According to a research report, two conditions that supported the high growth of equity AUM during 2003-08 may be revived by early 2013-gains in investors' portfolios and low bond yields
Mumbai: Mutual fund (MF) industry is likely to see revival of some flows into equity schemes by early 2013 on the back of gains in average assets under management (AUM) in equity portfolios coupled with low bond yields, reports PTI quoting a research report.
"Two conditions that supported the high growth of equity AUM during 2003-08 may be revived by early 2013-gains in investors' portfolios and low bond yields," a report by Avendus Securities said.
The report also said the present conditions are similar to 2003, when rising gains on the AUM and low rates had led to growth in equity portfolios.
The report said the past quarter saw a steady rise in the gains in investors' portfolio of around 6% by the end of September, while the yields on AAA-rated yields dipped 50 basis points.
According to the report, the phenomenal rise in stock prices leading to an outflow from equity MFs is nearing an end.
"The three-year long trend of a rise in stock prices, leading to a net outflow from equity mutual funds, may be nearing an end. There could be a return to a phase, where a rise in stock prices stimulates net inflows. Such a pattern has been reported for close to six years between mid-2003 and mid-2009," the report said.
As per the recent data released by the Association of Mutual Funds in India (AMFI), the industry saw an increase of 8% in its AUM for the quarter to September.
Average AUM for the July-September period stood at Rs7.47 lakh crore compared to Rs6.92 lakh crore in the year-ago quarter.
The market regulator feels that there is a need for a central legislation to regulate collection of money from citizens without requisite approvals and for dubious investment projects
Mumbai: Market regulator Securities and Exchange Board of India (SEBI) has asked the government to frame a strong central legislation to tackle the menace of companies collecting large amount of money from the public without requisite regulatory approvals and for dubious investment projects, reports PTI.
Stating the existing legal provisions are weak and allow such companies to benefit from certain loopholes in the regulatory framework, SEBI Chairman UK Sinha told PTI that the market regulator takes action against such entities whenever it suspects anything wrong and gets evidence.
"People make all sorts of excuses - in some cases they claim they are under the state government, some cases they are saying they are registered with the Ministry of Corporate Affairs (MCA), some cases they are saying they are housing companies and in some cases they claim to be non-bank financial companies (NBFCs). And in most cases, they say that we are not under the SEBI jurisdiction," Sinha said in an interview.
"But wherever we suspect and we got information and evidence, we take action against them. But the legal provision is relatively weak on this front and I agree that there is need for one strong central legislation because big amount of money is being collected from the citizens of the country," he said.
Giving an example, Sinha said he was recently in Assam and there he was told that all the mutual funds put together have a combined asset under management (AUM) of less than Rs1,000 crore in the state. At the same time, there is one such company that launched one scheme and managed to collect more than Rs1,000 crore, he said, without naming the company.
"So if you make the comparison, you will see the dimension is quite big. So, we have urged the government to make one strong central legislation to tackle this issue," he said.
SEBI is mandated to protect the interest of investors in securities market and to promote and regulate the various segments and entities in the capital markets, including the public listed companies.
However, raising of funds from public investors numbering 50 or more by unlisted companies also comes under SEBI's jurisdiction -- a regulatory position which recently came to light in the high-profile case involving Sahara group.
Asked about the Sahara matter and another case involving alleged violation of SEBI rules in an investment scheme involving Emu birds in Tamil Nadu, Sinha said: "I will not be able to answer anything about any particular company or the examples you are giving, but the fact remains that there are lacunae in the Act...
"... and in the legislations giving rise to people to claim that they are not under the jurisdiction of SEBI or RBI or other regulators and then raise money".
"But, wherever we suspect that people are raising money from public investors (without approval), for example through collective investment schemes, we do act and take actions," he said.
"For example, we have taken action against certain companies in West Bengal where they have gone to various courts and matter is currently before the courts," Sinha said.
"But, there is a need for one central legislation to regulate collection of money from citizens of this country for the purpose of managing their money," he stressed.
The issues related to the companies raising funds from the public investors without SEBI's approval have come to the light in the recent past after the Supreme Court verdict on Sahara group, whose two companies have been asked to refund about Rs24,000 crore to about three crore investors within three months with an annual interest of 15%.
The money was raised by the two unlisted Sahara companies through issue of instruments called 'Optionally Fully Convertible Debentures' (OFCDs), which are a kind of bonds.
Although unlisted firms do not come under jurisdiction of SEBI, any issue of securities to 50 or more investors is considered as a public offering and requires SEBI's clearance.
Sinha did not offer any comments on questions regarding SEBI's preparedness in handling cases like Sahara, where it might have to handle large quantity of documents to help the investors get back their money.
However, the market is abuzz with speculations that the regulator is looking to appoint a Registrar and Transfer Agent (RTA) to handle data processing work for this particular case.
SEBI floated tender for appointment of an RTA late last month and held pre-bid meeting with the potential bidders on 15th October, but the regulator has not disclosed so far that the concerned data processing work relates to Sahara case.
In the pre-bid meeting, SEBI informed the interested bidders that the work relates to three crore application forms pertaining to subscription towards bonds.
As per the tender, RTA would have to process application forms and other records of about three crore beneficiaries and an estimated 30 crore documents, consisting of application forms and related papers.
The RTA would need to create and maintain an electronic database of three crore beneficiaries, scan documents running into 30 crore pages, provide toll-free help line facility and a grievance redressal mechanism for these investors.
After request from the interested bidders, SEBI has extended the last date of submission of tender to 29th October, from 22nd October earlier. The technical bids would be opened on 29th October, after which SEBI would intimate the shortlisted bidders about the opening date of their price bids.
Pointing to the signs of heightened competition, the housing finance regulator sees further price wars among banks and the housing finance companies
Mumbai: Housing finance regulator National Housing Bank (NHB) has said there is scope for "further price wars" in the country's housing mortgage space as demand continues to be robust, reports PTI.
The NHB expects housing loans to clip at 20% in the current financial year compared to 17% observed last fiscal, especially after looking at the demand in the first half.
"Going forward, we do not rule out further price wars amongst banks themselves and the housing finance companies also," NHB chairman RV Verma told reporters at an event.
Pointing to the signs of heightened competition, he said, some banks have lowered interest rates on housing loans, some have cut their base rates (the minimum rate of lending), while many have abolished/reduced processing fees.
"The demand for housing loans has been good and sustained and we are seeing a growth of close to 20% this year compared to last year's 17%," he added.
Retail lending so far has been showing signs of resilience amidst a slowdown in demand by larger borrowers due to the overall macroeconomic atmosphere.
A majority of banks are focusing on the retail sector now to overcome problems and deploy funds. Housing finance is a lucrative area for banks due to low incidences of stress and smaller ticket sizes.
Verma said banks account for 70% of the overall lending in the housing finance. Housing Finance Companies (HFCs) constitute the rest.
On asked about how the HFCs will face the much larger in size banks in the market, Verma said HFCs have some inherent advantages like personalised services and quicker turnarounds, even though their cost of funds is high.
He said NHB will be able to meet its refinance target of Rs17,000 crore for the July 2012-June 2013 period given the demand for housing loans and it has already disbursed Rs3,500 crore to the bank in the first quarter ended September.
HFCs have explored newer sources of borrowings and the demand for loans will compensate for the higher cost of funds, he said.
To a question, Verma said the NHB is not considering increasing the capital adequacy requirement for HFCs from the current 12%.