This is the second time in the calendar year that equity schemes have suffered a net outflow of more than Rs2,000 crore
August was a terrible month for the mutual fund industry. Equity funds suffered massive redemptions amounting to Rs5,671 crore and with sales of just Rs3,385 crore, the net outflow of as high as Rs2,286 crore. This has been the highest outflow since February 2012 which saw an exodus of Rs2,809 crore.
In August the Nifty rallied by 3% from 5,241 to 5,421 before finally closing marginally higher at 5,259 while equity assets under management fell by 1.19% during this period. There were no new equity schemes launched during the period. However, an overseas scheme, DSP BlackRock US Flexible Equity Fund, raked in Rs26 crore. The net sales of equity schemes were marginally higher compared with the previous month, but it was still 42% lower than the total sales for the same month the previous year.
The total redemptions from equity schemes have been slowly increasing over the last four months and with no growth in sales we have seen a net outflow in the last three months. For the first eight months of 2012 we have seen a total net outflow of as much as Rs6,834 crore. In the first eight months of the 2011 we saw a total net inflow of Rs5,591 crore.
Net outflows will not reverse easily, especially now that the Securities and Exchange Board of India (SEBI) has announced a new set of norms which created a lot of flutter among both distributors and investors. As we have reported in various articles in the past month, in the proposed changes the investor is sidelined whereas the fund houses would benefit from the new cost structure and independent financial advisors were totally left out.
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MCX-SX, which received permission from the regulator to launch its equity trading platform after waiting for over two years, has launched its benchmark index ‘SX-40’ that would compete with incumbent Sensex of the BSE and Nifty of the NSE
Financial Technologies-promoted MCX Stock Exchange (MCX-SX) has launched its benchmark index ‘SX-40’. The index would be based on the free-float formula, which is also the formula used by BSE and NSE for its indices. Interestingly, while BSE’s Sensex has 30 stocks and NSE’s Nifty has 50 stocks, MCX-SX has chosen to be in the middle of two, with 40 stocks.
‘SX-40’ would be a free float based index of large market cap and liquid stocks representing most important sectors, the exchange said in a release. MCX-SX said it would collaborate with Indian Statistical Institute (ISI)—India’s premier research institute, FTSE of London and FTKMC in creating various domestic and global indices.
However, there is nothing middle-of-the-road about MCX-SX’s transaction charges. A few days ago, the exchange announced drastically lower transaction charges (50% of that charged by rivals) for its equity exchange platform slated to start around Diwali (Price war among stock exchanges to break out soon?). Justifying the lower fee structure, Jignesh Shah, chairman and chief executive of Financial Technologies said, “...the optimisation in transaction charges, along with optimal membership structure will lower the entry barriers to capital markets, thereby fostering inclusive growth.”
MCX-SX will charge Rs2 per Rs1 lakh trading in the equity cash segment if the total traded value in a month is under Rs1,000 crore while it will be Rs1.75 per Rs1 lakh if the monthly volume is over Rs1,000 crore and under Rs5,000 crore, Mr Shah said.
If the volume is over Rs5,000 crore, then the transaction fee will be Rs1.50 per Rs1 lakh, he added.
On the equity futures segment, it the total traded value in a month is under Rs2,000 crore, the charge will be Rs1.20 per Rs1 lakh, and if it is over Rs2,000 crore and under Rs10,000 crore, it will be Rs1.10 per Rs1 lakh. But if the volume exceeds Rs10,000 crore a moth, the chargeable fee will be a low Rs1 per Rs1 lakh, the exchange said.
On the equity options front, the fee will be a flat Rs25 per Rs1 lakh of the premium for any the traded volume in a month.
The exchange also introduced a cost optimal membership fee and deposit structure of Rs25 lakh as net outlay valid till 18th October, capping the total outlay for an MCX-SX membership to Rs50 lakh.
The rate of interest has been reduced on housing loan from 11% to 10.50% up to Rs30 lakh, and above Rs30 lakh from 11.25% to 10.75%