Monday, October 16, 2017


October 2017

With mutual funds gaining traction among retail investors, asset management companies have filed draft offer documents with the regulator SEBI for 85 new schemes so far in 2017. In comparison, 106 draft papers were filed by the fund houses in 2016. Equity, debt, hybrid and fixed maturity plans (FMPs) are some of the themes for which the mutual fund houses have filed the applications. Fund houses like Mahindra, Axis, ICICI Prudential, Birla Sunlife, HDFC, UTI, Reliance, Edelweiss and SBI have filed the offer documents for new fund offers (NFOs) with the Securities and Exchange Board of India (SEBI). Many of the schemes are already being launched, while others will be opened for subscription soon after the necessary clearance. Interestingly, some mutual fund companies have approached SEBI for launching plans with Hindi names so that investors in rural areas understand the objectives of the schemes in a better manner. The move is seen as moving away from the old tradition of English names for investment schemes. Dynamic Bond Bachat Yojana, Pragati Bluechip Yojana, Unnati Mid & Small Cap Yojana are some of the schemes filed with SEBI by Mahindra Mutual Fund.

NFOs of various hues adorn the October 2017 NFONEST.

ICICI Prudential Value Fund – Series 18
Opens: October 3, 2017
Closes: October 17, 2017

ICICI Prudential Mutual Fund has launched a new plan named as ICICI Prudential Value Fund - Series 18, a close ended equity scheme. The scheme will have tenure of 1300 days from the date of allotment of units. The investment objective of the scheme is to provide capital appreciation by investing in a well-diversified portfolio of stocks through fundamental analysis. The plan shall offer direct plan and regular plan with dividend payout option. The plan would invest 80% to 100% of assets in equity and equity related instruments with medium to high risk profile and invest up to 20% in debt, money market instruments and cash with low to medium risk profile. Investment in derivatives can be up to 50% of the Net Assets of the scheme. Benchmark Index for the plan is S&P BSE 500 Index. The fund managers of the scheme are Sankaran Naren and Ihab Dalwai. The investments under ADR / GDR and other foreign securities will be managed by Priyanka Khandelwal.

India Bulls Tax Savings Fund
Opens: September 21, 2017
Closes: December 20, 2017

Indiabulls Mutual Fund has launched a new fund named as Indiabulls Tax Savings Fund, an open ended equity linked savings scheme. The investment objective of the fund is to generate long-term capital appreciation from a diversified portfolio of predominantly equity and equity-related Securities. The scheme shall offer tax benefits under Section 80C of the Income Tax Act. The scheme would allocate 80%-100% of assets in equity and equity related instruments as per ELSS guidelines with high risk profile and invest up to 20% of assets in debt, money market instruments, cash & equivalent with low to medium risk profile. The performance of the scheme will be benchmarked against S&P BSE 500 Index. The fund managers of the scheme are Sumit Bhatnagar (Equity) and Malay Shah (Fixed Income).

UTI Long Term Advantage Fund – Series VI
Opens: October 5, 2017
Closes: January 5, 2018

UTI Mutual Fund has launched a new fund named as UTI Long Term Advantage Fund - Series VI, a 10 year close-ended equity linked savings scheme. The investment objective of the scheme is to generate capital appreciation over a period of ten years by investing predominantly in equity & equity related instruments of companies along with income tax benefit. The scheme will allocate 80%-100% of assets in equities, cumulative convertible preference shares and fully convertible debentures and bonds of companies with high risk profile and invest up to 20% of assets in money market instruments with low to medium risk profile. The scheme's performance will be benchmarked against S&P BSE 100 Index. The scheme will be managed by Lalit Nambiar.

IIFL Capital Enhancer Fund, Mahindra Pragati Bluechip Yojana, ICICI Prudential Liquid iWIN ETFAxis Growth Fund, Mahindra Dynamic Bond Bachat Yojana, Indiabulls Dynamic Bond Fund, Aditya Birla Sun Life Nifty Next 50 ETF, Baroda Pioneer Dynamic Equity Fund, Bharat 22 ETF are expected to be launched in the coming months.

Monday, October 09, 2017

October 2017
Many of us think that mutual funds can give just 12% annualized returns and stocks would give very high returns. While this is true to some extent, there are a set of mutual funds that can double or triple your money. These are the sector based mutual fund schemes in India. The October 2017 GEMGAZE would provide some of the best sector mutual funds which can fetch you phenomenal returns.

