Thursday Closing Report: No major movement until 20,200 and 19,900 are broken

The Indian market opened with marginal gains on mixed global cues. The steep rise in the weekly food inflation numbers put the indices under pressure and kept them in a narrow range on both sides of the neutral line till the end of the session.

The market opened with meagre gains, tracking its Asian peers that were mixed this morning. Early gains came in from the broader markets and realty, banking and healthcare stocks. The indices slipped into the red after touching the day's high and were range-bound. However, a sharp rise in the weekly food inflation data put pressure on the market, dragging the indices down.

The post-noon session saw the key indices trading sideways on both sides of the neutral line. The market closed flat with a negative bias, down for the second day in a row.

The Sensex ended at 19,982.88, below its psychological level of 20,000 and down by 32.92 points (0.16%) over its previous close. The index touched a high of 20,076.08 and a low of 19,939.30, intraday. The Nifty settled 4.40 points (0.07%) lower at 5,980. The benchmark touched a high of 6,006.45 and a low of 5,964.60 today.

The market breadth was in favour of the losers today. The Sensex had 20 declining stocks and 10 advancers. The Nifty closed with 34 losers and 16 gainers. Among the broader indices, the BSE Mid-cap index declined 0.23%, while the BSE Small-cap index was down 0.13%.

The top Sensex performers were NTPC (up 1.50%), Sterlite Industries (up 0.95%) and Infosys Technologies (up 0.77%). The top losers on the index were Hindalco Industries (down 1.81%), Tata Steel (down 1.61%) and DLF (down 1.26%).

BSE Healthcare (up 0.69%), BSE IT (up 0.27%) and BSE TECk (up 0.18%) were the noteworthy gainers in the sectoral space. BSE Consumer Durables (down 1.11%), BSE Metal (down 0.97%) and BSE Realty (down 0.89%) were among the sectoral losers today.

Markets in Asia ended mostly lower as China enhanced scrutiny of foreign fund inflows into its realty sector in a bid to curb spiralling property prices. This apart, the recent hike in gasoline and diesel prices by the Chinese government, also weighed on investor sentiments.

The Shanghai Composite tanked 0.79%, the Hang Seng declined 0.62%, the Jakarta Composite slid 0.25%, the KLSE Composite shed 0.04% and the Seoul Composite lost 0.03%. Bucking the trend, the Taiwan Weighted gained 0.43%.

Returning to double digits, food inflation rose to 12.13% for the week ended 11th December, the third successive weekly increase, with finance minister Pranab Mukherjee attributing high onion prices as one of the reasons.

The official data released today showed that for the week ended 11th December, food inflation rose by 2.67 percentage points from 9.46%, touching a six-week high.

The US markets continued to make fresh two-year highs on Wednesday, with banking stocks leading the gains on deal news. However, lower-than-expected economic data put a cap on gains. Sales of existing homes rose 5.6% from the previous month to a 4.68 million annual rate, the National Association of Realtors said in Washington. Economists projected sales would rise to a 4.75 million pace. Another report showed the US economy grew at a 2.6% annual rate in the third quarter, more than the previously calculated 2.5% gain and up from a 1.7% rise in the second quarter. The growth was below expectations.

The Dow gained 26.33 points (0.23%) to 11,559.49. The S&P 500 added 4.24 points (0.34%) to 1,258.84. The index climbed above 1,255.08 where it closed just days after Lehman filed for bankruptcy in September 2008. The Nasdaq surged 3.87 points (0.15%) at 2,671.48.

Concerned over the possibility of repayment defaults by microfinance institutions (MFIs) to banks, the Reserve Bank of India (RBI) has asked lenders to maintain funding lines to MFIs to prevent the problem from spreading out of Andhra Pradesh.

The bankers informed the RBI that collections by MFIs in Andhra Pradesh have deteriorated considerably and there were some incipient signs of the problem spreading to other states.

Participation by institutional investors in the equities segment on Wednesday was meagre. While foreign institutional investors were net sellers of stocks worth Rs67.57 crore, domestic institutional investors were net buyers totalling Rs98.93 crore.

Pipavav Shipyard (up 1.35%) has signed a memorandum of understanding (MoU) with Sweden-based SAAB Dynamics AB, part of the Wallenberg Group, for developing products in the defence and aerospace sectors.

