Mutual Funds
Equity mutual funds witness net outflow for the fifth consecutive month

The net outflows from equity mutual fund schemes at Rs1,984 crore, which peaked to their highest in two years in September 2012, continued for the fifth straight month

The mutual fund reforms that came into force from 1st October didn’t seem to have a positive impact yet on the industry. The new regulations triggered a flurry of activity among both, fund houses and investors. Fund houses were busy implementing the single plan structure wherein the regulator has mandated the fund houses to have a single plan under all their schemes. This has led to the withdrawal of systematic investments and dividend reinvestments under plans of existing schemes that have been discontinued. Along with this, the increase in expense ratio allowed to be charged has had no effect. New inflows into equity schemes declined even further. The new inflows could not match with the redemptions, leading to a net outflow of Rs1,984 crore, according to monthly data from The  Association  of  Mutual  Funds  in  India (AMFI).

Also Read: Best Equity Mutual Funds for Any Season

Moneylife has written in the past how the Securities and Exchange Board of India’s (SEBI) regulations seem geared to benefit asset management companies (AMCs) rather than investors.(Read: SEBI’s mutual fund rules changes are patently anti-investor) Considering this has been just the first month since the implementation it would be interesting to see if SEBI’s  new reforms would be able to “re-energise the mutual fund industry” in the coming months.

Sales, which had touched Rs3,385 crore in August 2012—the highest in seven months, has been on a decline ever since. Sales for the month of October reached just Rs3,072 crore. The additional incentive, in the form of higher expense ratio, has yet to create an impact on sales. Redemptions, though 25% lower than the previous month, were still higher the average redemptions seen April 2012 to July 2012.

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Equity assets under management (AUM) fell by 2% over the month from Rs1.87 lakh crore to Rs1.83 lakh crore while the Sensex declined by 1.37% over the same period. Equity AUM has declined by nearly 5% from May 2011 where the equity AUM stood at Rs1.92 lakh crore when the Sensex was at the same level compared to last month. Over the last few years equity mutual fund sales have struggled and redemptions continued. For CY 2012, equity mutual fund schemes have seen a total outflow of Rs12,377 crore. The highest such redemptions were seen in 2010.


Who were the winners and losers of the recently ended quarter? Here is an analysis




5 years ago

Mutual funds are investment vehicles for savings .
In a high inflationary scenario it is difficult to have savings .
INFACT to maintain the lifestyle we have to dip into our savings .
i have closed two of my accounts and if inflation does not fall i will have to redeem the balance also as the company has said no increments or bonus infact they may reduce workforce


5 years ago

There seems to be a popular perception in the ‘Ivory tower’ circles that mutual funds inflows would increase with rising equity markets. These pundits have been proven to be wrong so far as the equity markets have gone up by 20% approx. and with the rising markets more mutual fund investors have chosen to redeem than invest.

About 50% registered MF agents / distributors have gone out of business, now who is going to sell and bridge the widening gap & how?

It may already be too late now to realize that instead of stopping mis-selling, we may have succeeded in stopping sales in a very very big way – while doing nothing to penalize those who have indulged in client abuse by churning/mis-selling in the past.

Although investing in mutual funds is simple, past mobilization data would reveal not many like to invest directly on their own, but prefer going through an agent. Even the direct route offering 0.5% - 0.7% savings per annum may not be a game changer as envisaged. Though we can wait and the results will be there for all to see

A deeper look may actually reveal that while most people seek the services of an agent while investing, they may prefer redeeming mutual fund units by themselves, on their own depending mostly on their individual situation (need for funds). The number of folios has come down by about 2 million . . . who will win them back and how?

We will soon realize, that though the agents / distributors are the weakest link in the Mutual Funds ecosystem, they are also the most critical, as they are the ones who mobilize assets for the MF industry. If there are not enough assets what will the AMCs manage?

The ground realities shall finally prevail over the bird’s eye view. . .

