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Gold ETFs beat other funds in stability, growth

noreply@blogger.com (LK) — Mon, 09 Nov 2009 02:49:00 +0000

For many of us who have been investing in financial instruments, the relentless rise of old poses a problem because we have no easy framework in which to think of gold. Till as recently as a couple of years ago, gold lived in a completely different world from stocks, funds and debt products. There was no easy way of investing in gold except for buying it as jewellery or coins and bullion trading was a mysterious world that was inhabited by a different set of species altogether. Gold investing was very much an out-of-sight and out-of-mind phenomena.

Since then, the arrival of commodity exchanges, Gold Exchange Traded Funds (ETFs) and gold stock funds has made it trivially easy to invest in gold without having to worry about purity and physical security. Just as important is the fact that these have made gold easily comparable to other investments. When an investor looks at fund performance data on valueresearchonline.com or any other mutual funds portal, he can't help comparing the returns of gold-based investments with equity-based ones. Since about 2005, gold's returns make it looks like a great investment compared to anything else. And it's not just the returns, but the stability when compared to equity that the investor notices. The steepest fall in gold since 2005 has been the 20 per cent it lost from March 2008 to October 2008.

When I talk to gold's new found fans, I find that there are two more factors that make them like gold, if only at a sub-conscious level. One is the simplicity of decision making. Gold is gold and that's all there is to it-all the ETFs deliver identical results. Unlike an investor in equity or equity-backed products, there aren't hundreds of choices. Secondly, most Indians seem to come mentally pre-configured with a propensity to view gold as an ideal vehicle for safe long-term investing.

At an intellectual level, many of us have bought into the logic of why gold doesn't make sense. However, we are a gold-coveting culture and have descended from generations who have lusted after gold. It takes very little to convince us that gold is a great investment, even though the long-term evidence is decidedly patchy. Today, the value of gold is increasingly driven by the demand and supply of paper gold on financial markets. It is a financial asset and is clearly subject to the same volatility as other financial assets as investor interest flows in or out. We could well be in a gold bubble which is just as ephemeral as the stock or oil or real estate bubbles were.

However, it is undeniable that many investors have started buying gold-backed securities of one kind of another as short-term trading opportunities. In the mutual fund space, there are actually two distinct kinds of gold-related funds available. One is the straightforward Gold ETFs. These closely track the price of gold itself and deliver profits and losses that mirror investing in physical gold. The others are a couple of equity funds (one from AIG and the other from DSP BlackRock) that actually invest not in gold but in foreign gold-related stocks, like gold mining and processing companies. Interestingly, these funds seem to act as sort of high beta versions of the gold price itself. Over the last one year, gold has gained 44 per cent but these funds have gained more than twice that. Will the gold run last? If you look around, you will see as many cheerleaders as sceptics. As for me, I'm almost certain that one of the two groups will turn out to be correct!

Source: Economic Times

SBI Mutual Funds highest gainer, adds Rs 3,400 cr

noreply@blogger.com (LK) — Mon, 09 Nov 2009 02:43:00 +0000

SBI Mutual Fund emerged as the highest gainer in terms of monthly accretion with assets growing by about Rs 3,400 crore during October.

The average assets under management of the fund house promoted by the country's largest lender State Bank of India increased by Rs 3,449 crore in October to Rs 38,322.49 crore, according to the data released by Association of Mutual Funds in India (AMFI).

The increase was mainly because the fund house was able to mobilise relatively higher amount in its short term debt schemes and new investors acquisition, SBI Mutual Fund Chief Marketing officer Srinivas Jain said.

SBI Mutual Fund was followed by UTI Mutual Fund as it added Rs 3,258.55 crore to its assets in October. At the end of October the asset under management (AUM)of the UTI MF stood at Rs 76,847.34 crore.

Banks are expected to step up investment of their surplus funds in short-term debt instruments

noreply@blogger.com (LK) — Wed, 04 Nov 2009 02:15:00 +0000

Banks are expected to step up investment of their surplus funds in short-term debt instruments such as commercial papers, treasury bills, and government securities with one-two years residual maturity. This is to address the Reserve Bank of India’s concerns over circular movement of liquidity from banks to the liquid schemes of mutual funds (MFs) and vice-versa.

The central bank’s apprehension over circular movement of funds stems from the fact that should liquidity start drying up (on the back of improved credit pick-up) banks would redeem their mutual fund investments to shore up their funds position.

Faced with redemption pressure, MFs would then resort to heavy borrowing via Clearing Corporation of India Ltd’s collateralised borrowing and lending obligation (CBLO) facility, thereby putting upward pressure on CBLO as well as call money rates.

Bankers hold the view that the RBI’s “banks should lend directly to corporates and not through the intermediation of mutual funds” message implies that the central bank is anxious about the systemic implications of the circular movement of liquidity. According to Mr Arun Kaul, Executive Director, Central Bank of India, once the board approves internal prudential limits for investment in mutual fund schemes so as to mitigate risks, banks will actively invest in short-term debt to manage their short-term liquidity.

According to industry observers, a good chunk of the over Rs 1 lakh crore excess liquidity parked by banks in liquid schemes of mutual funds could find its way into short-term debt instruments. Tepid credit appetite in the economy in the financial year, so far, has forced banks to make large investments in government securities and also fairly sizeable investments in units of mutual funds.

Credit pick-up in the financial year up to October 9 at Rs 1,14,766 crore is less than half the off-take (Rs 2,47,775 crore) during the corresponding period last year. Hence, banks had no choice but to collectively channelise their daily surplus aggregating over Rs 1 lakh crore to the low-yielding RBI’s reverse repo window.

Further, banks also invested Rs 2,11,500 crore in the financial year up to October 9 in government securities (Rs 6,169 crore in the corresponding year ago period) and deployed Rs 1,28,772 crore in liquid scheme of mutual funds (Rs 9,079 crore).

As credit pick-up has been lacklustre, outstanding investments of banks in liquid schemes of mutual funds have been in excess of Rs 1 lakh crore since April. Ease of entry and exit as well as benefit of tax exemption on dividends and regulatory arbitrage have encouraged banks to plough excess liquidity into MFs.

Banks investment in liquid schemes of mutual funds currently fetches them a return of 4.0-4.5 per cent. Depending on rating, investment in commercial papers earns them a return of 5.0-7.0 per cent. Investment in Treasury Bills gets them a return of 3-4 per cent.

Source: Hindu Business Line

Domestic mutual fund assets move up in October

noreply@blogger.com (LK) — Wed, 04 Nov 2009 02:05:00 +0000

Source: Economic Times

Average assets under management (AUM) of domestic mutual funds rose marginally in October from the previous month. Total assets under
management in October stood at Rs 7,52,209 crore against Rs 7,43,696 crore in September, according to data on the Association of Mutual Funds of India (AMFI) website.

