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Wednesday, June 30, 2010

Amfi proposes more accountability, bigger role for MF trustees

Trustees are likely to be given a larger role in guarding the interest of unit holders. At the same time, they might also be held accountable, according to recommendations that the fiduciary committee of the Association of Mutual Funds in India (Amfi) has made in its latest report. "Some important decisions will soon be taken on trustees and they will be given more powers," said HN Sinor, chief executive of Amfi. 

Trustees could be given authority to pull up fund managers on performance and other important investment decisions. Amfi, which is currently seeking suggestions from mutual funds, is expected to forward those recommendations to the market regulator, Securities & Exchange Board of India (Sebi). 

A official from the mutual fund industry said, "The report of the committee largely covers all the major reforms for trustees. This will provide more power and greater accountability to them. Besides, trustees might be asked to be more involved in the important day-to-day functioning of mutual funds. 

The role of trustees in a way is similar to that of independent directors on company boards. Sebi regulations require that at least two thirds of directors of the trustee company or the board of trustees must be independent i.e. they should not be associated with sponsors. Currently, trustees of mutual funds meet once in every two months and get paid fees, which are typically 0.01% of assets. 

Indian mutual funds follow a three-tier legal structure comprising sponsor, trustee and the asset management company. Currently, a mutual fund is set up in the form of a trust under the Indian Trust Act. 

According to an earlier Asian Development Bank report, the trust structure has posed certain practical difficulties, including the issue of individual versus collective liability of trustees, for mutual funds. It has deterred experienced persons from serving as trustees, said the report. 

The provisions of the Indian Trust Act prohibit limiting or extinguishing obligations and liabilities of trustees or indemnifying them for losses or damages.

Crude sinks

Weak economic data pressures prices 

Crude oil prices ended substantially lower on Tuesday, 29 June 2010 at Nymex. Prices fell considerably due to weak global economic data, mainly at China and US front. The same questioned the demand for crude in coming months. Stern dollar also pushed crude prices lower. 

On Tuesday, crude-oil futures for light sweet crude for August delivery closed at $75.94/barrel (lower by $2.31 or 3%). Last week, prices gained 2.2%. 

For the month of May, crude shed 14%. It was the biggest monthly drop for crude since December 2008. For the month of April, crude rose 2.8%. For the first quarter of this year, crude rose by 5.5%. Year to date, crude is higher by 6.2%. 

In the currency market on Tuesday, the dollar index, which measures the strength of the dollar against a basket of six other currencies rose by 0.5%. 

The Conference Board in US reported on Tuesday, 29 June 2010 that consumer confidence index plummeted to 52.9 in June, the lowest level since March from a downwardly revised 62.7 in May. Market had expected a June reading for consumer confidence of 62.8. The Conference Board's prior reading for May was 63.3. 

Persistent selling pressure has kept the stock market near its monthly low today as investors pursue safety amid rekindled concerns about global growth. The Dow was trading lower by almost 261 points at one point of time. 

Separately, the Conference Board, a private research group, on Tuesday revised down its leading indicator index for China to 0.3% in April, from a previously reported 1.7%. The same weighed on overall sentiments throughout the day. 

On Tuesday, reformulated gasoline for August delivery, the most active contract, retreated 7 cents, or 3.1%, to $2.06 a gallon. 

Also on Tuesday, natural gas for August delivery, the front-month contract, lost 19 cents, or 3.9%, to $4.54 per million British thermal units. 

Crude ended FY 2009 higher by 78%, the highest yearly gain since 1999. It reached a high of $82 earlier in October 2009 and hit a low of $33.98 on 12 February 2009. Crude prices had ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex. 

At the MCX, crude oil for July delivery closed lower by Rs 97 (2.7%) at Rs 3,529/barrel. 

Natural gas for July delivery closed at Rs 215, lower by Rs 7 (3.15%).

Gold Falls In India; Steady On COMEX

Indian gold futures fell later in the session today, however international gold futures were trading steady on COMEX supported by nearly 1% drop in the US dollar. 

U.S. stock futures pointed to a partial bounce after the last session's hammering, helped after European banks sought a smaller amount of central bank loans than markets had anticipated. But a report on jobs looms as worries about the global economy intensify.

The euro rallied after the results of the ECB tender. S&P 500 futures rose 8.5 points to 1,043.90 and Nasdaq 100 futures added 12.5 points to 1,776.00. Futures on the Dow Jones Industrial Average rose 63 points.

Indian gold futures on MCX for August delivery are trading down over Rs 45 per 10 grams. The commodity slipped to as low as Rs 18801. The traders may sell it on break of Rs 18800 with the target of Rs 18730 and Rs 18675 levels. The stop loss may be placed near Rs 18870-80 levels.

Most active August gold futures are trading up nearly $ 2 at $ 1244 per ounce. The traders may sell it again with the target of $ 1235 and $ 1230 levels.

FIIs in selling mode

Net outflow of Rs 176.20 crore on 29 June 2010 

Foreign institutional investors (FIIs) sold shares worth a net Rs 176.20 crore on Tuesday, 29 June 2010, as compared to an inflow of Rs 880.20 crore on Monday, 28 June 2010.
The net outflow of Rs 176.20 crore on 29 June 2010 was a result of gross purchases Rs 1830.70 crore and gross sales Rs 2007 crore. There was an outflow of Rs 200.30 crore from the secondary equity markets which was a result of gross purchases Rs 1805.30 crore and gross sales Rs 2005.70 crore. The BSE 30-share Sensex lost 240.17 points or 1.35% to 17,534.09 on that day. 

There was an inflow of Rs 24.10 crore into the category 'primary market & others', which was a result of gross purchases Rs 25.40 crore and gross sales Rs 1.30 crore. 

FII inflow in June 2010 totaled Rs 10508.40 crore (till 29 June 2010). FIIs had sold equities worth Rs 9436.70 crore in May 2010. FII inflow in the calendar year 2010 totaled Rs 31077.40 crore (till 29 June 2010). 

There are a total of 1,713 foreign funds registered with the Securities & Exchange Board of India (Sebi).