This is the first major defence co-production initiative undertaken by the Wallenberg Group in India, which will help it gain a foothold in the Indian Army and Airforce segments.

Anil Dhirubhai Ambani Group company Reliance MediaWorks (down 0.42%) has inked a deal with Russian World Studios (RWS) to outsource film restoration, image processing and enhancement work.

A memorandum of understanding (MOU) was signed by the Indian company with the private film company RWS and the Obyedinennaya Gosudarstvennaya Kinokollektsia (OGK) during the visit of Russian President Dmitri Medvedev.

RWS is one of the largest private film companies in the Russian market and has produced several projects, both for TV and the big screen, while OGK is Russia's federal state unitary enterprise that preserves and manages Russian film archives.

Adani Enterprise run Adani Power (APL) (up 1.45%) said that it has synchronised the country's first supercritical unit of 660MW power plant, taking its coal power generation capacity to 1,980MW. APL is setting up a 4620MW coal-fired power plant at Mundra, in Kutch district of Gujarat, consisting of four units of 330MW and five units of 660MW.


The Year That Was: A messy trail for mutual funds

Knocked repeatedly by the regulator and investors during the past year, mutual funds will be hoping that the pain will yield positive results soon

The stock market climb this year was quite amazing. But strange as it may seem, it prompted investors to exit equity mutual funds in hordes, hurting fund companies. The pain was aggravated by a basket of confused measures by the regulators, which complicated matters for investors and distributors. It's been a difficult year for mutual funds and hardly anybody will speculate how long it could take to get better.

So difficult, that the friendly neighbourhood distributor has virtually cut out mutual funds from his bouquet of financial services. Many have all but closed shop to look for better pastures. Those who are still doing business are struggling and hoping that the situation will improve sooner than later.

Distributors shift business

A large section of distributors have been left to fend for themselves after stripping their fees. Last year, while attempting to justify its fatwa against entry loads, the regulator cried itself hoarse saying that "investors must pay for advice". But, investors haven't taken too kindly to this yet. Now, some distributors are offering free advice, while others have simply switched to selling commission-friendly unit-linked insurance plans (ULIPs) and company fixed deposits.

In March, the Securities and Exchange Board of India (SEBI) unwittingly triggered a war among large distributors who began to grab customers from one another, by allowing investors to change distributors without a no-objection certificate. It decided that in case of any change in the broker code, no trail commission would be paid to both-the one who loses a customer, as well as the one who gains a customer. Several national distributors and large intermediaries immediately swooped in on the clients of other smaller distributors, surreptitiously getting customers to switch allegiances.

Perhaps nothing irked the distributor community more than the intrusive and tedious know your distributor (KYD) norms. While distributors were amenable to the KYD concept, they were unhappy about the biometric verification part. This measure was seemingly taken to counter a few distributors who have been misguiding investors, exploiting them for their own benefit. Therefore, many of them wondered why the same rule was not being applied to other entities that are known to defraud investors.

SEBI tightened the noose on distributors further, when it tweaked the existing guidelines for procuring certification by mandating distributors to get certification from the National Institute of Securities Management (NISM), instead of the usual AMFI registration number (ARN).

Collecting customer details   

This flurry of regulatory changes resulted in headaches on the administrative side too. The regulator's insistence on compliance with know your customer (KYC) norms, meant that old and inadequate customer data in the records of older funds such as UTI Mutual Fund, had to be obtained afresh, with proper identification (photo, phone and address) proof and in a standard format, for easy access.

A misinterpretation of the trail commission rule meant that registrar and transfer agents (R&TAs) were burdened with requests for change of broker code and massive trading in customer data. The volumes subsided only after the Association of Mutual Funds in India (AMFI) issued a clarification.

In August 2010, SEBI asked fund houses to facilitate smoother shift of mutual fund units between two demat accounts. This not only meant that fund companies would have to shoulder additional costs, but this would also increase activity at the R&TAs. Similarly, in order to check fraudulent activities by some distributors, SEBI asked fund houses not to accept third party cheques for mutual fund subscriptions. Consequently, fund branches had to track investor applications with investor cheques to corroborate the investment.

After putting up a brave face on these changes through most of the year, fund companies showed signs of frustration towards the end of the year as business continued to fall. Faced with a sharp reduction in profit amid continuing reduction in the assets under management (AUM), asset management companies (AMCs) began to voice their concerns. The regulator, however, maintained that companies were coping well with the news regulations.