Most top fund houses registered a growth in assets this month. Fund managers said several fund houses sold off their equity assets as markets touched the year’s high earlier this month.

Many mutual funds are sitting on cash, fund managers said, in anticipation of a correction, they said. In fixed-income schemes, fund officials said there have been significant inflows into ultra short-term schemes.

Among leading fund houses, Reliance Mutual Fund’s AUM in October was at Rs 1,16,781 crore compared with Rs 1,18,251 crore in September. HDFC Mutual Fund’s assets during the month rose to Rs 93,316 crore against Rs 90,427 crore in the previous month.

ICICI Prudential Mutual Fund’a assets in October was almost flat over the previous month at Rs 80,524 crore. Birla SunLife Mutual Fund’s assets in the month rose to Rs 65,052 crore against Rs 63,055 crore last month.

Foreign Mutual Funds. Is Diversification Good?

noreply@blogger.com (LK) — Mon, 19 Oct 2009 00:34:00 +0000

Diversification is good. But how much diversification is best? And should you keep your investment diversification plans confined to within Indian borders or look beyond them? According to most advisers, diversifying your portfolio by investing abroad is a paying, as well as a cautionary exercise, and the effort is well worth the trouble.

But this aspect of investing needs to be looked at closely, especially on the performance of foreign funds of Indian mutual fund houses which invest abroad on behalf of Indian customers.

Data reveals that these foreign-bound funds have not really delivered when compared to the returns of India-based diversified equity funds. Keeping this in mind, while no one is arguing against geographical diversification, there is surely a need for a re-rating exercise.

To be sure, Indian diversified equity funds were expected to beat all those funds that invest abroad on behalf of Indian investors, simply because Indian stock market indices have beaten the heck out of the foreign bourses, being among the top performers. That means funds looking to invest abroad were fated to lag as other markets fell behind India. Aside from India, the only other indices that have done well are in Brazil and Russia, where the Bovespa has returned 49 per cent and RTSi has returned 47 per cent - Sensex gain was 43 per cent and Nifty 40 per cent (1-year period).

Out of the 14 international funds that are over 12 months old, four funds have given returns between 50-to-70 per cent, 4 funds have given returns between 40-to-50 per cent, while 2 funds have given returns between 30-to-40 per cent. Four funds have given returns between 2-to-20 per cent. Importantly, none of them is in the negative terrain, but if you take them as a category, then they have delivered an average of 36.18 per cent.

In comparison, the diversified equity constellation that includes over 200 funds, have beaten these funds’ performances by posting returns of 49.33 per cent as on October 9, 2009* for the same 1-year period.

If you look at 6-month returns, then the scale tilts in favour of the diversified equity funds even more as they have delivered returns of over 62 per cent, while the international funds are at 38.98 per cent.

The best performing international fund was ING Latin America Equity, followed by Mirae Asset Global Commodity Stocks.

These gains were put in shade by the equity diversified category in India, with the top three funds giving returns of 70 per cent.

While these kinds of data may be pointing away from diversifying geographically, but the overall gameplan that an investor should be looking at is not just maximizing returns, but also security of the investment (via diversification, including geographical ones). In case Indian markets dip, for whatever reasons (since the global meltdown has proved they can be very irrational), it would be better for investors if they have some of their eggs in foreign baskets too.

Also, do be aware of the fact that during the global meltdown, hedging, and even asset allocation, could not stop the global stock market freefall from crushing the portfolios of even the best investors, including stock market guru Warren Buffet.

But then, these kind of mass-scale destructive events are few and far between and can't be taken as a given.

For those who feel geographical hedging is a necessity, then they should consider investing some 80-to-90 per cent of their investment amount in India-based funds while the rest goes overseas, according to Financial Chronicle. The best scope is for the long-term investors as the markets abroad and Indian markets may align in a timeframe that stretches across 3-5 years.

*1-year diversified equity returns on October 12, at the time of finalizing this story, jumped to as high as 62 per cent on the back of Sensex rising 384 points, up 2.31 per cent on Monday from its previous close, while the broader-based Nifty on the National Stock Exchange jumped up 2.21 per cent, taking the former above 17,000-pt mark and the latter above 5,000-pt mark.

Foreign Returns
Fund	Launch	1-Month	3-Month	6-Month	1-Year
ING Latin America Equity	Jul-08	6.60	32.75	51.07	67.80
Mirae Asset Global Commodity Stocks	Jul-08	3.41	29.62	53.82	61.43
DSPBR World Gold Reg	Aug-07	2.16	27.83	34.26	59.68
AIG World Gold	May-08	2.99	35.26	43.03	58.91
HSBC Emerging Markets	Feb-08	2.46	19.39	38.56	42.92
Principal Global Opportunities	Mar-04	3.14	21.35	38.75	42.72
Tata Growing Economies Infrastructure Plan A	Mar-08	3.44	19.42	53.20	40.64
Franklin Asian Equity	Dec-07	0.88	12.44	34.50	40.40
ING OptiMix Global Commodities	Aug-08	0.32	24.32	34.13	33.28
Sundaram BNP Paribas Global Advantage	Jul-07	2.43	20.34	40.58	30.55
DWS Global Thematic Offshore	Aug-07	0.13	13.20	23.72	15.40
Birla Sun Life International Equity Plan A	Oct-07	-0.44	14.28	18.63	7.04
ING Global Real Estate Inst	Mar-08	-0.51	24.44	40.75	2.89
ING Global Real Estate Retail	Dec-07	-0.55	24.55	40.75	2.86
Source: ValueResearchOnline.com

Top 5 Mutual Funds

noreply@blogger.com (LK) — Mon, 19 Oct 2009 00:29:00 +0000

DSP Blackrock Top 100 Equity
Net Assets: Rs 2,097.97 cr
1-Year return:
50.93%

Known for its track record for a consistent performance, DSP Blackrock Top 100 Equity has proved its mettle in both bear and bull runs. Fund manager Apoorva Shah has a flair for diversifying the portfolio extensively that reduces its risk-per-stock holding, making it relatively safer. While the performance has slid in ’09-10, we expect the fund to make a quick comeback, given its current stock selection and past records. While a good investment for those seeking stable and consistent returns, those seeking higher gains should look at other options.

IDFC Premier Equity
Net Assets: Rs 1,014.27 cr
1-Year return: 66.10%

If mid-cap is what attracts your investment instinct, IDFC Premier Equity is one to watch out for. The fund was noted during the bull run for its higher returns ,but its ability to protect the downside last year was also commendable. The fund has also been quick to align its returns with that of its benchmark in the subsequent recovery. Its fund manager, Kenneth Andrade, is known for his accurate and timely stock picks based on strong fundamentals rather than momentum picks.