Weekly Scenario: Equity Diversified Funds Gains More than Index Funds

Most of the equity fund categories witnessed gains during the week end period 25 June 2010. Among the major equity fund categories, Equity Diversified funds category gained 0.80%, Tax Savings funds rose 0.68% and Index funds climbed 0.14% during the week end period 25 June 2010. Meanwhile, equity diversified funds gained more than index funds. Among the sector fund categories, FMCG Funds category was the biggest gainer by 2.53%, followed by Telecom Fund (2.51%), Pharma Funds (1.62%), Auto Fund (1.12%) and Media Funds (0.75%). While Banking Funds fell 0.42% and Infotech Fund lost 0.63%. Heavy profit booking in banking and IT sectors lead to the fall of these sector funds.

Among the sub categories in the debt funds, Short Term Income Funds gained 0.11%, Floating Rate Income Funds – Long Term surged 0.10%, Floating Rate Income Funds – Short Term, Ultra Short Term Funds and Liquid Funds climbed 0.09% each, Income Funds rose 0.08%, and Gilt – Short Term gained 0.02% over one week period ended 25 June 2010. On the other hand Gilt – Medium & Long Term category declined by 0.03%.
Sensex rose 3.71 points or 0.02% to 17,574.53 in the week ended 25 June 2010. While Nifty rose 6.45 points or 0.12% to 5,269.05. 

Small-cap and mid-cap indices outperformed the Sensex. The BSE Mid-cap index jumped 1.53% to 7,082.51 and the BSE Mid-cap index gained 1.62% to 8,989.20. 

Buying was seen in Consumer Durables, which gained 3.03%, followed by Oil & Gas (3.02%), Healthcare (2.97%), FMCG (2.79%) and Realty (2.21%). The major sectoral losers were IT and Bankex. 

Equity Diversified Funds
 
NAV of the Equity Diversified Funds category gained 0.80% in the week ended 25 June 2010, however the gains were lower than the previous week's gain of 1.69%. Among the schemes in the equity diversified category, DSP BR Natural Resources & New Energy Fund gained the maximum of 3.34%, followed by JM HI FI Fund which climbed 3.09%, SBI Magnum Comma Fund rose 2.82%, Tata Growing Economies Infrastructure – Plan A jumped 2.77% among others. Religare AGILE Fund and Principal Services Industries Fund were the worst performers in this category, losing 1.66% and 1.43% respectively.
 
Tax Savings Funds
 
Tax savings Funds category gained 0.68% over one week period as on 25 June 2010. Sahara Tax Gain Fund and Quantum Tax Savings Fund were the top performers with a return of 1.84% and 1.71% respectively during one week period. Among the other schemes in the category, Fortis Tax Advantage Plan (ELSS) rose 1.42%, ING Tax Savings Fund climbed 1.36% and HDFC Tax Saver Fund surged 1.31%. Bharti AXA Tax Advantage Fund – Eco and Bharti AXA Tax Advantage Fund ended at the bottom of the table losing 0.14% and 0.09% respectively. 

Index Funds
 
The Index Fund category gained 0.14%, over one week period ended 25 June 2010. However the category gains were lower than gains in the previous week end period. Benchmark S&P CNX 500 Fund was the highest gainers in this category as its NAV appreciated by 0.84%. Among the other schemes in the category, LICMF Index Fund – Sensex Advantage Plan rose 0.55%, ING Nifty Plus climbed 0.26% and Birla Sun Life Index Fund surged 0.18%. HDFC Index Fund-Sensex Plus Plan and HDFC Index-Sensex Plus Plan ended at the bottom of the table losing 0.06% and 0.05% respectively. 

Sector Funds
 
Pharma Funds category gained 1.62% over one week period ended 25 June 2010. All the schemes in this category gained, while UTI-Pharma & Healthcare Fund ended the week as the top performer with a return of 2.36%. 

Bank Funds category lost 0.42% over one week period ended 25 June 2010. Only 2 out of 7 schemes in this category registered gains, while the rest ended up as losers for the week end period. JM Financial Services Sector Fund rose 0.08% and Sundaram BNP Paribas Financial Services Opportunities Fund climbed 0.06%. Religare Banking Fund and ICICI Pru Banking & Financial Services Fund were the major losers in this category. Their NAV fell 0.91% and 0.81% respectively. 

FMCG Funds category rose 2.53% over one week period ended 25 June 2010. However the gains were lower than the previous week end gain of 3.60%. All the schemes in this category were able to deliver gains. ICICI Pru FMCG Fund was the top performer in this category. In terms of NAV performance, the fund's NAV gained 3.61% over the one week period. 

Infotech Funds category lost 0.63% over one week period ended 25 June 2010. Birla Sun Life New Millennium Fund was the only gainer in this category. Its NAV gained 0.11%. Franklin Infotech Fund was the biggest loser in this category as their NAV fell 1.10%. 

Hybrid Funds
 
Among the sub categories in the hybrid funds, Equity Oriented Balanced Funds surged 0.59%, followed by Debt Oriented Balanced Funds (0.22%), Monthly Income Plans (0.18%), Asset Allocation Funds (0.15%) and Arbitrage Funds (0.01%) during the one week period ended 25 June 2010. 

SBI Magnum NRI Investment Fund-Flexi Asset and UTI-Variable Investment Scheme gained 0.29% and 0.01% respectively under asset allocation balanced fund category.
JM Balanced Fund and HDFC Balanced Fund were the highest gainer in equity oriented balanced fund category as its NAV appreciated by 1.24% and 1.19% respectively. HDFC Children's Gift Fund-Investment Plan was the next highest gainer by 1.14%. Among the other schemes in the category, ING Balanced Fund climbed 1.08%, ICICI Pru Child Care Plan-Gift Plan surged 1.04% and DSP BR Balanced Fund added 0.98%. Benchmark Equity & Derivatives Opportunities Fund was loser in this category as their NAV eroded by 0.02%. 

LICMF was the highest gainer in debt oriented balanced fund category as its NAV appreciated by 0.61%. UTI-Retirement Benefit Pension Plan was the next highest gainer by 0.39%. Among the other schemes in the category, HDFC Children's Gift Fund-Savings Plan climbed 0.38%, UTI-CRTS surged 0.32% and UTI-Mahila Unit Plan added 0.29%. DWS Money Plus Advantage Fund was the worst performer in this category delivering just 0.03%. 

Exchange Traded Funds (ETFs)
 
Gold ETF category gained 0.71% during the week end period. All the schemes in this category ended as gainers as at the end of the week. 

