Foreign investors could invest up to $10 billion in MFs: Finance ministry

A new class of investors called Qualified Foreign Investors, but not FIIs, can invest money into domestic mutual funds through Unit Confirmation Receipts or Depository Participant route, joint secretary (capital markets) in the finance ministry, Thomas Mathew informed the media

New Delhi: The government today said that foreign investors, other than foreign institutional investors (FIIs), would be allowed to invest up to $10 billion in domestic mutual funds (MFs),  a move that will help in moderating volatility in the capital market, reports PTI.

This class of investors called Qualified Foreign Investors (QFIs), but not FIIs, can invest money into domestic mutual funds through Unit Confirmation Receipts (DPs) or Depository Participant route, joint secretary (capital markets) in the finance ministry, Thomas Mathew, said.

QFIs could be individuals and bodies, including pension funds, and cumulatively they can invest up to $10 billion (about Rs45,000 crore).

At present, only FIIs, sub-accounts registered with the market regulator Securities and Exchange Board of India (SEBI) and non-resident Indians (NRIs) are allowed to invest in mutual fund schemes in the country.

To begin with, $10 billion is the total ceiling on QFI investment in India but it is subject to review depending on response, he said.

“SEBI will be the regulator for all investments for both routes,” he said, adding the SEBI will issue necessary notification and framework by 1st August.

Only KYC (know-your-customer) compliant retail foreign investors would be allowed to invest and the DPs will ensure proper KYC of QFIs as per the norms prescribed by SEBI, he said.

Besides, mutual funds would also undertake KYC of QFIs, he added.

He further said that one QFI can open one account in one of the qualified DPs and only QFIs from jurisdictions which are FATF (Financial Action Task Force) compliant would be eligible to invest in the MFs under the scheme.

The move follows the announcement of finance minister Pranab Mukherjee on the issue in the last Budget.

“Currently, only FIIs and the sub-account registered with the SEBI and NRIs are allowed to invest in the mutual fund schemes. To liberalise the portfolio investment route it has been decided to permit SEBI registered mutual funds to accept subscriptions from foreign investors who meet the KYC requirements for equity schemes,” Mr Mukherjee had said in the Budget speech.

“This would enable Indian mutual funds to have direct access to foreign investors and widen the class of foreign investors in India equity market,” the finance minister had said.

The average assets managed by the MF industry, consisting of 40 players, stood at Rs7,00,538 crore as of 31 March 2011.

Since it is going to be retail investment, it would be more stable than the FII money, Mr Mathew said.


General insurance industry premium income up 27% in May

The total gross premium of 23 players in the non-life insurance market rose by 27%, from Rs3,151.41 crore in May 2010, according to IRDA data

New Delhi: The premium income of general insurance industry, comprising four public sector entities, grew by 27% in May to Rs4,004 crore, reports PTI.

The total gross premium of 23 players in the non-life insurance market rose by 27%, from Rs3,151.41 crore in May 2010, according to data available with the Insurance Regulatory and Development Authority (IRDA).

The four PSU entities—National Insurance, New India Assurance, Oriental Insurance and United India Insurance—saw their gross premium collection rise by 23% year-on-year to Rs2,358.60 crore in May. At the end of May, the four entities accounted for about 59% of the total general insurance industry.

Amongst the private sector players, ICICI Lombard saw its premium income rise by 37% to Rs329.26 crore. The premium income of HDFC Ergo grew by 50% to Rs113.31 crore and that of Reliance General Insurance by 13.33% to Rs156.59 crore in April.

Amongst the life insurance companies, Life Insurance Corporation of India’s (LIC) premium income fell by 8.03% to Rs9,273.08 crore during the first two months of the current fiscal (April-May) compared to Rs10,082.85 crore in April-May 2010.

Also, the 22 private life insurance companies saw their premium income decline by 23.26% to Rs2,980.36 crore. These firms had an income of Rs3,883.76 crore in April-May 2010.


Garlic prices double in two months despite bumper crop

Farmers, traders said to be holding stocks with the hope of getting higher prices. Experts believe fresh crop will eventually reach market and this should pull down prices

The retail price of garlic has doubled in the past two months, this despite a bumper harvest this season. Experts suggest that this has happened most likely due to farmers delaying sending the garlic crop to the market and traders hoarding stocks, in the hope of getting better prices.

But they also believe that going forward traders would not benefit much as the bumper crop will eventually find its way to the market.

The price of garlic in the retail market is in the range of Rs90-Rs140 a kilogramme (kg). In the wholesale market, the current price is in the range of Rs50-Rs60 a kg. In March, retail prices were about Rs50-Rs65 a kg.

Dr RP Gupta, director, National Horticultural Research and Development Foundation (NHRDF), told Moneylife, "This year there was a bumper crop and the prices had fallen steeply. Farmers and traders are now storing the crop and supplying less quantity in anticipation of a price rise. This won't happen as the price will remain stable due to expected bumper crop for the coming season."

According to NHRDF, in 2010-11 the garlic production was at 11.31 lakh metric tonne (mt), an increase of about 2 lakh mt from the previous year.

The price of garlic reached its peak in December 2010, when it was sold at Rs200/kg, on account of a shortage. The prices stabilised as fresh produce flooded the market.

Some traders say that the prices have gone up because benchmark quality garlic, for which there is high demand, has been in short supply.

S Altamash of Gemini Trading, which is based in Panvel, said, "There is a lot of demand for the 5.5cm garlic (benchmark quality), but there is a supply crunch and prices have increased. The small variety of garlic is available in plenty. There has been talk about some traders and farmers releasing less produce. Even I had to cancel my export order, as insufficient produce was available despite a bumper harvest. But with the arrival of the expected bumper crop season, the prices will decline."

Mr Altamash believes that "the current prices of garlic are hiked on speculation. This was also the case with onions a few months ago when there was hoarding of the produce in anticipation of a price rise. But this won't work for garlic due to the expected bumper crop."

Some industry experts also attribute the rising costs to a seasonal change in prices. Ashok Walunj, director, APMC Mumbai, said, "Input costs such as transport, labour charges are increasing and hence the price rise."

Asked if traders were hoarding garlic stocks, Mr Walunj said, "There is no storing by anyone. Prices are normal in the wholesale market and it will soon come down in the retail market as well."


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