Gold ETFs, debt funds pick up

It was a particularly bad period for equity mutual funds as investors pulled out relentlessly. The haemorrhage that began in August last year continued through 2010. Net outflows since January are up to a startling Rs28,000 crore. Only in May did investors put in more funds than what they took out. The explanation offered by fund companies for this massive exodus was that investors were looking to exit after the markets had sufficiently run up, so as to offset the losses they incurred in 2008.

However, gold and debt funds acquired a new sheen. Gold exchange-traded funds (ETFs) have emerged as a new favourite among retail investors, who were bowled over by the relentless rise in gold prices. The popularity of gold ETFs can be gauged from the sharp 143% rise in the corpus of gold ETFs from Rs1,425 crore to Rs3,464 crore in the year.

Debt funds also witnessed record inflows, as investors hoped to benefit from rising interest rates. Investors parked a total of Rs5,24,332 crore in debt funds during the year, and net inflows amounted to Rs1,80,200 crore. Balanced funds, which provide a combination of debt and equity, saw a 10% jump in retail AUM at Rs18,871 crore.

Cheer for investors

Mutual fund investors did have a little reason to smile. Karvy and CAMS, both top R&TAs, introduced a facility giving a consolidated account statement on a monthly basis. This will help investors to track their mutual fund investments across fund houses at one source. They will be able to get information about their holdings, fund returns, recent transactions, and more.

Another benefit for investors was the decision by SEBI reducing the window for listing of new fund offers (NFOs) to 15 days from the previous 30 days, as also reducing the allotment period to five days from the earlier 30 days. It also crunches the processing time for completion of NFOs to an astounding 20 days only from the earlier 60 days. To address investors' concerns over submission of applications on time, CAMS introduced 'eNFO', an online service that ensures hassle-free submission of NFO applications.

Fingers crossed

It has been a period of painful transformation for the mutual fund industry, with various participants at loggerheads with the regulator, while struggling for their very survival. As we enter the new year, fund companies will be hoping that the alarming outflow from equity funds subsides, and that investors come back. Distributors will be looking for the tide to turn in their favour. And the systems and processes that intermediaries and AMCs have invested in to conform to the changed regulatory climate should bear fruit. Perhaps, a fresh face at the helm of the regulator may usher in much-needed stability for the industry.




6 years ago

many self employed people were made unemployed by sebi by banning entry load from Mutual fund....The gov is itself responsible


6 years ago

Huge number of Indian youth remain unemployable: Report


Indian youth are not only unemployed but unemployable

IANS, On Sunday 26 December 2010, 1:37 PM
Rapid economic growth in the country is expected to generate 10-15 million jobs by next year but lack of suitable skilled candidates poses a major threat, a leading industry lobby said Sunday.

'Approximately 10 to 15 million jobs are expected to be created by next year, in which 75 percent will require vocational training. If not addressed properly it can lead to a slowdown in the country's economic growth,' said a report by the Associated Chambers of Commerce and Industry of India (Assocham).

According to the report, the principal reason behind India's growth is its youth force, the largest in the world. However, millions of young Indians are jobless because they do not receive proper vocational training.

'The huge numbers of Indian youth are not only unemployed but unemployable, whereas large numbers of white collar jobs are waiting for suitable candidates,' the report said.

It further said that though 90 percent of jobs in sectors like information technology (IT) and IT Enabled Services (ITES), biotechnology and the services sector are skill-based and require training, only six percent of the total workforce receive such training.

The report also predicted that 2011 will be a boom year for the IT & ITES sector, accompanied by a corresponding rise in salaries.

'The year 2011 is likely to be a boom for skilled workers in IT & ITES, biotechnology and services sectors. As against the 15 percent hike in salaries in 2010, it is expected to be registering 30 to 40 percent growth,' Assocham secretary general D.S. Rawat said.

Currently, IT and ITES industry alone provides direct employment to about 2.23 million people and indirect employment to a further eight million.

The report added that this sector in particular will experience a shortage of skilled manpower.

'The employers are trying to catch the highly skilled manpower and the salaries are going through the roof. It is expected that the salaries in this sector will be growing at a par of 30-40 percent during the year 2011,' the Assocham report added.