Reliance Diversified Power Sector
Net Assets: Rs 5,835.59 cr
1-Year return: 72.38%

Sectoral funds are considered to be the riskiest of the lot, but the risk is justified if the same is compensated by equally encouraging returns. That’s Reliance Diversified Power Sector for you. A limited number of stock holding makes it a risky bet, even within the sectoral space. The stock selection has been good. Not only was the fund one of the top performers of the previous bull rally, surprisingly for a sectoral fund the downside was limited in 2008 — though high cash calls had a major role to play then.

Canara Robeco Tax Saver
Net Assets: Rs 61.14 cr
1-Year return: 76.15%

A year ago, this fund would not have figured on our list. However, a huge turnaround during the market meltdown last year and the subsequent recovery thereafter were too compelling to add this one in the watch list. The fund has been consistently toping the charts under the tax-saving category of funds since the time new fund manager Anand Shah has joined. While there is little history to back the performance of this fund, it’s the new fund manager that needs to be watch out for.

HDFC Prudence
Net Assets: Rs 2,945.97 cr
1-Year return: 60.76%

For a balanced fund, the fund’s returns are impressive, matching that of a pure equity diversified scheme. It is one of the few funds that has been managed by a single person since its launch in January 1994 — Prashant Jain. However, within the equity segment, it has a high orientation towards mid-caps that makes it a relatively risky bet. While the fund has been a strong contender within its category, it now has a couple of equally strong competitors. It’s worth watching if it can continue to outperform its challengers.

Source: Economic Times

Don't bank blindly on Mutual Fund plans

noreply@blogger.com (LK) — Mon, 19 Oct 2009 00:26:00 +0000

Source: Economic Times

Mutual fund investors are dazzled by the outperformance of the banking sector schemes in the last one year. According to mutual fund
advisors, many investors are tempted to bet on the sector.

However, it could be a mistake if investors blindly go for the sector without understanding the risk involved, say investment experts.

‘‘Most investors tend to look at historical returns and decide to invest in a particular sector on the basis of it. But this a big mistake,’’ says Mukesh Dedhia, director, Ghalla & Bhansali Securities, a wealth management firm. ‘‘They should understand that different sectors tend to outperform at different point of time. For example, now the banking sector is performing, but gold was the outperformer sometime back.
Even government securities outperformed for a while,’’ he adds.

According to Krishnan Sitaraman, Director, Crisil FundServices, ‘‘all sectoral indices analysed gave positive returns in September with the banking sector topping gains with an 18% percent monthly rise. The metal, auto and healthcare sectors followed with monthly gains of 14.5%, 13.4% and 13% respectively.’’ If an investor takes a look at the returns in the past one year, he would be even more impressed. According to Value Research, an independent mutual fund tracking firm, banking sector schemes have given an average return of 65% in the last one year. Other sectors like tax planning, pharma, FMCG among others have returned around 50-52% in the same period.

Dedhia says investors should understand why the sector is outperforming and what are its prospects before investing in it. ‘‘Banking is an integral part of the whole economy. At any point of time, it will do better if the economy is in a better shape,’’ he says. ‘‘For example, banks were the worst hit when the economy was doing badly. All banking stocks were hammered down and the they were going extremely cheap. Now that the economy gathered momentum these stocks have also bounced back. That explains the outperformance of the sector,’’ he adds.

As for the future prospects of the banking sector, analysts believe it may continue to do well. ‘‘We are again on the path of growth. If the economy is growing at a decent pace, it is inevitable that banks would do well,’’ says an analyst with a broking firm. Dedhia also share the view: ‘‘The sector would continue to do well, but it can be volatile as it is directly linked to the economy,’’ he says. That is why he believes that it is not the right time to recommend it to investors.

‘‘As a general rule, investors should have 80-90% of equity portfolio in diversified schemes. Rest they can invest in sectoral schemes, provided they really understand how the sector works,’’ says Dedhia. ‘‘Investors should remember that sectors tend to get into cycles and one can lose money if you don’t properly understand how it works,’’ he adds.

Twitter Networking Problems ( Twitter is down )

noreply@blogger.com (LK) — Sun, 18 Oct 2009 17:01:00 +0000

Some Twitter clients in widely scattered network locations are unable to connect to twitter.com.

Changes in MFs and ULIPS - good for the consumer?

noreply@blogger.com (LK) — Sat, 17 Oct 2009 03:04:00 +0000

Source: Yahoo News

It is a contest that could prove to be ultimately beneficial for the informed investors. The recent regulation changes introduced by the Securities Exchange Board of India (SEBI) for the mutual funds and the Insurance Regulatory and Development Authority (IRDA) for unit linked insurance plans more popularly called the ULIPs has created a level playing field in both the mutual funds and the ULIPs investment scenario.

Recently, SEBI removed the entry load for mutual funds while the IRDA has come out with a cap on ULIP charges. These regulation changes will create the much needed transparency in both the fields, ensure better accountability and more importantly help the informed investors reap better value on their investments.

IRDA's new cap on ULIP: the highlights

Let us briefly see the IRDA’s cap on ULIP that will come into effect from October 1, 2009 and how as an investor this will benefit you.

There are changes in the overall charge structure for policies with tenure of less than or equal to 10 years and for policies with tenure over 10 years.

In the former case, the maximum cap will be at 3 percent of gross yield while the fund management charges will be at 1.5 percent and in the latter case the max cap will be at 2.25 percent and the fund management charges not to exceed 1.25 percent.

Other changes in the charge structures include no surrender charges applicable post 5 years of policy, and an obligation on the part of the insurers to give on maturity a certificate to policy holders showing the break up of the policy amount including annual premiums, charges deducted, the actual fund values, and partial withdrawals (if any) and the final amount payable.

So how this will benefit you?

As an investor you may have a reason to smile and might stand to gain!

The new ruling will give you net yield of 9.75 per cent back to you for a fund that is earning a gross yield of 12 per cent.

For instance if your policy with premium is worth Rs 100,000 per year for a term of 10 years, the new cap at 3 percent on overall expenses for year-on-year will put your fund value at Rs 14.78 lakh at the end of the term.

Also, the new obligation on the insurers’ part to show the break up of the policy amount will enable you to make an informed decision.

SEBI's 'no' to entry load for mutual funds: the highlights

The SEBI's removal of entry load for mutual funds is effective from August 1, 2009. The market regulator has also capped the expenses of asset management companies out of exit load to 100 bps.

SEBI has asked the mutual funds to chew over the idea of reducing the tenure of the exit load which has been revised to higher than one year effective from August 1.

So what this means to you!

