Despite a booming economy and vibrant equity markets, equity assets under management at many mutual fund houses remain abysmally low
At a time when the Indian economy is being lauded for its relentless growth and Indian companies are in the process of raising thousands of crores in the primary markets, the mutual fund industry is standing out like an eyesore. The sorry state of affairs in the mutual fund industry is evident from the miniscule corpus many of the fund houses are managing.
Here are the unpleasant facts. 18 out of 37 Asset Management Companies (AMCs) have less than Rs1,000 crore as assets under management (AUM) in their equity schemes. From these, 13 funds have less than Rs500 crore of AUMs. On an average, these 18 fund houses have Rs355.99 crore in equity MF schemes. Between them, they are managing a ridiculously low corpus of Rs6,407.80 crore.
Reliance Mutual Fund, the largest fund house, has AUM of Rs35,204 crore. HDFC Mutual Fund manages a corpus of Rs22,657 crore. These amounts might seem princely when compared to the small fund houses, but compared to international fund houses, even these are paltry.
Shinsei Mutual Fund is the smallest among the 18 funds, having a corpus of Rs19.47 crore as on 10 February 2010 while Escorts Mutual Fund and Benchmark Mutual Fund have Rs28.32 crore and Rs48.88 crore respectively in their kitty.
Quantum Mutual Fund and Baroda Pioneer Mutual Fund have AUM of Rs48.96 crore and Rs66.14 crore respectively.
Some of the bigger names in the industry like Bharti AXA Mutual Fund (Rs308.37 crore), AIG Mutual Fund (Rs612 crore) and Axis Mutual Fund (Rs874.11 crore) also appear in the list of funds having less than Rs1,000 crore.
Indian companies are capitalising on the recent bull-run by raising thousands of crores through IPOs and FPOs. In 2010, 17 companies have come out with public offers, (as on 8 March 2010). Despite the rush for raising funds and the flourishing equity markets, the investing public seems disinterested in vying for a share of the pie. The action in the equity markets has failed to catch on to the mutual fund industry.
Indeed, the lull being witnessed by most equity fund houses is a study in contrast to the growth of the economy. Despite equities being touted as the best asset class for the long term, investors continue to shy away from equities. Even the government’s efforts towards encouraging participation in equity mutual funds have failed to do the trick.
Withdrawal of support to the UPA government by its allies weakened the market rally towards the end of the day
Indian markets gained momentum throughout the day but selling pressure weighed heavily on markets later towards the day after the Samajwadi Party and the Rashtriya Janata Dal decided to withdraw support to the UPA government after earlier disrupting the proceedings in both Houses of Parliament demanding quotas for Dalits, backward classes and Muslims within the Women’s Reservation Bill. Both parties disrupted Question Hour in the Rajya Sabha over the non-implementation of the Ranganath Misra Commission report on minority welfare, leading to adjournment of the House.
During the day, index heavyweight State Bank of India (SBI) helped the bourses gain after the finance minister introduced a Bill in the Lok Sabha to allow the Bank to raise more capital from the market.
We expect the market to stay up tomorrow. However, the index looks tired, so wait for two-three days to buy.
At the end of the day, the Sensex rose 108 points from Friday’s close to 17,103, while the Nifty closed at 5,124, up 35 points.
At the end of the day, SBI rose 1% after a Bill, seeking to reduce the Centre’s shareholding in the Bank from 55% at present to 51% and to allow the Bank to raise more capital from the market through preference shares, was introduced in the Lok Sabha.
HT Media rose 1% after the company said that its unit, Hindustan Media Ventures, has filed draft papers with the market regulator for an initial public offer to raise up to Rs300 crore.
Syncom Healthcare rose 3% after the company signed a pact with Africa’s Advanced Techno Lab for marketing the company's product in Congo.
Man Industries (India) jumped 8% after the company secured an export order worth Rs950 crore from Kuwait for supply of 1.70 lakh tonnes of large diameter pipes.
Nagarjuna Construction Company rose 2% after the company secured new orders worth Rs1,221 crore.
Rama Paper Mills Ltd is setting up a power plant of 50MW in different phases by investing Rs200 crore. The stock was up 14%.
Nicco Corporation has entered into a memorandum of understanding with Hitachi Cables, Japan, to jointly develop and pursue business opportunities in the Indian cable market with focus on the speciality cable segment. The stock was up 5%.
The government will announce the industrial output data for the month of January 2010 on Friday, 12 March 2010. The data is expected to be robust after the infrastructure sector output—which accounts for 26% of industrial output—showed a growth of 9.4% in January 2010 from a year earlier. Industrial output grew 16.8% in December 2009.
Meanwhile, on Saturday, 6 March 2010, the Securities and Exchange Board of India (SEBI) mandated 100% application money for qualified institutional buyers (QIBs) in public issues from 1 May 2010, with a view to bringing about a level playing field for both large and small investors. In a move to bring greater stability and depth to the stock market, SEBI has decided in principle to allow stock exchanges to introduce physical settlement of equity derivatives. SEBI has also allowed, in principle, the introduction of equity derivatives contracts with tenures of up to five years as well as derivative products based on the volatility indices.