6 years ago

Though I'm not a regular investor in Mutual Funds, and not directly affected (yet), even I'm baffled by SEBI's incoherent actions. Don't they know anything about the workings of the MF Industry? They could have reduced the maximum entry load to about half of current value instead of completely removing it! One possibility could be that SEBI wants all MF Investment to happen through online brokerages which improves tracking. Hence, it could be doing all this to discourage 'benaami' kind of investments into MFs.
I hope they re-introduce atleast some entry load so that distributors stick around instead of completely vanishing.



In Reply to Ramanand 6 years ago

I'm surprised at MoneyLife not correcting this wrong impression, even though ML presents itself as pro-investor awareness.

All SEBI has done is prevent a high upfront commission being charged as entry load directly from the investor. The earlier entry load charged to the investor prompted brokers/distributor to keep churning investor portfolios and AMCs to keep launching meaningless new funds just to make money.
Redeem the fund you bought last year and buy this new fancy fund that is very good - most brokers were guilty of giving advice like this.

Actually, even now, distributors make commissions both at the time of fresh sale (upfront) and every year that you keep the money invested (trail) - from the AMC. This is fully within SEBI rules.

SEBI also made it mandatory to disclose this commission. And because the commission is now a cost to AMCs that they can recover only out of annual fund mgmt fees, they have kept the commisions reasonable. It is not zero - you can see it listed on all online brokers' websites.


In Reply to DG 6 years ago

Mr DG,it looks you are afraid of yor identity reveleation-bcos u feel that you are not strong to defend yor point-just tell me what a IFA is getting for a SIP of Rs1000 or Rs 500 per month-and tell me how much time a IFA invests for procuring SIP from investor-then filling up 3 pages form and then submission to AMC office-this all costs not less then Rs 300 to him-including time and conveyance expanses-
now tell me when he will earn back his Rs 300 from 1000 SIP bcos he gets hardly 4 rs per month from upfront-and trail of just 25 Rs in first year-
so who the fool will canvass to sell SIP based on present commission structure-
i advice you to become a IFA if you find it so lucrative kind of job-because people like me have already quit the job-so people like you will benifit from this situation when most of IFAs have left the competetion-so you must grab this opportunity and have a "wonderful"earning experience .


In Reply to Roopsingh 6 years ago

1. Your personal attack about my identity just diverts from the main issue. Has no relevance to the topic.

2. I've NOT said that distributors have not been affected by the reduction in commissions. Just saying that it always gets talked about in terms of abolition of entry load - giving people the impression as if actual commissions have gone to zero. That's not true. If you are talking equity funds, the peak upfront commission has simply gone down from about 2.5% to about 1.5%.

At the same time, the malpractice of broker-to-investor cashback of about 1-1.5% on initial investment has also disappeared now.

3. Customer Profile and Scale, Service Model:
The 1000/500 SIP customer you mentioned is the lowest-end customer of the MF industry. You'll know best the exact money you made in enrolling such a customer, but why are you surprised that it does not look lucrative enrolling ONLY the lowest end customers? Most stronger distributors will have a mix of low-end, mid-end, and some high-end customers.

The reason your numbers don't work out is simple - lack of scale. Most of the Rs 300 you quote is in other expenses like conveyance. The reason larger guys (and even new startups like are going after these SIP customers is because they have lifetime annuity revenues from them, that too growing.

+ They are lowering their service costs by using technology for servicing and tracking. And, they also allow sub-brokers/ agents to enrol and use the same platform for working with end-customers/ investors. In fact, you could see if this option works for you as an additional side-business.

+ They also get customer acquisition and marketing costs. E.g. ICICIDirect gets up to Rs 7 pm as customer acquisition fees for each active folio. The only reason we know this - because SEBI made it compulsory to declare it!

+ You should be enrolling a SIP customer only once along with direct debit instruction against his bank account. You keep on getting trail on this customer for the lifetime the customer stays with the fund!

+ And the commission is on fund value, not the original invested amount. So, if his money has doubled in 5 years in an equity fund, your trail commission also doubles!!