If you are an informed customer SEBI’s new rule to end the entry load on mutual funds is an obvious advantage for you as there will be more transparency. Gone are the old times when the payment of a separate fee for the distributor/agent was made out of the units that you buy which resulted in you getting only a fewer number of units for what you paid for.

With the new rule, you can now know how much commission is being paid to the distributor/agent or simply choose to not take any advice from your distributor/agent on the scheme to invest in and thus save the payment of the separate fee for the distributor/agent for the service. Also, you can buy the units directly from the fund management company.

What to choose now: ULIPs or mutual funds?

Well, it depends on the individual’s preference as the two are two different avenues offering two different types of investments.

If you are someone daring to invest in a moderate to high risk investment scenario then mutual funds could work better for you. The objective of a mutual fund investment is usually short term.

And if you have a medium or a long term objective with moderate risk factors, then ULIPs will suit you better. ULIPs will essentially serve the medium or long term purposes of retirement, children education and others.

Despite the recent SEBI regulation to do away with the entry load for mutual funds, the fee on Assets under Management (AUM) could, in some cases, prove to be costlier than the entry load on the invested amount!

However, if you are an informed customer then you could choose to skip seeking the advice of the distributor/agent and thus save the AUM charges.

Also, the ULIPs are better placed in the sense they come with the element of insurance. Mutual funds could cost you more if insurance needs to be added.

The new EET regime (Exempt-Exempt-Taxable) proposed recently could move the investors away from mutual funds as irrespective of when the investment was made, the returns are still taxable post EET regime. In the case of ULIPs, the returns on the ULIP investments made before the EET regime are tax free.

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Birla Sun Life Mutual Fund Revises load structure under Birla Sun Life Dynamic Bond Fund

noreply@blogger.com (LK) — Sat, 17 Oct 2009 03:01:00 +0000

Birla Sun life mutual fund has revised the exit load structure under Birla Sun Life Dynamic Bond Fund. After the revision an exit load of 0.50 per cent will be charged if the units are redeemed within 180 days from the date of allotment; after 180 days from the date of allotment, the exit load charged will be nil. Birla Sun Life Dynamic Bond Fund is an open ended income scheme, with the investment objective to generate optimal returns with high liquidity through active management of the portfolio by investing in high quality debt and money market instruments. The changes will be effective from 20th October, 2009.

Monthly Income Plans = Good last option for retirees

noreply@blogger.com (LK) — Thu, 08 Oct 2009 22:48:00 +0000

Source: Business Standard

These days, you will see few fund houses promoting their monthly income plans (MIPs). With returns improving due to the stock market rally, MIPs have started looking more promising.

Out of 39 funds in the category, eight have given over 20 per cent returns in the past one year, while 16 have given 12-20 per cent returns. Despite their performance, financial planners say these are not for everyone.

These funds invest 0-30 per cent of the money in equity and the rest in debt and give investors regular income in the form of dividends. As most people need regular income after retirement, these funds are usually recommended to retirees. This doesn’t mean the fund will give monthly or quarterly returns. The dividend depends on the surplus generated through investments.

The debt portion gives stability to the corpus and while the equity component ensures more returns. This way, theoretically, an investor can make more money than other debt funds. But this is not the only reason for their performance. According to investment advisors, the journey of equity markets from 8,000 levels to over 16,000 has pushed up returns. “Last year was fabulous for debt too. As interests rate fell, bond yields went up,” said a certified financial planner. He thinks it is difficult for the trend to continue.

Though such high returns may not continue, these plans come in handy for those who are already done with other debt investments. Let’s take an example of a person who has retired at 60 and has Rs 40 lakh to invest. According to financial planners, the first part of the corpus should always be put in an assured return product. So, the retiree should put the first Rs 15 lakh in the senior citizens savings scheme. Then, there can be another stable product such as the post office monthly income scheme. Some part of the corpus will go towards medical insurance, contingency fund and so on. After all these avenues are exhausted, an MIP can be an additional investment. It should be the last product where he should invest as it carries more risk than a bank fixed deposit. As two asset classes are involved, a person needs to understand the risks associated with each.

Equity is the most volatile asset class and can eat into even your capital. The same can happen with bonds. There have been times when most MIP funds have given negative returns and zero dividends.

In fact, even currently, returns from the Baroda Pioneer MIP on September 28 were -0.06 per cent.

That’s why some financial planners say that investors can replicate the MIP model in their portfolio. If you have Rs 10 lakh surplus, you can invest upwards of 70 per cent in a fixed deposit. The remaining, 5-20 per cent, can be put in a good equity mutual fund through a systematic investment plan. “This way the person will have a guarantee of returns,” said Mukesh Dedhia, director, Ghalla & Bhansali Securities.

“This can be followed as long as the person is willing to take the taxation part into account,” said Malhar Majumder, principal financial planner, Black and White Financial Managers. Whatever returns MIPs give are tax-free in the hands of the investor while interest from fixed deposits is clubbed with the income and taxed accordingly.

Mutual funds offer encouraging returns

noreply@blogger.com (LK) — Tue, 06 Oct 2009 00:13:00 +0000

Source ::: The PENINSULA

Those who listened to our advice in the worst of times must surely be smiling as the Indian markets inch their way towards better days. Not that there was anything spectacularly new in what we said when the Sensex was plumbing the depths at 7,700 points: “Stay put if you’re faint-hearted; Buy if you have a Lion’s heart – whatever else you do, do not sell.”

A solid 10,000 or so points later, we find that those who remained invested or put in more money into their investments have reaped substantial benefits – particularly those who took the mutual funds route.

According to the data released by Association of Mutual Funds in India (AMFI), in the last one year, the mutual fund (MF) industry has shown a 42 percent growth in average assets under management (AUM).

The Times of India recently reported that the net asset value (NAV) appreciation of nearly 480 funds or nearly one out of every two funds has bettered the sensex returns of nine per cent in the past year.

Around 100 funds have at least doubled the 30-share index’s gains. The ones like IDFC Small & Midcap Equity (42.92 percent), Tata Life Sciences & Tech (39.79 percent), UTI Transportation and Logistics (37.96 percent), Canara Robeco Equity Tax Saver (36.25 percent), Birla Sun Life Dividend Yield Plus (35.69 percent), ICICI Prudential Gilt Investment PF (35.23 percent) and Reliance NRI Equity (33.99 percent) returned eye-popping three times sensex’s returns. Overall, there are at least 23 funds which more than tripled the benchmark’s gains in the period starting August 31 2008 and ending this August 30.

Many exchange traded funds (ETFs), which track a specific index or commodity, find their place in the market-beater list with those tracking gold like Gold Benchmark ETF (26.69 percent) or banks such as Kotak PSU Bank ETF (31.8 percent) doing exceedingly well.