The other ETF category declines 0.01% during the week ended 25 June 2010. Hang Seng BeES and Junior BeES were the top performers by 2.33% and 1.58% respectively. The only debt ETF i.e. Liquid BeES witnessed gain of 0.08%. Bank BeES and Reliance Banking Exchange Traded Fund were the biggest losers in this category. Their NAV declined by 1.19% and 1.18% respectively. 

Debt Funds
 
Among the sub categories in debt fund, Short Term Income Funds category gained the maximum of 0.11%. ICICI Pru Long Term Plan was the highest gainer in the entire debt fund category by 0.31%, followed by LICMF Bond Fund which surged 0.28%, IDFC G-Sec Fund - STP climbed 0.24% and SBI Magnum Income Fund added 0.23% among others.

Religare MF Announces Changes in the Fund Management Team

Religare Mutual Fund has announced changes in the fund management team. Mr. Vinay Paharia – Associate Portfolio Manager is designated as a co-fund manager for Religare Tax Plan. Accordingly, Religare Tax Plan will now be jointly managed by Mr. Vetri Subramaniam and Mr. Vinay Paharia. 

Further, Religare Mid Cap Fund and Religare Mid n Small Cap Fund which are presently managed jointly by Mr. Vetri Subramaniam and Mr. Vinay Paharia will now be managed solely by Mr. Vinay Paharia. The changes will be effective from 28 June 2010. 

Pursuant to resignation of Mr. Umesh Sharma, Religare Liquid Fund, Religare Ultra Short Term Fund, Religare Short Term Plan, Religare Active Income Fund, Religare Overnight Fund and Religare Gilt Fund, Religare Fixed Maturity Plan - Series II – Plan A (13 Months), Plan B (15 Months), Plan C (15 Months), Plan E (18 Months), Plan F (13 Months) will be managed by Mr. Ashish Nigam. The changes will be effective from 26 June 2010.a

ICICI Prudential MF Launches Gold ETF

NFO Period from 28 June to 27 July 2010 

ICICI Prudential Mutual Fund has launched a new fund named as ICICI Prudential Gold Exchange Traded Fund, an open ended Exchange Traded Fund. The units being offered will have a face value of Rs 100/- each and will be issued at a premium equivalent to the difference between the allotment price as determined from the actual purchase price of physical gold and the face value of Rs 100/-. The new issue is open for subscription from 28 June and close on 27 July 2010. 

ICICI Prudential Gold Exchange Traded Fund seeks to provide investment returns that, before expenses, closely track the performance of domestic prices of Gold derived from the LBMA AM fixing prices. However, the performance of the scheme may differ from that of the underlying gold due to tracking error. 

The scheme would allocate 95% to 100% of assets in gold bullion and instruments with gold as underlying that may be specified by SEBI. It would further allocate up to 5% of assets in debt & money market instruments (including cash & cash equivalent). 

Investments in securitised debt shall be limited to the maximum exposure allowed to the debt instruments as per above asset allocation. 

The minimum application amount is Rs 5000 and in multiples of Re 1 in cash. 

The fund seeks to collect a minimum subscription (minimum target) amount of Rs 1 lakh under the scheme during the NFO period. 

Entry load charge will be nil for the scheme. There will be no exit load on units bought or sold through the NSE and BSE. 

The scheme will be benchmarked against the domestic price of gold as derived from the London Bullion Market Association (LBMA) AM fixing prices. 

The units of ICICI Prudential Gold Exchange Traded Fund will be listed and traded on The National Stock Exchange, Mumbai (NSE) and the Bombay Stock Exchange Limited or on such other stock exchange(s) as may be decided from time to time after the closure of the New Fund Offer. 

The scheme will be managed by Mr. Chaitanya Pande.

Taurus MF Unveils Taurus MIP Advantage

NFO Period from 29 June to 23 July 2010 

Taurus Mutual Fund has unveiled a new fund named as Taurus MIP Advantage, an open ended income scheme. The New Fund Offer (NFO) price for the scheme is Rs 10 per unit. The new issue is open for subscription from 29 June and closes on 23 July 2010. 

The investment objective of the scheme is to generate regular income through a portfolio of fixed income securities, Gold ETFs and equity & equity related instruments. 

The scheme offers two options viz. growth and dividend option. Dividend option offers payout and reinvestment facility. 

The scheme will allocate 65% to 95% of assets in debt & money market instruments, upto 25% of assets in equity & equity related instruments and 5% to 25% of assets in Gold ETFs.
The minimum application amount for growth option is Rs 5000 and in multiples of Rs 1000 thereafter. Under dividend option the minimum application amount is Rs 25000 and in multiples of Rs 1000 thereafter. 

The fund seeks to collect a minimum subscription (minimum target) amount of Rs 100 lakh under the scheme during the NFO period. 

Entry load charge will be nil for the scheme. Exit load charge will be 1% if exited upto 1 year and nil if exited after 1 year. 

75% of the scheme will be benchmarked against CRISIL MIP Blended Fund Index and 25% against price of gold. 

The fund manager of the scheme will be Rahul Pal and Sadanand Shetty.

IDFC Capital Protection Oriented Fund – Series III Floats On

NFO Period from 28 June to 11 August 2010 

IDFC Mutual Fund has launched a new fund named as IDFC Capital Protection Oriented Fund – Series III, a three year close ended scheme. The scheme shall mature on 26 August 2013. The New Fund Offer (NFO) price for the scheme is Rs 10 per unit. The new issue is open for subscription from 28 June and closes on 11 August 2010. 

The investment objective of the scheme is to protect the capital by investing in high quality fixed income securities as the primary objective and generate capital appreciation by investing in equity and equity related instruments as a secondary objective.
The scheme offers dividend and growth option. 

The scheme would allocate up to 16% of assets in equities & equity related securities with high risk profile. It would further allocate 84% to 100% of assets in debt securities & money market instruments (of which up to 30% would be in securitized instruments) with low to medium risk profile. Equity Derivatives (futures and options) may be used in place of cash equities with the condition that the total notional exposure together with the investments in equities will not exceed the allocation of the corpus towards equity investments at any point of time. 

The minimum investment amount is Rs 5,000 and in multiples of Rs 10 thereafter.
The fund seeks to collect a minimum subscription (minimum target) amount of Rs 1 crore under the scheme during the NFO period. 