Rajan Bharti Mittal, the newly-elected president of industry body FICCI said that there’s no room for hardening of interest rates and the Reserve Bank of India should maintain the status quo on the rates to allow the industry to make fresh investments. He added that fresh investment announcements have begun across sectors and further increase in interest rates will only hamper economic growth.
During the day, Asia’s key benchmark indices in Hong Kong, South Korea, Singapore, Taiwan, Indonesia, China and Japan rose between 1.25%-1.97%.
According to data released by the Japanese finance ministry, Japan's current account surplus totalled 899.80 billion yen in January 2010, a sharp reversal from the 132.70 billion yen deficit a year earlier. The trade and services balance was 37.30 billion yen in the black, compared with 1.05 trillion yen in the red the previous year. The trade portion logged a surplus of 197.20 billion yen, while services posted a deficit of 159.90 billion yen. In the previous year, both categories were in the red, at 844.80 billion yen for trade and 212.40 billion yen for services. The income balance shrank 8.1% to 911 billion yen. Imports were up 7.1% year-on-year to 4.4 trillion yen, while exports surged 40.6% year-on-year to 4.6 trillion yen.
On Friday, 5 March 2010, the Dow Jones Industrial Average was up 122 points while the S&P 500 and the Nasdaq Composite were up 16 points and 34 points respectively.
As per media reports, US employers cut a net total of 36,000 jobs in February 2010, after jobs fell by 26,000 in January 2010. That was short of the expected 68,000 job loss, according to a consensus from economists. The unemployment rate, generated by a separate survey, held steady at 9.7%, versus forecasts for a rise to 9.8%. According to Federal Reserve data, consumer credit rose to $4.96 billion in January 2010, its first increase in a year and the largest for any month since mid-2008.
In premarket trading, the Dow was trading 18 points higher.
While banks have ‘know your customer’ norms, it is also essential for customers to ‘know your bank’, says the former deputy governor of the RBI.
“I wish people became more aware of their rights in relation to banks. If you are not aware, how can you hope to fight against malpractices? You should be vigilant about every matter relating to your bank. While banks have ‘know your customer’ norms, it is also essential for customers to ‘know your bank’. There are so many cases of banks fleecing customers but no one bothers to take the matter to the concerned authorities,” said Kishori J Udeshi, Chairperson of the Banking Codes and Standards Board of India (BCSBI). She was speaking at a special financial literacy workshop organised by Moneylife Foundation on Monday on International Women’s Day.
Ms Udeshi outlined the procedure for taking up issues with banks and the steps available at the disposal of the customer for escalating the matter with higher authorities like the Banking Ombudsman. “At BCSBI, we look after the systemic issues in the banking industry. These issues do take a long time to resolve, but they do get redressed. We ensure that the concerned bank changes its practices.
Several banks have evolved as a result of our efforts in grievance redressal. Each bank has a grievance redressal policy. In case a customer approaches bank authorities with a complaint, the bank is expected to reply within a month. In case you are unsatisfied with their reply, it is required that the banker give you the option of escalating the matter with the Banking Ombudsman,” she said.
She listened to the grievances experienced by members from the audience and advised them on the correct route to be adopted in such cases and the ways to avoid them.
On International Women’s Day, the Moneylife Foundation was proud to felicitate three women activists who have a made a difference to society, fighting for various causes and standing up for the middle class. Ms Udeshi, the former deputy governor of the Reserve Bank of India, felicitated Ms Indrani Malkani of the Malabar Hill Residents Association, Ms Anandini Thakoor of the Khar Residents Association and Ms Sumaira Abdulali of the Awaaz Foundation.
Civic activist Indrani Malkani is secretary-trustee of the Malabar Hill Residents Association, which has put in place a unique partnership between the residents, traders, hawkers etc for their peaceful co-existence. She is the moving force behind the effort to get school children to travel by buses in order to decongest the city.
Environmentalist and Mumbai’s foremost and veteran anti-noise activist Sumaira Abdulali has braved a physical attack by the sand quarry mafia. These days, she is better known for Awaaz Foundation, which is primarily responsible for the effective implementation of the 10pm deadline on noise and introduction of silence zones.
Civic activist Anandini Thakoor is the managing trustee of Khar Residents Association. She is another brave woman who has faced attacks and gheraos for her campaign against political posters across Mumbai. She is also known for lending ready support to various causes.
The felicitations were followed by a short speech by Ms Anjana Makkar, who advised and urged women to deal effectively with finance matters. She is the Grievance Redressal Officer for Citibank India. She said, “I would urge each woman to be aware of any investments being made in their names. We need to know what is happening around us. It would be wise to understand the documents you are signing and ensuring you have joint ownership of your spouse’s investments. I would also urge women to put away some money for a rainy day.”
The programme was followed by an interactive working session on finance, specifically designed for women, by Moneylife Foundation’s programme coordinator Aparna Ramachandra. The entire event turned out to be an enlightening experience for the women’s audience, which made them realise their inherent ability to be smart with money.
Pictures of the event