FUND FULCRUM

December 2016

Mutual fund industry's asset base surged to an all-time high of Rs 16.5 lakh crore at the end of November 2016, aided by strong inflows in income and equity segments as a result of buoyant investor sentiment. Comprising 43 active players, the industry had assets under management (AUM) of over Rs 16.28 lakh crore at the end of October 2016. Overall inflows in mutual fund schemes stood at Rs 36,021 crore at the end of November 2016 compared to Rs 32,334 crore at the end of October 2016. Income funds, which invest in government securities, saw an inflow of Rs 18,306 crore, while equity and equity-linked saving schemes witnessed an infusion of Rs 9,079 crore. Balanced funds, which invest in equity and debt instruments, saw an inflow of Rs 3,632 crore. However, Gold exchange traded funds (ETFs) witnessed a pull out of Rs 69 crore during the period under review.

Piquant Parade

FundsIndia, an online advisory MF portal has launched their own research-driven, in-house funds rating service – FundsIndia ratings (FI ratings). With this launch, FundsIndia claims to become the first investment service provider to rate and analyze mutual funds. Currently, the portal has their own basket of researched funds called as FundsIndia Select Funds. With FundsIndia ratings, investors would not only have access to Select Funds, but also get an idea of where their other current holdings stand, in relation to category peers.

MF Utiity has launched e-CAN (Common Account Number) facility which allows distributors and investors to open a CAN online for individual investors. Since launch, more than 72,000 CAN requests have been processed on MFU. The  average AUM as on October 31, 2016 held by the CAN holders is close to 45,000 crore. Currently, on an average more than 300 CAN requests are received each day. With the convenience offered by eCAN, this number is expected to grow substantially. Until now, to open a CAN, investors had to submit a signed physical form with necessary attachments. With the launch of e-CAN, investors and their advisors can open a CAN with the help of a single form and single payment for initiating multiple transactions. Here’s how your clients can open an e-CAN. Investors have to fill the CAN registration data online on MFU website and submit electronically. The supporting proof documents can also be submitted electronically, by using an upload link. The CAN number is allotted instantly. eCAN is also available in the form of API, to enable distributors to facilitate creation of CAN for their clients online. New investors can also make use of the eCAN option to fill and submit the CAN registration data online to get the CAN number allotted instantly and later submit a signed CAN form with necessary documents to their intermediaries or at any of the MFU Point of Service (POS).

BSE has started levying transaction fee on its BSE Star MF platform. The transaction fee is applicable from December 1, 2016. This cost will be borne by AMCs. “In order to cover the costs of operations, all participating Mutual Funds/AMCs are hereby informed that transaction charges shall be levied on all orders being routed through the BSE Star MF platform”, states the circular issued on November 30, 2016. BSE Star MF is a browser based automated online order collection system which can be accessed through web from anywhere. Distributors can initiate a number of transactions like invest, redeem and start a SIP through this platform on behalf of their clients. BSE StAR MF has around 2400 registered distributors using this platform.

Investing in mutual funds through SIP without any upper limit just got simpler and faster. BSE StAR MF has launched paperless SIP service called ISIP through which IFAs can initiate SIPs on behalf of their clients without submitting any form and NACH mandate. This new facility can be activated through a net banking platform or mobile application. Distributors will have to generate Unique Registration Number (URN) from the platform for their investors. Investors will then be required to key in this number in the add biller option on their net banking or mobile application. This facility is available in most of the large banks. Typically, banks take three days to activate this facility. Currently, registering a SIP through NACH mandate takes up to 10 days.  In addition, distributors can register multiple SIPs through one mandate. This is a cost effective and paperless way to initiate SIP. To start with, BSE has enabled this facility for four fund houses – Mirae, ICICI Prudential, Tata, and Quantum. The platform will extend this service to other fund houses soon. Further, BSE has said that they are ready with the infrastructure of accepting payments through e-wallets like Paytm, FreeCharge, and Mobikwik. This service would be operational once it gets a nod from SEBI.

Regulatory Rigmarole

In order to give a fillip to startups, SEBI has relaxed investment norms for Angel Funds. The minimum ticket size of Angel Funds has been slashed from Rs.50 lakh to Rs.25 lakh. Angel Fund is a sub-category of Venture Capital Funds under AIF Category I. As the name suggests, such funds can raise capital from angel investors who invest in startups to support them during initial days. Earlier in March 2015, SEBI had constituted a committee headed by NR Narayana Murthy, co-founder of Infosys, to suggest measures to boost the startup ecosystem in India and develop the AIF industry. Based on the recommendations of the committee, SEBI has made amendments in the AIF regulations. Here are some of the key amendments in AIF regulations introduced by SEBI:

·         Maximum number of angel investors has been increased from 49 to 200

·         Lock in period of three years has been slashed to 1 year

·         Angel Funds will now be allowed to invest in startups incorporated within five years. Earlier, it was three years.

·         Angel Funds are allowed to invest in overseas venture capital undertakings up to 25% of their investible corpus in line with other AIFs.

Total wealth held by individuals in India grew by 8.5% to Rs.304 lakh crore in FY16, and is expected to grow to Rs.558 lakh crore over the next five years. That projection, which translates into a compounded annual growth rate of 12.9% over the next five years, is the assessment of the wealth management arm of financial services firm Karvy, as presented in its seventh India Wealth Report. The total individual wealth in financial assets grew by only 7.14% to Rs.172 lakh crore in FY16, much slower than in FY15, when wealth grew nearly 19%. The relatively poor performance of direct equities may account for this. However, Karvy predicts that financial assets will grow at a faster pace of 14.73% CAGR, nearly doubling in five years. Individual wealth in physical assets stood at Rs.132 lakh crore, a 10.32% growth in FY16 against a 2% decline in FY15. Individual wealth in gold stands at Rs.65.90 lakh crore, whereas wealth in real estate (excluding primary residences), comes in second at Rs.55.47 lakh crore. The report noted that India is “considered the bright spot among emerging economies.” However, it said that the economy is bound to slow a bit in the short term, given the government’s recent efforts to demonetise old, high-value notes. However, in the long run, India is expected to outshine its emerging market peers, including China, owing to changing positive dynamics, especially the government’s reforms push (the Goods & Services Tax (GST), Real Estate (Regulation and Development) Act, and the Bankruptcy Code, among others.