Entry and entry load charge shall be nil for the scheme. 

The Scheme's performance will be benchmarked against CRISIL MIP Blended Index. 

Ashwin Patni will be the fund manager for the scheme.

Religare MF Appoints Custodian of Physical Gold Held by Gold ETF

With effect from 29 June 2010 

Religare Mutual Fund has announced that The Bank of Nova Scotia has been appointed as a Custodian of physical gold held by Religare Gold Exchange Traded Fund (ETF), an open ended gold exchange traded fund, with effect from close of business hours of 29 June 2010. 

Accordingly, Deutsche Bank AG has been ceased to be Custodian of physical gold held by Religare Gold Exchange Traded Fund with effect from close of business hours of 29 June 2010.

Canara Robeco MF Launches Large Cap+Fund

NFO Closes on 27 July 2010 

Canara Robeco Mutual Fund has launched a new fund named as Canara Robeco Large Cap+Fund, an open ended equity scheme. The New Fund Offer (NFO) price for the scheme is Rs 10 per unit. The new issue closes subscription on 27 July 2010. 

The investment objective of the fund is to provide capital appreciation by predominantly investing in companies having a large market capitalization. 

The fund will invest in any of the ‘Top 150' stocks on the basis of market capitalization representing large cap stocks. Canara Robeco Large Cap+ Fund will have a distinctive feature in its investment process. This fund will use the inputs of the Robeco Emerging Markets Quantitative model (‘REM Quant model') in its investment process as an Idea Generator. 
 
The scheme offers two options viz. growth and dividend option. Dividend option offers dividend payout and dividend re-investment facility. 

The scheme would allocate 65% to 100% of assets in large cap equity and equity related instruments. For the purpose of this Fund, Large Cap Companies are defined as those which are ranked from 1 to 150 on the basis of market capitalization at the time of investment. The ranking will be reviewed on the basis of market capitalisation of companies at the end of every calendar quarter. It would further allocate upto 35% of assets in domestic debt and money market instruments (including securitized debt up to 10% of AUM). 

The minimum application amount is Rs 5000 and in multiples of Re 1 thereafter.
The fund seeks to collect a minimum subscription (minimum target) amount of Rs 1 crore under the scheme during the NFO period. 

Entry load charge will be nil for the scheme. Exit load charge will be 1% for all amounts if redeemed / switched-out within 1 year from the date of allotment. 

Benchmark Index for the scheme is BSE 100. 

The fund manager of the scheme will be Mr. Anand N. Shah.

Friday, June 25, 2010

MFs heave a sigh of relief as Sebi extends debt norm deadline

Sebi's decision to extend the deadline for debt valuation norms by one month has come as a respite for mutual funds. 

Debt funds had been facing massive redemptions in the current month with close to Rs 1,00,000 crore expected to be redeemed by investors - mostly banks and large corporate houses - facing liquidity crunch. In its release in February, Sebi had stated that debt and money market securities with maturity of more than 91 days (earlier 182 days) shall be marked to market. Now, the deadline of July 1 had been extended till of August 1. 

The new valuation norms are expected to affect NAVs of liquid funds - particularly those having higher average maturity. Average maturity indicates the average holding period of fund as measured by remaining days of maturity of debt papers, weighted by amount of investments. Liquid schemes like LIC MF income plus, IDFC Saving Advantage Fund A and DWS Treasury Investment Regular might see some NAV adjustments in the coming days as their maturity is much higher than 91 days, according to the data from Value research.
K Ramkumar, head of fixed income at Sundaram BNP Paribas Mutual Fund said, "There were already some liquidity crisis is the market and with June being the quarter end the redemption is likely to continue. However, the breather of one month to the fund houses will have not much impact as we were already prepared for it." In May, debt schemes had seen huge redemption's of over 65,000 crore following banks pulling-out money to lend to telecoms companies for the 3G auctions. 

Market experts expect this norm to reduce the practise of short-ended funds going long - by buying long dated securities, in its quest for higher returns. Now, such investments will increase volatility and affect overall fund performance, according to experts. Sebi in its release stated that, floating rate securities with floor and caps on coupon rates, and a residual maturity of up to 91 days should be valued on amortisation basis taking the coupon rate as floor price. 

Sebi rider for stock market courses 

The Securities and Exchange Board of India (Sebi) has said that persons above the age of fifty years or having at least ten years experience in sale or distribution of mutual fund will be given the option of obtaining the certification either by passing the National Institute of Securities Markets (NISM) certification examination or qualifying for Continuing Professional Education (CPE) by obtaining such classroom credits. 

Sebi in its release said, "However, to facilitate the transition process from AMFI to NISM, it has been decided that a person holding a valid AMFI certification whose validity expires between June 01, 2010 and December 31, 2010, would be required to comply with the CPE requirements as laid down by NISM under the relevant clauses of the Certification Regulations, by December 31, 2010."

Amfi set to turn into self-regulatory body

The Association of Mutual Funds in India (Amfi) is all set to become a self-regulatory organisation. "In a meeting held a fortnight ago, we had discussed Amfi becoming a self-regulatory organisation. The point is to not to bother the market regulator with things we can sort ourselves," said H N Sinor, CEO, Amfi. 

He added it will take some time, but will be discussed in the forthcoming board meeting. Sinor was present on the sidelines of a CII conference on mutual funds in Mumbai. 

The mutual fund regulator, Securities and Exchange Board of India (Sebi), is agreeable that Amfi must take responsibility in its own hands by drafting a policy paper. It wants to create a clear roadmap for the industry. 

"I think Amfi should prepare the report and start the initiative rather than wait for the government or the regulator to start the work." said Sebi chairman C B Bhave. 

"We will soon start the work on the policy paper," said Sinor "The time frame is not yet decided, the policy paper is expected to look into all elements of concern for the industry as it leapfrogs into the next decade of growth, he added. 

A special Amfi committee is looking at simplifying the jargon used in the mutual fund industry. A report is likely to be submitted soon. 

Amfi chairman, AP Kurian said: "Investors find key information documents and offer documents quite complex. We have simplified all the terms used in such documents and soon it will be circulated among the investors." Recently, Amfi conducted 96 programmes covering 45 cities with 4,000 participants for investor education.