Monthly income plans, best suited for getting specified monthly payment to investors like senior citizens and retired persons, also make it to the sensex-beater list. Funds like Reliance MIP (27.61 percent), HDFC MIP Long-term (22.08 percent), Principal MIP Plus (13.87 percent), Templeton MIP-G (11.74 percent) and LIC Floater MIP (10.4 percent) are some examples.

There are over 700 funds in India today and about 35 different companies that run these funds. Last month, the Anil Ambani-controlled Reliance Mutual Fund announced a 40 percent dividend in Reliance NRI Equity Fund and 15 percent dividend in Reliance Media & Entertainment Fund.

The investment philosophy of Reliance Mutual Fund is to focus on wealth creation for all NRI investors, which corelates with the growth of Indian markets. Improved investor trust in financial institutions and consistency in performance of the fund have contributed to its growth, Reliance Mutual Fund’s CEO, Sundeep Sikka, told the media.

Data released by the Reserve Bank of India shows a rise of about 4 percent in the mutual fund investments by banks, compared with the investments by the end of August 2009.

The continuous surge of equity markets since March has found nearly one out of every two diversified equity MFs now quoting higher than the net asset values (NAVs) of September 27, 2007, when sensex closed above the 17,000 mark for the first time.

While the current rally is being driven by FIIs who have net bought equity worth around Rs58,000 crore so far this year (up to September 25) - MFs, who turned net buyers in March, have also continued to invest in equity. The equity holdings of MFs crossed 90 per cent mark in August, a 16-month high, and funds have net bought equity of around Rs 2,500 crore this year.

Even fixed maturity plans (FMPs) are back. In the last few weeks, quite a few fund houses have applied to the Securities and Exchange Board of India (Sebi) for launching these products. For instance, new fund offers (NFOs) of ICICI Prudential, Tata Mutual Fund and Fortis are on, while Religare, HDFC and Principal PNB have applied for launching NFOs.

Fund distributors said unofficially, the annual returns of existing schemes based on a model portfolio were 7.25-7.5 percent. In the next three months, many believe the returns will rise further. The returns will be higher than the bank fixed deposits because of double indexation benefits. That is, if you have invested in an FMP for just over a year, you will get the inflation indexation benefit of two years. Now is as good a time as any to pick a fund that suits your investment horizon and needs and invest in it for good returns.

Mutual Funds assets dip as corporates pull out funds

noreply@blogger.com (LK) — Sun, 04 Oct 2009 22:17:00 +0000

Source: Economic Times

Contrary to expectations that the revival in the equity market would have boosted the assets managed by mutual fund houses, nearly 58% of the 36
fund houses that have disclosed their average assets under management (AAUM) figures for September 2009, have seen a drop in assets compared with the previous month.

According to the data released by the Association of the Mutual Fund Industry (Amfi), the total industry AAUM for September 2009 stands at Rs 7,42,919 crore against Rs 7,49,915 crore as on August 2009, registering a decline of about 1% since the previous month. This is the second instance of a month-on-month decline in mutual fund assets in 2009 so far, the earlier one being in March.

According to the industry experts, the marginal decline is mainly on account of outflow of corporate funds from the debt and liquid schemes for making advance tax payments
for the half year ended September. However, banks have continued to park in their idle funds with the mutual funds, though the proportion of the same appears to have dropped vis-à-vis the recent past.

According to the data released by the Reserve Bank of India, banks had an outstanding balance of Rs 1,56,573 crore with the mutual funds till September 11, 2009. This shows a rise of about 4% in the mutual fund investments by banks, compared with the investments worth Rs 1,51,136 crore by the end of August 2009.

But it is a grim situation where equity assets are concerned. Equity schemes have failed to register any significant growth despite rise in the equity markets and improving valuations of the existing schemes. With Sebi banning entry load with effect from August this year, distributors are not interested in selling mutual fund products due to inadequate commissions, said fund house officials.

In terms of fund house-wise growth, among India's larger and well-renowned fund houses, Reliance Mutual's AAUM rose marginally about 0.8% to Rs 1,18,251 crore and ICICI Prudential has reported an increase of about 3%. MFs managed by HDFC and UTI have, however, seen their AAUM shrink by about 4% and 0.5%, respectively, since August 2009.

Interestingly, it is the relatively smaller fund houses that have shown a healthy rise in their asset figures for the month. Fund houses like Taurus, Shinsei and JP Morgan
have reported around 25% increase in their AAUM positions for the month ended September 2009, while Benchmark and Bharti AXA’s assets rose by 13% and 20%, respectively, this month.

MF assets slip in September on outflow of funds

noreply@blogger.com (LK) — Fri, 02 Oct 2009 22:59:00 +0000

Source: Times Of India

COIMBATORE: After making decent gains in the last two months, domestic mutual fund (MF) houses have shown a marginal decline in their average assets under management (AUM) in September. The average AUM declined 0.9% or Rs 6,995.8 crore to Rs 7,42,919 crore for the month, data with the Association of Mutual Funds in India (AMFI) shows.

Most fund houses reported declines in their average AUMs in a month, which saw the sensex crossing the 17,000 mark gaining about 10% in the process. In all, 21 out of the 36 fund houses for which data is available with AMFI have seen a drop in their average AUMs.

The drop was on account of outflows from liquid and ultra short term schemes, industry officials said. "This normally happens during the end of every quarter. Institutions pull out the (surplus) money they park in these schemes," says Lakshmi Iyer, head, fixed income and products, Kotak Mahindra MF.

Banks and companies withdrew money to meet advance tax payments, officials said. Liquid and money market schemes account for about 17% of overall AUMs. Income and liquid schemes contribute about 3/4th of the total AUM of the industry. Among the large fund houses, HDFC witnessed a 3.6% decline in average AUM to Rs 90,427.26 crore while UTI declined marginally to Rs 73,588.79 crore. While ICICI Prudential, SBI and DSP BlackRock recorded decent gains, Birla Sun Life saw a flat growth.

Market leader Reliance witnessed a flat growth and ended with assets of Rs 1.18 lakh crore in the month. Franklin Templeton, Sundaram BNP Paribas, LIC, Tata and Kotak Mahindra recorded declines.
Shinsei and JP Morgan led the performance charts for the month growing by 26.7% and 25.2% respectively albeit on much smaller asset bases. Baroda Pioneer reported a steep decline with average AUM falling 17.1% followed by ING (10.8% drop) and HSBC (10.7% decline).

Fixed maturity plans in demand

noreply@blogger.com (LK) — Wed, 30 Sep 2009 23:50:00 +0000

Source: livemint.com

Money managers in India are scrambling to launch fixed maturity plans (FMPs) on hopes the prospect of better returns than liquid funds will help revive interest in one of the most popular fund categories of 2008.