The consistent performance of all five funds in the October 2016 GEMGAZE is reflected in all the funds holding on to their esteemed position of GEM in the October 2017 GEMGAZE.

Canara Robeco Infrastructure Fund Gem
The Budget boost
Canara Robeco Infrastructure Fund is a thematic fund focused on identifying growth-oriented companies within the infrastructure space. The fund, with an AUM of Rs 154 crore, aims at having concentrated holdings with 80.26% of the assets in the top three sectors and a bias towards large market capitalization stocks at 52.21%. With a well-diversified portfolio of stocks in the energy, construction, and services sectors, it employs fundamental analysis with a focus on factors such as the industry structure, the quality of management, sensitivity to economic factors, the financial strength of the company, and the key earnings drivers. In the Union Budget 2017, the government proposed to assign infrastructure status to affordable housing projects and facilitate higher investments and better credit facilities, with an aim to provide Housing for All by FY 2022. The National Housing Bank will refinance individual housing loans of about Rs 20,000 crore in 2017-18. The Finance Minister proposed to complete 1 crore houses by 2019. All these developments are expected to boost cement demand. The fund benchmarks the performance of its portfolio against the S & P BSE 100 Index. Canara Robeco Infrastructure has been among the better performers in its category. The fund’s one-year return is 13.97% as against the category average return of 19.78%. The expense ratio of the fund is high at 2.73% while the portfolio turnover ratio is 42%. The fund has been managed by Mr. Yogesh Patil since December 2011.

SBI Magnum FMCG Fund Gem
The best bet
In the past one year, the Rs 344 crore, Magnum FMCG Fund is perched at the top with 54.6% of the assets in large caps. The expense ratio is high at 2.52% and the portfolio turnover ratio is a mere 16%. Braving all odds, the one-year return of the fund is 20.56% as against the category average of 18.89%. Over the three and five year periods, the fund posted 14.65% and 17.34% of CAGR, respectively as against the category average of 14.61% and 16.12% respectively. Magnum FMCG Fund is benchmarked against the S & P BSE FMCG Index. Most stocks that operate in this space have already moved up because revenue and profit growth for these companies were still better than firms in beleaguered sectors. Despite high valuations, companies in the consumption space still hold strong growth potential, thanks to lack of viable alternatives in the market. FMCG funds are, therefore a good bet.  Saurabh Pant has been managing the fund since June 2011.

ICICI Prudential Banking & Financial Services Fund Gem
An evergreen fund
ICICI Prudential Banking & Financial Services Fund invests predominantly in large and midcap financial companies. 71.04% of the portfolio consists of large caps. This fund adopts a 'bottom-up' strategy, to identify and pick its investments across market capitalizations. The fund has not only outperformed its benchmark, the S&P BSE Bankex but has also outperformed other banking sector funds. The current AUM of the fund is Rs 2,519 crores and the one-year return is 26.36% as against the category average return of 19.94%. The expense ratio is 2.37% and the portfolio turnover ratio is 149%. The fund is managed by Vinay Sharma since February 2015.

SBI Pharma Fund Gem
Consistent healthy prospects
SBI Pharma Fund sports an AUM of Rs. 981 crores. The number of stocks held by the fund in the last few months has hovered around 22. The concentration analysis reveals that the fund has around 41.92% assets allocated towards the top 5 stocks while the top 10 stocks make up around 63.44%.  The one-year return of the fund is -14.44% as against the category average of -11.71%. The three-year and five-year returns of the fund are 3.64% and 17.55% as against the category average of 2.71% and 15.48% respectively. SBI Pharma Fund tops the list of pharma funds across time periods. The outperformance of the fund has been quite consistent. For instance, in the last five years, the scheme’s annual returns have been better than its benchmark almost 84% of the time. The expense ratio of the fund is 2.26% while the portfolio turnover ratio is 70%. An average large-cap slant of about 30.2% should hold the fund in good stead even during volatile times. The fund has been managed by Tanmaya Desai since June 2011.