Bullion metals glitter

Weak economic data impart shine to precious metals 

Bullion metal prices ended higher on Thursday, 24 June 2010 at Comex. Weak set of economic data at Wall Street and shaky dollar pushed prices higher on Thursday. 

Generally, a stronger dollar pressures demand for dollar-denominated commodities, such as crude oil and gold, which become more expensive for holders of other currencies and also vice versa. Recently, the embattled euro has played stronger role in moving prices rather than dollar fluctuation. Bullion metals have registered increase in prices despite strong dollar in recent times and vice versa. 

On Thursday, gold for August delivery ended at $1,245.9 an ounce, higher by $6 (0.9%) an ounce on the New York Mercantile Exchange. During intra day trading, prices rose to a high of $1,249.5. Last Friday, prices rose to a high of $1263.7 during intra day trading. Last week, gold ended higher by 2.3%. 

Gold for June delivery had settled above $1,200 in early December 2009, only to pull back to $1,172 area and dip as much as the $1,050 vicinity in early February 2010. Gold ended May higher by 3%. For the month of April, gold ended higher by 6%. For the first quarter of this year, gold rose by 1.7%, its sixth quarterly rise. On a year to date basis, gold is higher by 13.2%. 

On Thursday, July Comex silver futures ended higher by 28 cents (1.5%) at $18.73 an ounce shrugging off earlier weakness. Last week, silver ended higher by 5.2%. For May, silver shed 1.1%. For the month of April, silver ended higher by 4.1%. For the first quarter of this year, silver rose by 3%. On a year to date basis, silver is higher by 9.5%. 

In the currency market on Thursday, the dollar index, which measures the strength of the dollar against a basket of six other currencies fell by 0.2%. 

The Commerce Department reported on Thursday, 24 June 2010 that the steady upward trend in the manufacturing sector hit a bump in May as a big drop in orders for new airplanes pushed total durable-goods orders down 1.1%, the largest decline since last August. April's orders were revised up to a 3.0% gain from 2.8% previously reported. 

Separately, The Labor Department reported on Thursday, 24 June 2010 that initial claims (first-time applications for state unemployment benefits) fell by 19,000 last week to a seasonally adjusted 457,000, the lowest in six weeks confirming that U.S. labor markets remain weak. The report was close to market expectations, as market was looking for a drop to 460,000. 

Gold had ended FY 2009 higher by 24%. Silver futures had ended 2009 up 50%. The dollar index had lost 4.2% against its counterparts last year. 

Last year, after hitting a low at $807.30 per ounce on 15 January 2009, gold futures rallied almost 51% to hit an all-time high at $1217.40 per ounce during early December of 2009 but fell from those levels at the end. Silver futures had hit a low at $10.42 on 15 January 2009 and hit a high at $19.30 per ounce on 2 December 2009. Like gold, silver also ended lower than its all time high level. 

At the MCX, gold prices for August delivery closed higher by Rs 97 (0.51%) at Rs 18,790 per ten grams. Prices rose to a high of Rs 18,854 per 10 grams and fell to a low of Rs 18,595 per 10 grams during the day's trading. 

At the MCX, silver prices for July delivery closed Rs 226 (0.8%) higher at Rs 29,498/Kg. Prices opened at Rs 29,300/kg and rose to a high of Rs 29,610/Kg during the day's trading.

Crude manages to inch up

Volatile crude shrugs off earlier weakness 

Volatile crude oil prices managed to shrug off earlier weakness and inch up on Thursday, 24 June 2010 at Nymex. Prices fell earlier due to weaker than expected set of economic reports, which questioned crude's demand in the coming months. But a weak dollar helped crude finish in the green. 

On Thursday, crude-oil futures for light sweet crude for August delivery closed at $76.35/barrel (higher by $0.21 or 0.2%). Last week, prices gained 4.6%. 

For the month of May, crude shed 14%. It was the biggest monthly drop for crude since December 2008. For the month of April, crude rose 2.8%. For the first quarter of this year, crude rose by 5.5%. Year to date, crude is higher by 6.9%. 

In the currency market on Thursday, the dollar index, which measures the strength of the dollar against a basket of six other currencies fell by 0.2%. 

The Commerce Department reported on Thursday, 24 June 2010 that the steady upward trend in the manufacturing sector hit a bump in May as a big drop in orders for new airplanes pushed total durable-goods orders down 1.1%, the largest decline since last August. April's orders were revised up to a 3.0% gain from 2.8% previously reported. 

Separately, The Labor Department reported on Thursday, 24 June 2010 that initial claims (first-time applications for state unemployment benefits) fell by 19,000 last week to a seasonally adjusted 457,000, the lowest in six weeks confirming that U.S. labor markets remain weak. The report was close to market expectations, as market was looking for a drop to 460,000. 

The EIA reported on Wednesday that oil inventories for last week increased 2 million barrels in the week ended 18 June. Gasoline stocks declined by 800,000. Stocks of distillates, which include heating oil and diesel, increased 300,000 barrels. Refineries operated at 89.4% of their capacity last week. Demand for gasoline rose 0.8%. On the contrary, market was expecting a decline of 1.5 million barrels in crude stocks and a drop of 500,000 barrels in gasoline supplies. 

The International Energy Agency said on Wednesday that the average import oil price will likely increase from $77 a barrel this year to $86 a barrel by 2015. 

On Thursday, reformulated gasoline futures added a penny to end at $2.08 a gallon.
Also on Thursday, July natural gas retreated 6 cents, or 1.2%, to settle at $4.74 per million British thermal units. The U.S. Energy Information Administration reported on Thursday that inventories of natural gas increased by 81 billion cubic feet in the week ended 18 June. That compares to a five-year average of 86 billion cubic feet. 

Crude ended FY 2009 higher by 78%, the highest yearly gain since 1999. It reached a high of $82 earlier in October 2009 and hit a low of $33.98 on 12 February 2009. Crude prices had ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex. 

At the MCX, crude oil for July delivery closed lower by Rs 30 (0.84%) at Rs 3,536/barrel. Natural gas for June delivery closed at Rs 222.9, lower by Rs 3.2 (1.4%).

