing picked up in the past one week with acreage going up to 72.3 lakh hectares till 9th July, which is 3.6 lakh hectares more than the same period last year. Acreage of coarse cereals increased to 58.2 lakh hectares, 5 lakh hectares more than the year-ago period.
The government today set up a committee headed by Reserve Bank of India (RBI) deputy governor Shyamala Gopinath to review the structure of the National Small Savings Fund (NSSF). The panel will review the existing terms of loans extended from the NSSF to the Centre and States and recommend the changes required in the arrangement of lending to the net collection of small savings to the Centre and States.
Foreign institutional investors were net buyers of Rs1,001 crore in the equities segment. Domestic buyers were sellers of stocks worth Rs293 crore on the same day.
Infosys Technologies (down 3.4%) posted a growth of 13% and 5% in sales and operating profit, respectively.
Subex (up 4%) has received an order from a leading European communications service provider (CSP) to implement its ROC Platform for Interconnect Billing and Fraud Management through managed services. This is the sixth ROC contract that Subex has won over the past six months.
The board of KPIT Cummins Infosystems (up 0.7%) has approved the acquisition of a Germany-based automotive product company for up to €3 million to be paid over a period of three years.
IL&FS Transportation Networks Ltd's (up 1%) subsidiary in Spain, Elsamex SA and its wholly-owned subsidiary in Portugal, Intevial Gestao Integral Rodovlaria SA, in consortium with local firms in Portugal had participated in the bid tendered by the Road Administration Authority, government of Portugal, for maintenance of roads. The consortium has emerged as the preferred bidder in six contracts for maintenance of roads of around 10,000 lane kilometres across various States in Portugal for a period of three years. The estimated total contract value is €57.63 million (about Rs3,388.49 million) which includes share of Elsamex and Intevial Portugal of €44.10 million (around Rs2,593.16 million).
Gokul Group arm Gujarat Gokul Power Ltd is planning an 80-MW lignite-based thermal power station near Tadkeshwar, Surat. Gokul Refoils & Solvent (up 5.2%) is the equity partner for 74% stake and Gujarat Mineral Development Corporation (GMDC) has 26% stake in the proposed power project.
Over the past two months, the BDI has fallen by around 55%, touching a new low of 1,840 points on Monday
The Baltic Dry Index (BDI) continues its downward trend, with the shipping index falling below the 2,000 mark in the past couple of days. On 12 July 2010, the index closed at 1,840 points, the lowest in the past one year.
Last month, the index had fallen from 4,074 points in the beginning of June 2010 to 2,482 points on 28 June 2010. It has further crashed to Monday's 1,840-point level, taking the percentage fall to around 55% in the past two months. Around a year back, in July 2009, the BDI stood at 3,407 points.
The BDI is calculated based on the rates quoted for the three main types of vessels - Capesize, Panamax and Supramax. As on 8 July 2010, the Capesize index was at 18,185, with a negative change of 1,467 points. Similarly, the Baltic Panamax Index (BPI) stood at 1,985 points, with a negative change of 96 points. The Baltic Supramax Index (BSI) was down by 27 points at 1,843.
As the BDI is dominated by Capesize shipping rates, the huge downfall in the Capesize index has triggered the BDI's fall to the below-2,000 mark. As on 8 July 2010, the BDI was at 1,940 points - falling below the 2,000 mark - 78 points down from 7 July 2010. The rates for Capesize vessels are dominated by dry bulk movement. Capesize rates have been severely affected by the slowdown in China's steel-producing activities.
According to a news report by 247wallstreet, another factor contributing to the falling BDI is the number of ships being built in China. As of March 2010, the Chinese had 3,783 ships on builders' order books, more than double the next leading shipbuilding country, South Korea. China, apparently, plans to ship its cargoes on its own vessels. As those vessels hit the high seas, demand from other shippers is very likely to fall and the BDI is likely to fall with it.
The BDI is not likely to be predicting a double-dip recession. It is far more likely to be predicting some tough times ahead for dry bulk carriers, though, as all those Chinese vessels set sail.
Freight rates are expected to remain low in the third quarter, "as steel mills shut for maintenance, grain shipping ends and concerns over China's falling import demand looms," said JP Morgan shipping analyst Corrine Png in a research report this week. "However, we do not expect freight rates to collapse to distress levels (seen) in late 2008, which was exacerbated by trade-finance issues," she said.
"The container shipping experience in the past 1.5 years has taught us that pricing at marginal cost is unsustainable, as vessels start getting laid up before long." As the industry continues to take delivery of new vessels, "this will lend support to longer-term freight rates," she said.
"We expect stable tanker rates, despite the fall in the BDI. Going forward, I expect the BDI to be volatile, depending on Chinese steel production," S Hajara, chairman and managing director, Shipping Corporation of India, had told Moneylife last month.
However, stock prices of Indian shipping companies have not been impacted by this downfall in the BDI.