4. See, if you have been personally affected by the reduction in commissions, you will not be convinced by any logic.
Distributors/ financial intermediation is an industry in transition - from lot of unorganised/individual providers towards organised scale. There are individual agents like you who are badly affected. While I sympathise with you at a personal level and wish you the best in your new business, it does not change the facts. Trying to justify high intermediation costs works does not work long-term, and makes the industry vulnerable to sudden shock and competition.

girish prasad

6 years ago

instead of doing all these changes authourity can use master key , raise the minimum investment amount to 1.0 lac or 10.0 lac this will be one lohar ki instead of previous 100 sunar ki


6 years ago

With so many rules and regulations,banning of entry loads&,kyc mandatory from jan etc will more kill the induustry of MF.Who has the proper address.Address with Care of is not acceptable for making now 50% of women are knocked out of investing in Mutual Fund.And the fraud of making KYC will take place.....Nobody can stop MF industry to die...No body....hats off to all those people who make regulation...great job



In Reply to shankar 6 years ago

Friends,i have finally fastened myself to NEW Marketing job which i mentioned in my prior comments-and i have got stabilised there(thanks to Mr Bhave and co.who made me do this)now i plan to put my son in same line looking to bleak future of MF industry-most of my friends in Surat are struggling to find new avenues of earnings-but its very tough to go for a new livelihood at this age juncture(i will complete 46 on 28th of this month),
i choose to adopt new FMCG marketing line looking to attitude of AMC's which was negative towards distributors in all these years-they never raised their voices against these IFA killing fatwas-
and i am sure these guys running AMC's will ask SEBI to remove trail commission once IFAs make a big amount of AUM-and they will put all blame on SEBI for these steps-(but in closed rooms they will ask SEBI to do this because their profits wii ges multiplied when Trail commission is reduced or removed-then these guys will ask us to go for FEE based model for AUM of investor-and we FOOLS will be thrown into ACID tank-
so i have lost trust in people managing AMC business-so last time i adviced my IFA frends to adopt some other livelihood as soon as possible and stop procuring new business for these cunning guys-who have tried to FOOL IFAs very bitterly and thrown us out like MAKKHI(bee) OF TEA DISh)

Madhusudan Thakkar

In Reply to Roopsingh 6 years ago

Your charge against AMCs is valid.Deepak Parekh spoke on Radia's issue and said that it will affect FII & FDIs but is silent on retail participation in mutual funds.The only reason he spoke because Ratan Tata is under cloud.He also defended Lavasa construction and added that how can construction stop after so many years. Here also powerful people like Sharad Pawar and Gulabchand are involved.I have lost all respect for people like Deepak Parekh who speak only for rich and powerful people and do their "chamchagiri".People like them are more concerned about foreign inflows than retail participation.There is a real danger for our economy despite 8.5% growth,savings contribution in GDP is decreasing.
The other day during HT summit our FM Pranab Mukerjee was asked question on regulations of IFAs which was not understood by him.

Jaguar Land Rover celebrates 2010 International Awards Success

Tata Motors Ltd's Jaguar Land Rover is celebrating a successful 2010 having received more than 80 international awards for its vehicles during the year.
The tally of awards was shared almost equally between the two brands. Leading the charge for Land Rover was Discovery 4 with over 28 global awards this year bringing its total to 144 since launch in 2004. Commenting on the awards Land Rover's Global Brand Director John Edwards said: "The Discovery 4 offers an exceptional breadth of capability. It is now one of the most highly-decorated vehicles ever and we are thrilled that it continues to receive such great recognition across the industry."

Other Land Rover nameplates also had a tremendous year with the Range Rover being voted the 'Car of the Decade' by readers of, the Range Rover Sport voted 'Best 4x4' by Auto Bild (Germany) and the Freelander 2 was voted 'Best Compact SUV' at the Auto Express Car of the Year Awards.

Jaguar's new XJ which went on sale earlier this year and got off to a flying start receiving more than 20 international honours including 'Best Luxury Car' from China's Auto News, 'Annual Limousine King' from Quattroroute (Italy), 'Luxury Car of the Year' from Top Gear (UK), Automobile Magazine's '2011 Design of the Year' and 'Best Executive Sedan' at the Bloomberg Awards (US).

And it was not just production cars that caught the eye of the auto industry elite. The C-X75 concept car was named 'car of the show' at this year's Paris Automobile Show.

On Thursday, Tata Motors ended 1.23% down at Rs1,348.80 on the Bombay Stock Exchange, while the benchmark Sensex closed 0.16% down at 19,982.88 points.


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