FIIs step up buying

Net inflow of Rs 1238.40 crore on 24 June 2010 

Foreign institutional investors (FIIs) bought shares worth a net Rs 1238.40 crore on Thursday, 24 June 2010, higher than a net inflow of Rs 369.70 crore on Wednesday, 23 June 2010. 

The net inflow of Rs 1238.40 crore on 24 June 2010 was a result of gross purchases Rs 4511.30 crore and gross sales Rs 3272.90 crore. There was an inflow of Rs 1216.70 crore into secondary equity markets which was a result of gross purchases Rs 4488.20 crore and gross sales Rs 3271.50 crore. The BSE 30-share Sensex lost 25.70 points or 0.14% at 17,730.24 on that day.
There was an inflow of Rs 21.70 crore in the category 'primary market & others', which was a result of gross purchases Rs 23.10 crore and gross sales Rs 1.40 crore. 

FII inflow in June 2010 totaled Rs 10088.50 crore (till 24 June 2010). FIIs had sold equities worth Rs 9436.70 crore in May 2010. FII inflow in the calendar year 2010 totaled Rs 30657.50 crore (till 24 June 2010). 

There are a total of 1,709 foreign funds registered with the Securities & Exchange Board of India (Sebi).

Escorts MF Declares Dividend For Opportunities Fund

Record date for dividend is 1 July 2010 

Escorts Mutual Fund has declared dividend on the face value of Rs. 10 per unit under dividend option of Escorts Opportunities Fund. The record date for dividend is 1 July 2010. 

The quantum of dividend will up to maximum of Rs 0.0981 per unit as on the record date. The NAV of dividend option was at Rs. 10.1579 per unit and Rs. 27.2638 per unit for growth option as on 23 June 2010. 

Escorts Opportunities Fund has the investment objective to generate long term capital appreciation by predominantly moving investments in a portfolio of equity and equity related securities amongst different sectors, present or future, expected to show high earnings such as technology sector, media sector, entertainment sector, communications Sector, fmcg sector, pharmaceuticals sector, cyclical sector, real estate sector, space sector, cybercity sector etc.

Wednesday, June 23, 2010

Crude prices erase earlier gains

Prices drop due to weak economic data and strong dollar 

Crude oil prices slipped on Tuesday, 22 June 2010 at Nymex. Prices fell due to the steady dollar and weaker than expected housing sector report. 

On Tuesday, crude-oil futures for light sweet crude for August delivery closed at $77.85/barrel (lower by $0.76 or 0.96%). During intra day trading, prices rose to a high of $78.95 and also fell to a low of $77.79. Last week, prices gained 4.6%. 

For the month of May, crude shed 14%. It was the biggest monthly drop for crude since December 2008. For the month of April, crude rose 2.8%. For the first quarter of this year, crude rose by 5.5%. Year to date, crude is higher by 8.6%. 

Latest report at Wall Street showed that existing-home sales registered an unexpected 2.2% decline in May against an expected rise around 6%, on the thought that buyers would rush to take advantage of a tax break expiring this month. This shook investor confidence a bit today once again. 

In the currency market on Tuesday, the dollar index, which measures the strength of the dollar against a basket of six other currencies rose by 0.3%. 

On Tuesday, natural gas for July delivery shed 26 cents, or 4.6%, to $4.6 per million British thermal units. 

Also on Tuesday, heating oil for July delivery shed 58 cents, or 0.3%, to $2.09 a gallon. July gasoline lost $0.01 (0.5%) to $2.12 a gallon. 

Crude ended FY 2009 higher by 78%, the highest yearly gain since 1999. It reached a high of $82 earlier in October 2009 and hit a low of $33.98 on 12 February 2009. Crude prices had ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex. 

At the MCX, crude oil for July delivery closed higher by Rs 18 (0.52%) at Rs 3,613/barrel. Natural gas for June delivery closed at Rs 217.2, lower by Rs 6.2 (2.8%).

Gold Edges Up As Dollar Weakens

Gold futures edged higher in mid day London electronic session as the U.S. dollar weakened against its major counterparts, weighed down by expectations the Federal Reserve will keep its low-rate stance at the end of its monetary-policy meeting.

Gold for August delivery rose $5.40, or 0.4%, to $1246.40 an ounce in electronic trading on Globex. It may face a resistance near $1249 levels.

Attention turns to the Federal Open Market Committee, which releases its interest rate decision at 2:15 p.m. Eastern. Economists don't expect a rate move or even a changing of the language saying rates will be kept low for an extended period of time.

Wednesday's session features data on May new-home sales, which are expected to drop sharply, as existing home sales did in data released on Tuesday.

In markets the U.S. stock futures rose, pointing to a partial recapturing of the previous session's losses as the Federal Reserve is expected to again refrain from signalling interest rate hikes. S&P 500 futures rose 4.7 points to 1,095.20 and Nasdaq 100 futures climbed 7.5 points to 1,885.70. Futures on the Dow Jones Industrial Average added 40 points.

MCX August gold futures are trading at Rs 18728 per 10 grams. The traders may buy it again on break of Rs 18750 with target of Rs 18810-825 and a stop loss near Rs 18710.

FIIs continue buying

Net inflow Rs 8480.40 crore in June 2010 

Foreign institutional investors (FIIs) bought shares worth a net Rs 1037.30 crore on Tuesday, 22 June 2010, which was lower than their massive buying of Rs 1799.40 crore on Monday, 21 June 2010 

The net inflow of Rs 1037.30 crore on 22 June 2010 was a result of gross purchases Rs 2576.30 crore and gross sales Rs 1539 crore. There was an inflow of Rs 1036.20 crore into secondary equity markets which was a result of gross purchases Rs 2574.90 crore and gross sales Rs 1538.70 crore. The BSE Sensex lost 126.86 points or 0.71% at 17,749.69 on that day. 

There was an outflow of Rs 1.10 crore in the category 'primary market & others', which was a result of gross purchases Rs 1.40 crore and gross sales Rs 0.20 crore. 

FII inflow in June 2010 totaled Rs 8480.40 crore (till 22 June 2010). FIIs had sold equities worth Rs 9436.70 crore in May 2010. FII inflow in the calendar year 2010 totaled Rs 29049.40 crore (till 22 June 2010). 

There are a total of 1,709 foreign funds registered with the Securities & Exchange Board of India (Sebi).