As many as 18 new FMPs have been launched this month, data from ICRA Online shows, and offer documents of at least 10 more are awaiting clearance from the regulator Securities and Exchange Board of India.

FMPs offer a specific maturity to the investor and invest in debt and money market instruments of the same maturity, thus using the interest payments on those papers to generate returns.

Falling short-term rates and regulatory changes have dented returns on liquid funds, which park funds in instruments up to 91 days, helping boost demand for FMPs which invest in medium-term and long-term papers as well.

“Liquid, liquid plus (fund) returns which were earlier probably in the range of 6-7% have now fallen to... 4-5%,” said Bekxy Kuriakose, head of fixed income at DBS Cholamandalam Asset Management Ltd.

“FMPs can give higher returns now as compared to liquid plus or liquid funds ... now there’s a good rate differential.”

FMPs briefly lost favour as liquid funds were also investing in similar paper and promising liquidity as well, but a recent regulation change which compels liquid funds to invest in paper maturing in up to three months brought investors back.

So, only five new FMPs were launched between April and August, of which three collectively raised only Rs200 crore, while total assets under such plans fell by nearly half to Rs35,000 crore, the Association of Mutual Funds in India’s website shows.

With such plans making a comeback, fund houses will woo retail investors, especially those looking to invest for more than 12 months as FMP returns can be more tax efficient than traditional bank deposits in some cases.

The new 18-month FMP of Tata Asset Management Ltd that closed earlier this month raised around Rs530 crore, a spokesperson for the fund house said, adding that there was a drastic increase in retail participation.

FMPs can generate 150-200 basis points higher return than liquid funds in the current environment, Kuriakose said, which can even prompt some investors to forgo their liquidity requirements and invest in these close-ended products.

NSE, BSE may join hands for mutual fund trading

noreply@blogger.com (LK) — Wed, 30 Sep 2009 02:25:00 +0000

Source: livemint.com

Mumbai: A working group of the Association of Mutual Funds in India, or Amfi, has recommended that India’s two largest bourses, along with other firms, jointly build a transaction platform for mutual funds trading in India.

The group has suggested jointly engaging three consortia that have bid to build the platform: National Stock Exchange and National Securities Depository Ltd; Bombay Stock Exchange and Central Depository Services Ltd; and registrars Karvy Computershare Ltd and Computer Age Management Services Ltd.

“We have recommended an open architecture where strengths of all three consortia will be leveraged for the benefit of the mutual fund industry,” said Jaideep Bhattacharya, who heads the Amfi committee and is chief marketing officer of UTI Asset Management Co. Ltd.

The committee, which submitted this proposal to Amfi last week, has also suggested that mutual fund trackers Morningstar India and rating agency Icra Ltd provide the data support for this platform.

Amfi expects the platform to go live by March.

The proposed online portal will help investors buy and sell mutual fund units and get consolidated statements. With the abolition of upfront commission, few distributors are keen on servicing small investors and the transaction platform will come in handy for them.

“We have received proposals on the operationalization of the platform. A decision will be taken in a week or two. The final clearance has to come from Sebi,” said A.P. Kurian, chairman, Amfi.

According to him, the platform would provide a better reach for the industry, higher efficiency in transactions and cost control over a long term. “Similar platforms exist in developed markets like Australia and Canada. It is our effort to bring such world-class service to our investors,” he told Mint.

Officials from the bidding companies refused to comment as the proposal is yet to be finalised. The chief executive officers of four leading asset management companies confirmed the broad structure of the proposal but refused to comment as they are not familiar with the details. “A presentation is likely to be made for the members in a couple of weeks, after which a decision will be made,” one of them said.

In a parallel move, Amfi is exploring the listing of open-ended mutual fund schemes on an exchange platform.

The system has to be tweaked in such a manner that the relevant mutual fund will be the counterparty for transactions and the registrar will have to create and extinguish units for every purchase and sale, respectively, say industry experts.

Religare's new fund bets on state-run firms

noreply@blogger.com (LK) — Wed, 30 Sep 2009 02:19:00 +0000

(Reuters)

Indian money manager Religare Asset Management launched an equity fund on Tuesday to invest mainly in state-run firms, which are likely to benefit from stake sale by the government.

Religare PSU Equity Fund will invest at least 65 percent of its assets in the firms part of the BSE PSU index , the firm said in a statement.

"PSU companies are attractively priced in terms of valuations vis-a-vis the broader markets," said Saurabh Nanavati, chief executive officer of the firm.

He said many state-run firms were available at 20-30 percent discount to India's benchmark index .BSESN and offered a good margin of safety.

"Further, disinvestment by the government would lead to significant re-rating of PSU companies," he added.

Prospects of stake sale in state-run firms improved following a strong mandate to the Congress-led government at the centre during April-May polls.

MFs get it right for now, but will the show go on?

noreply@blogger.com (LK) — Tue, 29 Sep 2009 12:10:00 +0000

Source: Economic Times

JM Emerging Leaders, Canara Robeco Emerging Equities and DBS Chola Midcap may be the stars of the latest stocks rally with them more than
doubling in the past six months to September, but the real test of their glitter may come during a slide, going by the past history.

Though net asset values of many of these funds have vaulted since April, investors must take into account the volatility quotient of many of these schemes.

While it is the midcap funds that have obviously gained the most in the current rally, it will be foolish for investors to be guided by these returns without analysing the past performance of these funds.

For, even though most of the funds now boast of double to triple digit returns for the past six months, the key driver could well be the momentum in the market rather than fund managers’ design.

The top 10 performers in the current market upturn, when plotted on a graph for their returns since 2006, conform to a deep V-shape grid, indicating extreme volatility. In fact, some of these schemes, which have gained immensely in the past six months, were not only bruised during the 2008 meltdown, but their performances during the peak of the historic bull rally in 2006-07 was average.

Schemes, such as JM Emerging Leaders, Canara Robeco Emerging Equities and DBS Chola Midcap, among others, have undoubtedly done extremely well in the current calendar year, each posting absolute returns of over 115% in the past six months alone. Having said that, the fact remains that there is nothing that stands out about their performances going by past records.

Then there are schemes that have not delivered high returns recently, but have been consistent performers over a period of time. Birla Sun Life Frontline Equity, Sundaram BNP Paribas Taxsaver, DWS Investment opportunities and Reliance Growth are some of them.

While their absolute returns in the past six month range between 60% and 90%, lower than the over 115% returns of some of their peers, these schemes succeeded in not only generating handsome returns in 2006-07, but also succeeded in limiting losses during a slide in 2008.

So what should an investor look out for? Periodic bouts of block-buster performances or a fair deal of consistency that ensures decent returns in upswings and provide relative cushion during the downslide? While those using MFs more as a trading platform may opt for the former, for others who have faith in the concept of long-term investing, it pays to plump for consistency.

