Mutual Funds
Equity mutual funds report a net inflow of Rs427 crore in January

Equity mutual funds register another month of positive inflows on the back of improved sales, new fund offers and lower redemptions

Equity mutual funds have registered net inflows for three consecutive months, totalling Rs1,983 crore. This has been the highest inflows in three consecutive months since October 2011, when equity funds reported a total inflow of Rs3,636 crore. In January last year, equity mutual funds registered a net outflow of Rs2,690 crore. At Rs4,558 crore, sales of equity schemes in January 2014 was higher than nine of the past 12 months. Sales of equity linked savings schemes (ELSSs), which usually picks up towards the end of the financial year, increased by nearly 50% to Rs307 crore in January from Rs207 crore reported in the month of December 2013. As many as four close-ended funds were launched, bringing in a total of Rs472 core in January. Redemptions in January, which amounted to Rs4,131 crore, was the lowest in the past five months.
 

Over the past three months as many as 12 new fund offers (NFOs) have been launched bringing in a total of Rs2,192 crore. The four NFOs that were launched in January were all close ended equity funds. These NFOs included IDFC Equity Opportunity Series 2, Reliance Closed Ended Equity Fund - Series B, Sundaram Select Micro Cap Series I and Series II. It seems fund houses are still cashing in on the uptrend in the market. In an earlier article we mentioned how investors and mutual fund houses rush in when the market is rising. (Read: Equity mutual funds register highest sales in November as market hovers near all-time high)
 

While equity mutual funds reported net inflows, the total number of equity folios declined marginally to 29.67 million folios in January 2014 from 29.89 million folios in December 2013. Over the year, the total number of equity folios has declined by 3.96 million or nearly 12%, from 33.63 million in January 2013.
 

Over the one year period while the Sensex has moved up by 3.11% to 20,513 as on 31 January 2014 from 19,894, the total equity assets under management has declined by as much as 7% to Rs1.75 lakh crore in January 2014 from Rs1.90 lakh crore in January 2013. This is due to the fact of heavy outflows over the year which amounted to a total of Rs7,310 crore.

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2G spectrum auction: Bids cross Rs52,700 crore on 5th day

During the 33rd round, the bids for 2G spectrum in the 1800 MHz and 900 MHz band crossed Rs52,700 crore

The ongoing 2G spectrum auction has entered its 33rd round of bidding after starting off from the Rs52,689 crore mark on Friday morning.

 

According to an official statement, the auction of spectrum in the 1800 MHz and 900 MHz band that began on 3rd February completed 32 rounds, as per the latest information available on the fifth day and bidding was ongoing.

 

The government had received Rs30,754 crore of bids for the 1800 MHz band and bids totalling Rs21,935 crore for the 900 MHz band at the end of the fourth day.

 

There is no time limit for the sale of spectrum and the duration of the auction will depend on the appetite of the eight companies in the fray - Bharti Airtel, Vodafone, Idea Cellular, Reliance Jio Infocomm, Aircel, Tata Teleservices, Telewings (Uninor) and Reliance Communications.

 

Winners of spectrum in auctions are allowed to borrow as much as $750 million, or about Rs4,671 crore, from overseas in every financial year to pay for the airwaves, the government had said in Parliament.

 

At the end of each bidding round, the price of airwaves is increased in the range of 1% to 10%, depending on the number of spectrum blocks in demand.

 

The price of the 900 MHz band in Delhi shot up by about 78% to Rs639.24 crore per MHz, compared with the base price of Rs360 crore fixed by the government. In the 1800 MHz band, the reserve price rose by 5% to Rs230 crore a MHz.

 

The auction for the fourth day ended with no excess demand for the first time for the 900 MHz in any of the three metros - Delhi, Mumbai and Kolkata.

 

In Mumbai, the price of the 900 MHz band increased 72% to Rs563.09 crore per MHz and in Kolkata it rose 54% to Rs 192.71 crore.

 

The government is offering about 385 MHz of spectrum in the 1800 MHz band, which started on 3rd February, following a February 2013 Supreme Court order.

 

Also on offer are airwaves in the 900 MHz band in Delhi, Mumbai and Kolkata, which are held by Vodafone, Airtel and Loop Mobile, whose licences expire in November.

 

The 3G auction in 2010 took place over 34 days, while the auction in November 2012 lasted for two days and the March auction last year was a one-day affair.

 

In November 2012, bids worth Rs9,407 crore were received for spectrum worth Rs28,000 on offer.

 

In March 2013, no GSM operators participated in the auction and only CDMA operator Sistema Shyam bought spectrum of about Rs 3,600 crore in eight of the 21 service areas

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RBI is warding of the contagion in the financial market with its rate hikes, says SBI Research

With the Fed going for another round of taper at $10 billion, it is now evident that emerging economies (including India) are in close sync to ward off any destabilising impact on their domestic currencies, says SBI Research in its research note

The RBI (Reserve Bank of India) hiked the repo rate by 25 basis points on 28 January 2014 and the rate hike was ostensibly done with the purpose of reigning in inflation, but SBI Research believes it also served another purpose, warding of the contagion in the financial market. This is its opening remark in its research note of January 2014.

 

According to SBI Research, with the Fed going for another round of taper at $10 billion, it is now evident that emerging economies (including India) are in close sync to ward off any destabilising impact on their domestic currencies.

 

The year 2014 has already marked the start of the withdrawal of quantitative easing (QE) in the United States and a range of asymmetric policy responses across developed economies. SBI Research points out that the most desired and likely scenario is for the taper to follow a relatively orderly trajectory and for global interest rates to rise only slowly – reaching 3.6% only by mid-2016. Under this scenario capital flows to developing countries is projected to ease from about 4.6% of developing country GDP in 2013 to 4.1% in 2016, as investors take advantage of higher yields in high-income countries.

 

According to SBI Research, for emerging market economies, growth in 2013 was relatively weak, at an estimated 4.8%. It has been firming in recent months – partly reflecting strengthening growth in high-income countries, but also a recovery from earlier weakness in large middle-income countries, such as India and China. Overall, growth in developing countries is projected to come to about 5.3% this year and 5.5% and 5.7% in 2015 and 2016 respectively. India will not be an exception in this context.

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