ICICI Pru MF to Introduce Exit Load for Switch-out Transactions

With effect from 25 June 2010 

ICICI Prudential Mutual Fund has announced the introduction of exit load on prospective basis, for switch-out transactions made from the following schemes to any other equity scheme (s) with effect from 25 June 2010. 

The schemes are ICICI Prudential Balanced Fund, ICICI Prudential Infrastructure Fund, ICICI Prudential Power, ICICI Prudential Discovery Fund, ICICI Prudential Services Industries Fund, ICICI Prudential Dynamic Plan, ICICI Prudential Emerging S.T.A.R. (Stocks Targeted At Returns) Fund, ICICI Prudential Banking & Financial Services Fund, ICICI Prudential Focused Bluechip Equity Fund, ICICI Prudential Equity and Derivatives – Wealth Optimiser Plan, ICICI Prudential FMCG Fund, ICICI Prudential Indo Asia Equity fund, ICICI Prudential Technology Fund, ICICI Prudential Equity Opportunities Fund and ICICI Prudential Target Returns Fund (an open ended diversified equity fund). 

According the exit load charge will be 1% of the applicable NAV, if the amount sough to be switched out is invested for a period of up to one year from the date of allotment. The exit load charge will be nil, if the amount sough to be switched out is invested for a period of more than one year from the date of allotment.

ICICI Pru MF Declares Dividend For Discovery Fund

Record date for dividend is 28 June 2010 

ICICI Prudential Mutual Fund has announced the declaration of dividend on the face value of Rs 10 per unit under dividend option of ICICI Prudential Discovery Fund. The record date for dividend has been fixed as 28 June 2010. 

The quantum of dividend will be Re 1 per unit as on the record date. The NAV of the scheme was at Rs 20.88 per unit as on 21 June 2010. 

ICICI Prudential Discovery Fund is an open-ended equity scheme, which as the investment objective to generate returns through a combination of dividend income and capital appreciation by investing primarily in a well-diversified portfolio of value stocks.

Mutual funds offload shares worth Rs 231.70 crore on 22 June 2010

They are net buyers to the tune of Rs 327.39 crore this month 

Mutual funds offloaded shares worth a net Rs 231.70 crore on Tuesday, 22 June 2010, compared to an inflow of Rs 72.70 crore on Monday, 21 June 2010. 

The net outflow of Rs 231.70 crore on 22 June 2010 was a result of gross purchases Rs 297.60 crore and gross sales Rs 529.30 crore. The BSE Sensex lost 126.86 points or 0.71% at 17,749.69 on that day. 

Mutual funds have bought equities worth a net Rs 327.39 crore in this month so far (till 22 June 2010). Mutual funds had bought equities worth a net Rs 98.60 crore in May 2010

Indian Mutual Fund Industry Moves towards Inclusive Growth

The robust growth of Indian mutual fund industry is an indication that the country is an attractive investment destination. India is emerging as the big investment destination, riding on a high savings and investment rate, as compared to other Asian economies. The trend of rising personal incomes has been witnessed not only amongst the young population, but also the high net worth (HNI) segment, which have sizeable sums to invest.

PricewaterhouseCoopers (PwC) and the Confederation of Indian Industry (CII) in a report titled Towards 2015: “Sustaining Inclusive Growth - Evolving Business Models” had highlighted the low level of retail participation and the persistent challenges which the industry is facing. Limited reach in smaller towns and cities (beyond Tier 1 cities), cost pressures and lack of investor education, are some of the most dominating concerns, which fund houses are dealing with. The report emphasises the predicament of the distribution community, after the restrictions on entry load, and tries to identify viable measures to deal with this change. The report also highlighted the regulatory front, enlisting the various changes that have occurred over the last year, along with their impact on the business. The regulatory trends across some other global economies like US, UK, Australia and China also have been looked at to bring a perspective to local regulations vis a vis the rest of the world.  

Despite the growth of mutual fund industry, penetration levels in India are low as compared to other global economies. Assets under management as a percentage of GDP is less than 5 per cent in India as compared to 70 per cent in the US, 61 per cent in France and 37 per cent in Brazil.

U K Sinha, Chairman - CII Mutual Fund Summit 2010 and Chairman & Managing Director, UTI Asset Management Company Limited commented: “The Indian mutual fund industry is passing through a transformation. On one side it has seen a number of regulatory developments while on the other the overall economy is just recovering from the global crisis of 2008. The regulatory changes have been made keeping in mind the best interests of the investors. However, like all changes these changes will take time to be adapted by industry, intermediaries and the investing public at large. The industry is looking forward to early resolution of certain inter-regulatory issues requiring Government / Court intervention. Market participants are waiting to see how the industry adapts to these changes, while trying to maintain its pace of growth. Mutual funds are restructuring their business models to provide for increased efficiencies and investor satisfaction. The industry also faces a number of issues which are characterized by lack of investor awareness, low penetration levels, high dependence on corporate sector and spiralling cost of operations. The Growth rate of the industry therefore needs to be seen from this perspective. Though, it is commendable to note, that, Assets Under Management have managed to record a compounded growth of 28% over 2006-2010, however, the AUM of Equity Funds and Balanced Funds where retail investors invest have only grown by 20% in the same period. The net sales of Equity/Balanced funds in 2009-10 have been one of the lowest in recent years.

India has vast growth potential backed by a resilient economy, commensurate with an accelerated GDP growth rate of 7.4%, high rate of household savings and investments”.

Since the 1990's when the mutual fund space opened up to the private sector, the industry has traversed a long path, adapting itself continuously, to the changes that have come along. Growth in Assets Under Management (AUM) experienced has been unprecedented, growing at a CAGR of 28% over the last four years, slowing down only over the last two years, as a fallout of the global economic slowdown and financial crisis. Although investor confidence was significantly eroded and AUMs suffered a dent, the sale of mutual funds has revived over the last few quarters, which implies regained confidence of investors, striving to look at alternate investment opportunities and any attendant higher returns, though the markets continue to be choppy.

In today's volatile market environment, mutual funds are looked upon as a transparent and low cost investment vehicle, which attracts a fair share of investor attention helping spur the growth of the industry.