MF advisors act pricey, overcharge investor

noreply@blogger.com (LK) — Mon, 28 Sep 2009 11:54:00 +0000

Source: Economic Times

Nashik-based Sanjay Shellar was in for a surprise, when his neighbourhood broker handed out a cash memo of Rs 200 at the end of a casual discussion about his mutual fund portfolio. Mr Shellar was politely asked to remit the amount towards “consultation fees”.

There are many investors out there — more so in two- and three-tier cities — who are paying money to distributors under various heads. ‘Visit charges’, ‘consultation charges’, ‘advisory charges’ and ‘redemption charges’ are just some of them.

If fund industry sources are to be believed, the general practice among financial advisors is to charge investors per visit. Investors, who have less than Rs 5 lakh as mutual fund investments, are charged anywhere between Rs 100 and Rs 250 per visit. Apart from ‘visit charges’, additional charges are levied on fund-based tasks, tax calculations and portfolio realignment (broadly termed consultation charges). There has also been instances when distributors have charged additional money (in the range of Rs 500-1,000) for redeeming mutual units.

“Even though Sebi mandates distributors to disclose the commission received from fund houses, not many are adhering to it. Moreover, the regulator has not mentioned when a distributor can charge money from investors. Even if the advisor levies consultation charges or visit charges, there is nothing illegal about it — except for the fact that he is looting the investor in broad daylight,” said the channel head of a Mumbai-based fund.

According to a Nagpur-based distributor, apart from the usual 60-bps upfront charges, a few fund houses were doling out ‘marketing charges’ to distributors to promote their funds. Though a very nominal amount (Rs 20-30 per application), it aims to encourage advisors to promote that particular scheme over the rest. A few distributors also pass on the sum to investors to make them invest in the fund. Sebi does not allow MF distributors to rebate commission.

The regulator recently tightened the code of conduct for MF intermediaries, directing them to disclose to clients all information, involving commissions received for competing schemes of various MFs, of which the scheme was recommended.

“Such things might be happening sparsely throughout the country. The trend of wrongly charging investors will not last for long. Investors will differentiate between good and bad advisors over a period of time,” said Anil Rego, CEO, Right Horizons, an investment advisory and wealth management firm.

Cities like Jaipur, Ahmedabad and Surat are witnessing huge takers for company deposits. According to distributors, there is a conscious effort being made by distributors to sell corporate deposit schemes, which yield them a nominal interest of 12%. Companies with dubious financial records, which are raising money through this route, are offering distributors as high as 15% to raise deposits from investors.

“The focus of most independent advisors has shifted to insurance and fixed deposit instruments. Investors, especially in smaller cities, with little knowledge of investment products will fall for ‘high-risk, high interest’ deposit schemes floated by companies with doubtful financial credentials,” said Rakesh Goyal, head of distribution at Bonanza Portfolio.

MF investors wind up old SIPs to shed load

noreply@blogger.com (LK) — Mon, 28 Sep 2009 11:45:00 +0000

Source: Economic Times

It is an early indication of mutual fund investors taking advantage of the revised fee system for investments in equity schemes. Many investors are closing their existing investments through systematic investment plans (SIP) in equity schemes, which were started before August 1 — when the revamped commission structure to distributors came into force — and starting afresh.

This is because SIPs that were registered prior to August 1, will continue to be subject to the old fee structure, popularly known as entry load, of 2.25%, while the ones after that date will not attract the load. Under the old system, an investor, who invested through an SIP of Rs 10,000 a month, continues to pay 2.25%, or Rs 225, to the mutual fund as a fee. This means only Rs 9,775 is invested, while a larger portion of Rs 225 finds its way to distributors, a system that was banned by Sebi in June. The market regulator said mutual funds will not charge entry loads on any scheme and investors will directly pay distributors a fee for their advisory services.

“Investors with big SIPs every month are closing their earlier investment agreements and restarting them, because annual cost savings do make a difference,” said Akhilesh Singh, head-wealth management at Emkay Global Financial Services. An investor with a SIP outgo of Rs 50,000 every month ends up paying Rs 13,500 every year as fees to the mutual fund every year.

Top officials at mutual funds admitted that investors are closing their SIP that were registered before August 1, while emphasising that only wealthy investors were doing so. “Most retail investors are yet to close to their old SIPs due to lack of knowledge or a feeling that entry loads in their SIPs are not that significant for efforts to start a new one,” said a top official at a leading mutual fund. “Distributors are partly be blamed for not facilitating this for their clients,” he added.

Most beleaguered distributors, who have been hit badly after the new fee system has been introduced, have not yet advised their clients to restart SIPs. This is because the commission from SIPs registered before August 1 — many of them which end only in 2011 — is a steady source of income for them, especially at a time when they have almost stopped selling mutual fund products.

Equity funds position portfolios for market surge

noreply@blogger.com (LK) — Sat, 26 Sep 2009 13:24:00 +0000

Source: Economic Times

Indian fund managers, who missed out on a stunning seven-month surge in stocks, are now stepping up share investments, especially in the
riskier mid-caps and small-caps, hoping the rally will continue in coming months.

India's main stock index has more than doubled since early March but more than 95 percent of the equity funds didn't match its return as they held 10 percent of their portfolio or more in cash until April.

"With signs of economic recovery and the Indian markets going up, the fund managers have quickly cut down on cash in order to capture the rally and also to beat the benchmark," said Chintamani Dagade, a senior research analyst with Morningstar.

Some funds were sitting on cash levels as high as 40 percent earlier this year and missed out on the initial run-up, he added. With increasing signs of a recovery in the global as well as local economies, higher prospects for a better earnings growth for Indian firms and sustained foreign investment flows, fund managers are now increasing their bets on stocks.

Second-quarter growth in major Asian economies such as China, Hong Kong and Singapore has been better than expected, while Germany and France have made a surprise return to economic growth, ending their recessions earlier than many expected.

Indian industrial output grew for a seventh month in July, rising 6.8 percent from a year earlier, adding to signs of economic upturn. That has lead to brisk fund flows into domestic shares with foreign portfolio investors bringing more than $10 billion from the start of 2009, convincing domestic investors
to start deploying cash back into the market.

STOCK TUMBLE

Stock funds took refuge in cash after the index tumbled more than half to record their sharpest annual drop ever in 2008. The average cash levels among equity funds rose to 18 percent in February, a multi-year high. But, as the stock market began its turnaround in March, the caution led to underperformance, prompting a return in risk appetite and a relook at mid-caps and small-caps.

By August, the latest month for which data is available, equity funds' average exposure to stocks rose to 92.1 percent, the highest since February 2008, data from fund tracker ICRA Online showed. Their investment in shares of small and medium-sized firms to more than 38 percent in August, from their 2009 low of 31.4 percent in February, the data showed.

