The Benchmark Yield this Fortnight

The benchmark bond yield recently started rising sharply, after the Reserve Bank intervened to stabilise the falling rupee by mopping up rupees. While the RBI has said that this would be a temporary measure, it is unclear what will ensure the basic problem of low exports and high imports is dealt with. We expect the yields to remain high, pushing up bank deposit rates.



Majority of mutual funds are either unconcerned or act as ‘yes man’ during company voting

Mutual funds have significant voting power in key decisions of listed companies, but they have so far mostly acted as yes-men or acted unconcerned when proposals are put to vote

Bengaluru-based InGovern Research Services said Indian mutual funds are still largely passive and/or indifferent while voting at investee company’s shareholders meeting. According to a report by InGovern, IDFC Mutual Fund and Motilal Oswal Mutual Fund have completely abstained from voting on any resolutions put forth by their investee companies. Mutual funds voted FOR in 47.0% of the resolutions and abstained from voting in 51.5% of the resolutions.


According to InGovern, the number of instances where a mutual fund has voted against a proposal is very low. “No significant improvements are seen in voting participation by AMCs in shareholders’ meetings compared to previous two years,” mentions the report, which analysed the proxy voting patterns of Indian mutual funds as per disclosures made by the respective asset management company (AMC) for FY13.


“Out of the total 28,290 resolutions disclosed, mutual funds have voted AGAINST just 1.5% of the resolutions, whereas they have voted FOR in 47.0% of the resolutions and abstained from voting in 51.5% of the resolutions. Out of all the vote recommendation reports published for shareholder meetings between April 2012 and March 2013, InGovern recommended voting against 23% of these resolutions, whereas mutual funds have voted against just 1.5% of the resolutions put forth by investee companies and have abstained from voting in 51.5% of resolutions, ” the proxy-advisory firm said.


Out of the AMCs, which are among the top in terms of equity AUM, HDFC MF has voted over 683 resolutions of 255 investee companies. The fund house has been fairly active in its investee companies, voting against in 0.4% of the resolutions and voted FOR in 84.8% of the resolutions. Reliance MF has made a voting disclosure on 411 investee company meetings with a total of 2,395 resolutions. It has voted against in 0.7%, FOR in 96.7% and abstained from voting in 2.7% of resolutions of investee company meetings. Franklin Templeton MF has been fairly active as well, voting FOR in 89.4% of the 1,477 resolutions of the 240 companies and voted against in 9.7% of the companies. DSP BlackRock has voted FOR in 95% of the resolutions of 234 investee companies.


SBI MF has abstained from 42.9% of the resolutions and has voted FOR in 55.8% of the resolutions. UTI MF abstained from voting in nearly 95% of resolutions out of a total of 2,402 resolutions of 428 investee companies. ICICI Prudential MF too, abstained from voting in majority of the resolutions and has voted against in just 0.1% of the resolutions.


Over the past two years, mutual fund houses have started disclosing their voting policy, though, with much reluctance. The regulator made it mandatory in March 2010 for fund houses to make public their 'voting policy' and also their votes, but it took another reminder by the regulator in October 2011 for them to declare their voting details.




4 years ago

Mutual Funds ought to fully weigh various proposals (being put up at shareholders' meetings) regarding remuneration / commission payable to various Directors / personnel and accordingly ensure to exercise their votes.They must see that same is reasonable considering qualification / experience / ability of the person and not excessive.