BSE Sensex, Nifty still in a downtrend: Monday Closing Report

Nifty has to stay above 5,645 for the bulls to be hopeful

The market ended the last day of the Hindu calendar on a flat note weighed down by the decline in industrial production numbers for September and weak global cues. Today the Nifty hit a lower high and a lower low ended marginally in the negative. On Friday we had mentioned that the index may see further downward momentum if it closes below 5,645. We continue to maintain the stance. The National Stock Exchange (NSE) saw a volume of 64.22 crore shares and an advance decline ratio of 793:921.
The Indian market will hold a special ‘Muhurat’ trading session on Tuesday to welcome the Hindu New Year—Samvat 2069—and will remain closed on Wednesday. regular trading will resume on Thursday.
The Indian market opened with small gains ahead of the release of the industrial output data for September later in the day and weakness in the Asian markets which were mostly lower in morning trade on reports of a fall in Japan’s gross domestic product (GDP) to 0.9% in the September quarter and concerns about the US economy.
The Nifty opened two points up at 5,688 and the Sensex started off the day at 18,691, a gain of seven points over its previous close. Select buying in initial trade led the indices to their highs in the first half hour wherein the Nifty rose to 5,719 and the Sensex went up to 18,751.
However, the gains were short-lived as the benchmarks began paring early gains and edged lower. The disappointing Index of Industrial Production (IIP) data for September coming in at negative 0.4% compared to 2.3% in the previous month pushed the market into the red.
This apart, higher food prices pushed up retail inflation to 9.75% in October compared to 9.73% in the previous month. 
The market remained sideways in noon trade as benchmarks hovered on both sides of their previous closing levels. The lower opening of the key European markets kept the local indices in the red. The losses pushed the market to the day’s low. At that point, the Nifty fell to 5,666 and the Sensex went back to 18,608.
The market settled almost unchanged on a decline in IIP numbers for September and a weak trend across Asia. The Nifty shed three points to finish the session at 5,684 and the Sensex fell 13 points to 18,670.
While the Sensex settled with a negative bias, the broader markets were in the green. The BSE Mid-cap index gained 0.32% and the BSE Small-cap index rose 0.20%.
The main sectoral gainers were BSE Consumer Durables (up 1.13%); BSE Bankex (up 0.94%); BSE Realty (up 0.87%); BSE TECk (up 0.57%) and BSE IT (up 0.54%). The key losers were BSE Metal (down 0.70%); BSE Capital Goods (down 0.67%); BSE Oil & Gas (down 0.36%); BSE Auto (down 0.34%) and BSE Power (down 0.23%).
Eleven of the 30 stocks on the Sensex closed in the positive. The top gainers were HDFC Bank (up 1.85%); Bharti Airtel (up 1.63%); State Bank of India (up 1.59%); TCS (up 0.66%) and Infosys (up 0.48%). The major losers were Tata Steel (down 1.72%); Hero MotoCorp (down 1.67%); ITC (down 1.56%); Tata Power (down 1.43%) and Jindal Steel (down 0.95%).
The top two A Group gainers on the BSE were—United Spirits (up 34.93%) and L&T Finance Holdings (up 11.37%).
The top two A Group losers on the BSE were—United Breweries (down 4.48%) and Indian Hotels Company (down 3.77%).
The top two B Group gainers on the BSE were—BLS Infotech (up 20%) and Kamdhenu Ispat (up 20%).
The top two B Group losers on the BSE were—Raj Television (down 20%) and Somi Conveyor Beltings (down 19.75%).
Out of the 50 stocks listed on the Nifty, 24stocks settled in the positive. The chief gainers were IDFC (up 3.31%); HDFC Bank (up 2.15%); Jaiprakash Associates (down 2.03%); Bharti Airtel (up 1.69%) and SBI (up 1.57%). DLF (down 2.68%); Ranbaxy Laboratories (down 2.16%); Hero MotoCorp (down 2.03%); BPCL (down 2.01%) and Siemens (down 1.85%) settled at the bottom of the index.
Markets across Asia closed mostly in the red on the decline in Japanese GDP and economic concerns in the US. ON the other hand, the Chinese market received a boost from a higher trade surplus in October, which was the biggest in the past 45 months.
The Jakarta Composite declined 0.37%; the KLSE Composite fell 0.21%; the Nikkei 225 dropped 0.93%; the Straits Times shed 0.07%; the Seoul Composite lost 0.19% and the Taiwan Weighted settled 0.35% down. Among the gainers, the Shanghai Composite climbed 0.49% and the Hang Seng rose 0.21%.
At the time of writing, the European indices that opened in the red were mixed while the US stock futures were in the positive.
Back home, institutional investors—both foreign and domestic—were net sellers of stocks on Friday. Foreign institutional investors withdrew funds totalling Rs204.25 crore and domestic institutional investors pulled out Rs154.01 crore.
Mumbai-based DCB Bank today said its board has approved a preferential allotment Rs93 lakh shares to two overseas VC funds in order to partially meet the regulatory requirement of bringing down the promoters stake to 10%. Accordingly, the bank will issue around 56 lakh shares to WCP Holdings III and around 37 lakh shares to Tano Mauritius India FVCI II at premium of Rs33.68 per share, which has a face value of Rs10, the small-sized bank said in a statement. The stock gained 1.01% to settle at Rs44.80 on the NSE.
Natco Pharma has announced that it acquired 51% of the paid-up equity capital of Natco Organics, a joint venture between Natco Pharma and TIDCO. Natco Pharma jumped 2.935 to settle at Rs404 on the NSE.
India Infoline today said it has received approval from market regulator SEBI for launching its Alternative Investment Funds—IIFL Venture Fund, IIFL Private Equity Fund and IIFL Opportunities Fund. As part of the various asset management bouquets of products offered by the IIFL Group, India Infoline now will be additionally offering alternate asset investment products by launching various schemes, in due course, a company statement said here. The stock climbed 1.56% to settle at Rs68.20 on the NSE.


Diwali dampener: IIP, exports shrink, inflation rises

Diwali celebrations are going on, however on the economic front nothing seems working for the Indian government, as industrial production and exports are down while inflation is nearing double digit. Even the much talked about 2G spectrum auctions has received a lukewarm response

New Delhi: Hopes of early economic revival were belied with key data released on the eve of Diwali showing contraction in industrial production, continued decline in exports and rise in retail inflation, reports PTI.
Besides, the much-talked spectrum auction received a lukewarm response from telecom operators, casting doubts whether the government will be able to realise Rs40,000 crore as targeted from sale of radio waves.
After raising hopes of revival in August, the industrial production contracted again, shrinking by 0.4% in September due to dismal show by the manufacturing sector.
The factory output, as measured by Index of Industrial Production (IIP), declined by 0.4% as against an uptick of 2.3% in August.
Exports remained in the negative territory, declining by 1.63% in October pushing the monthly trade deficit to all time high $21 billion.
On the price front, there was no respite to the common man from rising inflation that is driven by high cost of food items such as sugar, pulses, vegetables as well as clothings.
The retail inflation moved closer to the double digit mark at 9.75% in October, even as India Inc pressed for interest rate cut to revive growth.
The economic growth rate slipped to nine-year low of 6.5% in 2011-12. It was 5.5% in the first quarter of the current fiscal prompting the Reserve Bank of India (RBI) to lower the growth projection for 2012-13 to 5.8%.
Terming the decline in industrial output in September as "very disappointing", Planning Commission Deputy Chairman Montek Singh Ahluwalia said the impact of recent reforms initiatives will manifest in the data for the second half of the fiscal.


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