As a result, most of them beat the gain in the benchmark index last month helped by higher gains in their mid and small-cap portfolios and relatively lower cash levels. Cash levels could drop further as funds are no longer required to maintain high cash levels in anticipation of likely redemptions given higher liquidity in stocks compared with late 2008, said Krishnan Sitaraman, head of fund services at CRISIL.

If cash level goes down to "around 5 percent, I would not be surprised," Sitaraman said.

Abolition of entry load hits sales of equity MF schemes: Sharekhan

noreply@blogger.com (LK) — Fri, 25 Sep 2009 10:55:00 +0000

Source: IRIS (24-SEP-09)

The abolition of entry loads on equity MF schemes has sharply hit sales of equity schemes in the very first month of the new rule coming into effect, states a report released by Sharekhan.

Equity assets recorded a net outflow to the tune of Rs 1.42 billion in August despite a 5% increase in the overall industry`s AUM to Rs 7,000 billion. Thus, the share of equity assets in the total industry AUM has slipped further to 24%, including equity linked saving schemes (ELSS), from over 25% of assets until the last month.

Fund flows also witnessed a sharp decline due to the abolition of entry loads which has severely hit MF sales. Fund flows into the existing schemes declined by 37.7% due to a sharp 96.6% drop in the NFO collections to Rs 820 million as compared to Rs 23.94 billion in July 2009. Besides, redemptions declined by 8.3%. The NFO collections include the amounts raised by Shinsei Industry Leaders Fund, Kotak Select Focus, Sahara Star Value Fund, Franklin Build India Fund and Canara Robeco FORCE Fund.

Speaking about the cash levels, it declined by 9.7% to Rs 143.21 billion in Aug. 2009. Even as a percentage of corpus the cash level fell to 8.9% from 10.2% in the previous month. This is indicative of the improvement in the buying activity of MFs to capitalize on the rock-bottom valuations.

Further, the total cash sitting with the MFs including the cash mobilized through the recently launched NFOs (Rs 820 million) stands at healthy Rs 144.03 billion. Flush with cash, MFs are well placed to maintain the buying interest and propel the market forward.

The cash level for all funds more than three months old also showed a similar trend, falling to 8.3% of the equity oriented AUM during Aug. 2009 (as compared with 9.4% in July 2009).

India’s Stocks Fall on Monsoon Concern; Jaiprakash Declines

noreply@blogger.com (LK) — Tue, 04 Aug 2009 23:47:00 +0000

Shares in the Sensex trade at an average 18.7 times future earnings, up from their 2009 low of 8.83 times on March 11, according to data compiled by Bloomberg.

The following stocks were among the most active on the exchange:

Hindalco Industries Ltd. (HNDL IN) rose 4.3 percent to 112.9 rupees. Novelis Inc., a unit of India’s biggest aluminum producer Hindalco, posted a first-quarter net income of $143 million, according to a company statement. Sales reached $1.96 billion, Novelis said in the PRN newswire release.

Steel Authority of India Ltd. (SAIL IN) declined 2.2 percent to 175.7 rupees. The country’s second-largest producer of the metal cut prices for a second month, a company executive said. Prices of so-called long products were lowered by as much as 1,500 rupees a ton, said the executive, who declined to be identified before an official announcement.

Tata Motors Ltd. (TTMT IN) increased 2.8 percent to 443.1 rupees. The No. 1 truckmaker posted its first sales increase in 10 months in July. It sold 48,054 vehicles last month, 18 percent more than the 40,729 units sold a year earlier. The company started delivering the Nano last month. It sold 2,475 of the small cars.

Source: Bloomberg

Interest rates unlikely to fall in next 3-6-months: Parekh

noreply@blogger.com (LK) — Thu, 30 Jul 2009 03:00:00 +0000

Source: Economic times

Interest rates
are unlikely to decline in the next 3-6-months due to high Government borrowings, a top financial sector expert
said.

"Interest rates will come down (only) when cost of funds of banks comes down....I don't think rates will fall in the next 3-6 months (as the huge Government borrowings may tighten liqudity in the system)," HDFC's Chairman, Deepak Parekh, told reporters.

He was speaking at a function organised by the Maharashtra Chamber of Housing Industry (MCHI) here today.

On demand for property, Parekh said that there is ample demand in the affordable housing sector.

Builders who don't reduce their prices would be at a loss, he said.

Kotak Mahindra Bank's Vice-Chairman, Uday Kotak, said that interest rates were likely to remain at the same level till November-December this year.

"I don't think rates will go up till November-December," Kotak said.

According to him, inflation was likely to rise and be on the higher side by March 2010.

FDI in May declines by 43%

noreply@blogger.com (LK) — Thu, 30 Jul 2009 02:58:00 +0000

Source: Economic Times

India received $2.2 billion foreign direct investments (FDI) in May this year, department of industrial policy & promotion (DIPP)
secretary Ajay Shankar said. There is a 43% drop in the FDI inflow in May 2009 compared to $3.9 billion received in the same month of the previous year.

The inflow of foreign capital into the country will improve now, as the country’s industrial output in June looks “promising,” Mr Shankar said on the sidelines of a seminar by Confederation of Indian Industry (CII).

“We think, with liquidity improving and confidence in the economy rising, these (FDI) numbers should pick up,” he said. The government had scaled down the FDI target by $5 billion from $35 billion last fiscal.

In April 2009, FDI inflow had fallen by 38% to $2.34 billion from $3.74 billion a year ago. In the calendar year 2009 up to April, FDI inflow into the country slipped by nearly 46% from the year-ago period to $8.5 billion, as per the latest figures released by DIPP. Inflow of foreign capital dried up as foreign investors were reluctant to put their money in risky emerging markets but India’s 6.7% growth in 2008-09 when developed countries struggled with recession is expected to bring foreign investors back.

In the first six months of 2008-09, FDI inflow was $27.3 billion compared to $24.5 billion in 2007-08. Cumulative FDI inflow from April 2000 to March 2009 was about $90 billion, as per DIPP data.

The department collects data on foreign investment from the RBI and releases monthly updates. Mauritius, with which India has a double taxation avoidance agreement, is the largest contributor of FDI into India, followed by Singapore and the USA. Services sector attracts the largest share of foreign capital, followed by computer software and hardware, telecommuniation, housing and real estate.

Mr Shankar expressed confidence that there would be “continuous improvement” in industrial output. Official data released earlier this month had shown industrial output rising for the second straight month in May, fueling hopes of faster economic growth. Led by the consumer durable sector, the Index of Industrial Production (IIP) rose by 2.7%, its biggest increase since October 2008.