Sensex, Nifty crosses the first hurdle: Monday closing report
As suggested on Friday, Nifty rallied and crossed the first hurdle of 5,600 today. For the bulls to feel confident, Nifty will have to close above 5,660 tomorrow
Both the Sensex and the Nifty opened in the positive. Sensex opened higher for the third consecutive trading session by 110 points higher at 18,899. The broad market Nifty-50 opened 41 points higher at 5,607. During the entire trading session today Sensex traded higher than Friday’s close. Nifty traded in the negative during the first hour in the morning but traded higher later. Immediately after opening, indices hit their lows for the day. Sensex hit a low of 18,796 while the Nifty hit a low of 5,557. The National Stock Exchange (NSE) recorded a volume of 58.22 crore shares.
In the afternoon session, these benchmarks hit their respective intra day highs after which they traded lower but managed to close in the positive territory. Sensex hit a high of 19,067 and closed at 18,947 (up 158 points or 0.84%) while Nifty hit a high of 5,644 and closed at 5,612 (up 47 points or 0.84%).
All the major indices on the NSE closed in the positive. CNX Smallcap was the top gainer, up 2.66%.
Among the other indices, Metal (rose 4.48%); FMCG (rose 2.39%); Commodities (rose 1.90%); Pharma (rose 1.89%) and PSE (rose 1.79%) were the top five gainers. While the loser were PSU Bank (fell 1.53%); Bank Nifty (fell 1.07%); Energy (fell 0.66%) and Finance (fell 0.06%). 
Of the 50 stocks on the Nifty, 33 ended in the in the green. The major gainers were Jindal Steel (up 9.09%); Tata Steel (up 7.68%); Sun Pharma (up 7.13%); NMDC (up 6.58%) and Hero MotoCorp (up 3.56%). The main losers were State Bank of India (down 4.02%); Tata Power (down 3.28%); Reliance Industries (down 2.73%); IndusInd Bank (down 2.01%) and Punjab National Bank (down 1.79%).
India’s trade deficit declined sharply on year-on-year basis in July 2013 as exports surged and imports fell, data released by the government showed. Merchandise exports jumped 11.64% to $25.83 billion in July 2013 over July 2012. Total imports declined 6.2% to $38.10 billion in July 2013 over July 2012. Oil imports declined 8.02% to $12.70 billion in July 2013 over July 2012. Non-oil imports declined 5.26% to $25.39 billion in July 2013 over July 2012. The trade deficit declined sharply on year-on-year basis at $12.26 billion in July 2013, from $17.47 billion in July 2012.
Last week, the Reserve Bank of India (RBI) announced fresh steps to drain cash from the banking system, as it stepped up efforts to stop the rupee’s decline against the US dollar. The RBI said it would sell short-term cash management bills worth Rs22,000-crore every week from Monday. The sale is in addition to Rs12,000 crore of Treasury bills and Rs15,000 crore of sovereign bonds, the government sells every week to fund its fiscal gap.
India expects to fully finance its current account deficit in the year ending March 2014, finance minister P Chidambaram said on Monday, as the government tried to sooth nerves about its external finances after a sharp fall in the rupee. Chidambaram also said the government will take steps to curb imports of gold, silver, oil and luxury goods.
Rising growth concerns is making global investment banks cautious on Indian stock markets. Nomura has revised its March 2014 Sensex target downwards to 20,000 from 21,700. The new target is underpinned by Sensex FY14E EPS growth of 8% (vs.13% consensus) with further risk to the downside.
Most of the Asian indices closed in the positive territory today. Jakarta Composite fell the most, 0.93% while the Shanghai Composite rose the most, up 2.39%. A newspaper report in South China Morning Post said that Beijing was "quietly offering financial stimulus" to key cities and provinces to support the local economies. Data released on 9 August 2013, showed that Chinese banks made 699.9 billion yuan ($114.3 billion) worth of local-currency loans in July, beating expectations. 
Japan's economy grew an annualized 2.6% in the April-June period, the Cabinet Officer reported Monday, cooling sharply from a rapid 4.1% gain in the first calendar quarter. On a seasonally adjusted quarterly basis, gross domestic product rose 0.6% from the first quarter's 0.9% increase.
European indices were trading lower and US Futures too were trading in the negative.
Following notice by Indiabulls Housing Finance to promoters of realty company HDIL last month on default of loans, HDIL promoters today said Indiabulls has withdrawn the notice against them following payment of Rs3.22 crore interest dues by them. HDIL promoters said they have paid Rs3.22 crore as interest to the former and regularised the loan account. The total loan amount due was about Rs46 crore. The stock rose 4.87% to close at Rs31.25 on the NSE.


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