While it prefers to sell off the equities in October 2009
Mutual Fund's (MF's) net selling in equities had shot up in October
2009 against September 2009. As per Securities and Exchange Board of
India (Sebi) data, MFs had sold equities in bulk amount while increased
the investment in debt papers in October 2009. In the low interest rate
scenario, MFs preferred to buy debt securities which crossed net
investment to Rs 34300 crore in October 2009.
Equity investments under selling pressure in October:
Equity investments: In the month of October 2009, MFs remained
net sellers of equity. Of the 20 trading sessions, MFs were net sellers
of equities in 15 sessions while net buyers in the remaining five
sessions. Domestic mutual funds' net investments in equities increased
to Rs 5194.30 crore in October 2009 compared with net selling of Rs
2334.60 crore in September 2009, according to data released by the
Sebi.
MFs sold a massive Rs 906.70 crore on a net basis on 5 October 2009.
The funds net bought maximum equities of Rs 457.70 crore on 29 October
2009.
The BSE Sensex and the S & P CNX Nifty plunged 7.18% and
7.31%, respectively in October 2009. As per Sebi data, FIIs net
investment slowed down to Rs 9077.00 crore in October 2009 from Rs
18344.3 crore in September 2009. While FIIs' debt net investment rose
to Rs 6895.6 crore in October 2009 as against Rs 2228.4 crore in
September 2009.
Debt investments: To gain good returns at low interest rates,
MFs remained net buyers of debt instruments in October 2009 since past
11 months. More activities were recorded in income and debt funds which
invest mainly in debt papers.
MFs were net buyers of debt securities in all 20 sessions. MFs net
buying of debt instruments zoomed to Rs 34308.00 crore in October 2009
compared with buying of just Rs 8458.00 crore in September 2009.
Maximum net investment of debt securities was of Rs 8171.60 crore on 1
October 2009.
MFs trading for April- October 2009:
The Indian benchmark indices ended positively at the end of October
2009 from April 2009 on a note of global recovery and strong potential
in Indian economy. BSE Sensex and NSE's S & P CNX Nifty advanced
39.40% and 35.63%, respectively in seven months ended October 2009.
Equity investment: MFs were net sellers of equities worth Rs
1963.90 crore in April-October 2009. Out of seven months, April to
August 2009, MFs were net buyers worth Rs 5565.00 crore but it turned
into net sellers of Rs 7528.90 crore in past two continuous months of
September and October 2009. As major benchmark indices started to gain
from March 2009, MFs picked up investment in equities. When the markets
were up in September 2009 above 9%, MFs preferred to sell shares to
book profits as market crossed 17000 mark. Thus, the equity investments
slowed down in September 2009. While in October, major indices tumbled
on an expectation of reversal of easy monetary policy.
As the Indian benchmark indices recovered at fast pace, FIIs invested
heavily in the stock markets in this period. As per Sebi data, FIIs
invested Rs 73845.70 crore in April- October 2009 compared with net
selling of Rs 40706.40 crore in the same period last year. While FIIs'
net investment in debt securities were surged to Rs 11707.20 crore in
April-October 2009 compared with net buying of Rs 3359.50 the same
period in last year.
Debt exposure: Since September 2008, RBI's various monetary
measures led to fall in interest rates to induce more credit flow and
to revive the economic growth. Thus, MFs preferred to invest in debt
securities in the falling interest rate scenario to enjoy profits along
with the rise in debt papers price. In all the seven months,
April-October 2009, MFs were net buyers of debt securities. MFs net
buying of debt papers soared worth Rs 128310.10 crore in April- October
2009 compared with net buying of Rs 19208.40 crore in April- October
2008.
Mobilisation through new launches slows down:
As far as new issues are concerned, Out of 58 NFOs (new fund
offers), 35 funds are income funds and only 14 equity funds have been
launched in past 7 months.
As per Association of Mutual Fund of India (AMFI) data, 58 new funds
have been launched from April-October 2009. Through new launches, the
industry mobilised Rs 14181 crore. However, this collection figure is
very much less than Rs 93285 crore in April- October 2008. In September
and October 2009, 30 NFOs were launched, 23 were of income and 5 of
equity category and 1 from ELSS category and 1 from liquid category.
As the markets started to recover from March 2009, MFs had launched new
funds. At the same time the debt securities continued to be lucrative
on low interest rates, MFs were in rush to launch more income funds.
Nearly 25 income funds had been launched in past 3 months. Moreover,
Reserve Bank of India (RBI), in its recent stance, signaled reversal of
easy monetary policy by indicating the end of low interest rate regime
in next few months. To reap profits from the current low interest rate
structure, MFs have launched such type of funds that invest primarily
in debt securities, government bonds.
From the equity front, markets are likely to move up though from past
few days correction has occurred in the market. As the Indian economy
is having good prospectus, more inflows are expected on fast recovery
in the economy.
Sebi's move since April 2009:
The Securities and Exchange Board of India (Sebi) has been taking
various steps to empower the investors in mutual funds by way of more
transparency in the loads borne by the investor so that the investor
can take informed investment decisions.
Sebi has abolished entry load in all schemes, with effect from
1 August 2009. In order to ease concentration risk, the Sebi has
decided that no mutual fund scheme shall invest more than 30% of its
net assets in money market instruments of an issuer. The schemes may,
however, continue to invest up to 15% or 20% of net assets, as the case
may be, in other investment grade debt instruments of an issuer as
already provided in the Regulations. These limits will not cover
investments in government securities, T-Bills and Collateralized
Borrowing and Lending Obligations (CBLO).
The distributors should disclose all the commissions (in the form of
trail commission or any other mode) payable to them for the different
competing schemes of various mutual funds from amongst which the scheme
is being recommended to the investor.
Sebi has revised the filing fee for offer document.
Accordingly, there shall be fee of 0.0020% of the amount raised in the
new fund offer, subject to a minimum of Rs 1 lakh and a maximum of Rs
50 lakh.
Fund houses have planned to launch more debt funds, FMPs, equity funds.
54 are in waiting list of Sebi's OK to launch the scheme in the market.
This is expected to boost the asset base of the industry. Overall,
mutual fund industry is planning to move up fast along with these new
launches of equity and income funds. Sebi has played a very pivotal and
regulatory role to protect investors' interests and to move the
industry up with sound base.