Investor contribution remains skewed towards the corporate sector: Inspite of India offering an exciting retail environment, with abundant growth opportunities, participation from the segment of retail investors continues to remain at deplorably low levels. As of March 31, 2010, the participation from the retail segment was 26.6%, a marginal increase from 21.3% as on March 31, 2009. Dependence on the corporate sector is still pretty pronounced at 51%, which is not much of a change from last year. Volatile market conditions, sound a note of caution for the industry, as high dependence on the corporate sector may result in the fund houses being prone to unexpected redemption pressures.

The rationale behind institutional sales claiming such a large chunk of the AUM pie is the benefit of tax arbitrage and lack of short term investment options. When compared with economies like US and China, investments channelized through corporates, comprise only around 15% and 30% of the assets under management (AUM), respectively.

Overall, the assets under management recorded an impressive growth of 47%, as of March 2010 which was predominantly driven by the corporate sector, posting the same level of growth. In the same period, the retail sector also managed to report a strong growth of 84% in its assets under management, followed by the HNI segment growing 24%. It has been observed of late, that the HNI segment especially in Tier 2 &Tier 3 cities has expanded creating a pool of investible surplus at the disposal of the mutual fund industry.

Tectonic changes in Business Models have been necessitated to sustain profitability:  The restriction of entry load on existing and new mutual funds last year marked a turning point in the functioning of the mutual fund industry. This in effect, has spelt out a huge impact on the commission structure of distributors, leading funds houses and distributors to restructure their business and operating models in order to arrive at a profitability solution. Intermediation has become painful for distributors who are making the best of this current situation by turning themselves into financial advisors, which would act as a positive step towards financial literacy of investors. Another measure which is being adopted by distributors is that of deeper segmentation of clients, wherein the lower rung of revenue earners is being encouraged to transact online. In addition, retail strategies are being modified to generate optimum efficiencies. There is also another category of distributors which is using this regulatory change as a stepping stone to acquiring new clientele by luring them with attractive mutual funds and then selling them high margin products.

The various options for Business models that are currently being explored are: discount brokers, directly from AMC and advisory model. Discount brokers model will serve customers at a nominal fee, earning commissions from the AMC in addition to receiving trail commissions. Directly from AMC model is apt if the customer is able to identify the type of fund that he wants to invest in. Advisory model functions on fees paid to financial advisors for advice rendered by them. Liaison with an advisory model is more likely to pave the way for long term benefits, aiding in gaining more market share.

However, distributors seem to be daunted by a common concern of lack of adequate investor education, impacting all these models, as their success will depend extensively on the levels of financial literacy among investors. The investor stand to reap long term gains, as all the alternatives in one way or other urge investors to move towards better awareness and product education.
    
Cost management, a key element of operating models: All business and operating models are central to meeting customer needs while streamlining their business processes. In order to establish a sustainable model, which will yield profits in the long run, cost management needs to be dealt with a firm hand. The three major cost components of fund houses are distribution cost, hiring cost and spending on marketing.

The industry should look for diverse range of products, regulations for the distributors, eligibility norms of AMCs, trading through stock exchange platforms and real estate mutual funds.

Other key highlights of the report are as follows:

  • Strong distribution networks are crucial. Learning's can be taken from other sectors like FMCG, telecom, to get a new perspective


  • Assessment of regulatory and business trends in other global economies, on similar businesses  

Tuesday, June 22, 2010

Oil Tumbles On Sharp Appreciation In Dollar

International crude oil futures tumbled more than $1 on sharp gains in US dollar ahead of the housing data and as the Fed begins its 2 day rate meeting today. The movement was quite somber earlier in the session with traders focused on UK's emergency annual budget after last month's elections. 

U.S. stock futures declined Tuesday, with worries over the health of the European banks at the forefront as the Federal Reserve begins its two-day interest rate setting meeting.

S&P 500 futures fell 5.4 points to 1,105.20 and Nasdaq 100 futures fell 7 points to 1,892.50. Futures on the Dow Jones Industrial Average dropped 40 points.

NYMEX light sweet oil for August contract is trading down $1.07, falling as much as $ 77.33 per barrel. The July futures contract expires today.

Tuesday's session includes data on May existing home sales as the Federal Open Market Committee begin its two-day meeting. As is custom, no comment is expected on the first day.

Front month futures contract on MCX are trading at Rs 3593 down just Rs 2 per barrel. The weakness in Indian Rupee is saving the domestic commodities from falling in tandem with the international commodities. The traders may watch for support between Rs 3460-3435 levels. A break of that may take it to Rs 3500 levels.

Diverse Trades Seen In Domestic & International Gold

Opposite movement was seen in domestic and international bullion futures today with the respective currencies playing the key role in determining the momentum. Gains in the US dollar pressurized the COMEX gold futures, which fell below $ 1235 levels. On the other hand the overseas gains in US dollar weakened the Indian Rupee, which in turn protected the domestic commodities from falling. 

U.S. stock index futures dipped on Tuesday as investors took a more cautious view over China's vow of more yuan flexibility, while data on home sales was on tap later in the morning.

Most active august gold futures on COMEX lost nearly $ 8 falling as low as $ 1233 per ounce. The traders may watch for next support around $ 1229 levels.

On the contrary MCX August bullion is trading over Rs 60 at Rs 18610 per 10 grams. The counter needs to break the range of Rs 18650-18540 for direction. A fall below Rs 18540 may take it to Rs 18500 and Rs 18440 levels.

MCX July Silver futures fell to as low as Rs 29283 down Rs 85 per kg. The commodity may find next support at Rs 29250 levels, a break of that may take it to below Rs 29140-100 levels.

FIIs continue buying

Provisional net inflow of Rs 975.83 crore on Tuesday, 22 June 2010 

Foreign institutional investors (FIIs) continue to mop up Indian stocks. FIIs today, 22 June 2010, bought shares worth a net Rs 975.83 crore, as per the provisional data released by the stock exchanges. Domestic funds sold shares worth a net Rs 196.99 crore. 

Foreign funds have made heavy purchases of Indian stocks over the past few days. The net inflow totaled Rs 5480.79 crore in this month so far (till 22 June 2010), compared to a massive outflow of Rs 12071.13 crore in May 2010. 

Domestic funds, which had absorbed some of the heavy selling from foreign funds last month, have offloaded stocks worth a net Rs 2210.10 crore this month so far. Domestic funds had mopped up equities worth a net Rs 6361.17 crore in May 2010.

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