ICICI Prudential Technology Fund Gem
Driven by growth of new technologies

Consumers’ appetite for new technologies has been driving growth in the technology sector for years. This is providing good opportunities for technology companies. ICICI Prudential Technology Fund is a Rs 248 crore technology fund, which invests in large technology oriented companies. It invests in companies listed in the BSE Teck. Its portfolio has 74.3% exposure to large cap companies. The fund seeks to invest in knowledge sectors like IT and IT Enabled Services, Media, Telecommunications, and others. The one-year return of the fund is 4.27% as against the category average of 4.05%. The three-year and five-year returns of the fund are 1.23% and 15.96% as against the category average of 2.07% and 14.52% respectively. The fund is benchmarked against the S& P BSE IT Index. The expense ratio of the fund is 2.68% while the portfolio turnover ratio is 28%. The fund is managed by Ashwin Jain since October 2016 and Sankaran Naren since July 2017.

Monday, October 02, 2017

October 2017

Sector Mutual Funds: Risky but Rewarding

Although most mutual fund schemes swear by diversification, there are some schemes that do not diversify. They stick to one or few sectors and prefer to cash in on their performance. Sectoral and thematic funds fall in this space. But there still is a big difference between the two. Sectoral funds aim to invest their entire corpus in one sector and thematic funds invest in two or three sectors that are closely related to one another. As the name implies, a sector fund is a mutual fund that invests in a specific sector of the economy, such as pharmaceuticals, banking & financial services, FMCG, technology and other sectors like energy and infrastructure. Sector funds come in many different flavors and can vary substantially in market capitalisation, investment objective (i.e. growth and/or income) and class of securities within the portfolio. If you are an informed investor willing to take higher risks for higher returns, then sectoral funds may be just for you.

Volatility is the name of the game

The performance of sectoral funds has been volatile in recent times. All the pharma funds which were once celebrated as outperformers gave a negative return of -12 to -16% in the last one year. In comparison, many of the banking & financial services sector funds have given above 30% and some have given as high as 37%. The FMCG funds have a decent return profile of 14 to 15% whereas the technology funds have barely given any return at all as they were lingering at a combined average of around 2.2% in the last one year. Infrastructure funds have seen good returns but the long-term performance of the sector depends on several macro factors which can influence the stock prices in the near future.

The pros …

  •          A sectoral fund allows you to take a macro call on a sector.
  •          It is diversified well within a larger sector which gives it more breadth.
  •          It does not have to be micromanaged by the investors as the portfolio will be handled by the fund.
  •          A variety of similar funds allows you to choose from the better portfolios between funds.
  •          It allows you to choose between different sectors by buying multiple sector funds.
  •          A higher weightage is given to a sector which is not possible in regular diversified funds.
  •          It paves the way for absolute returns as opposed to relative returns.

and the cons…

  •          It has a higher volatility of returns when compared to equity diversified funds.
  •          If the decision turns out to be wrong, the drawdown can be significant.
  •          It is meant for knowledgeable investors who want to time the market albeit in the long run.
  •          There is not enough variety to choose from in India.
  •          You cannot customize the portfolios based on your preferences.

Sectoral funds do not find a place in most financial plans as these are considered risky because of their focused exposure. For wealth creation, a mix of diversified equity funds is prescribed. These are considered safer since the money is spread across companies from various sectors to limit the risk arising from a downturn in some industries. Given that sectoral funds are also capable of delivering high returns, are you losing out by staying completely clear of this category of funds? 

Better returns 

Even as investors in mid- and small-cap equity funds are sitting on handsome gains made over the past few years, sector-focused funds have delivered higher returns over a longer term. A look at the 10-year performance of mid- and small-cap schemes shows that these have delivered a return of 15% CAGR (compounded annual growth rate), compared with around 18% by funds focused on banking, pharma and FMCG sectors. 

Tactical standpoint

The main purpose of investing in a sectoral fund is to gain from the concentrated exposure to a pocket of the economy—FMCG, banking and financial services, infrastructure, pharma, technology—that is doing well and promises growth in the future. In effect, sectoral funds provide a tactical exposure to your portfolio. If you pick the right sector, you stand to reap higher rewards than you would by investing in the broader market. In the past five years, for instance, pharma and FMCG-focused funds, the so-called defensive bets, have clocked 22.7% and 19.8% CAGR, respectively. If you had adopted a tactical position and invested in these funds, your portfolio returns would have exceeded those of the broader market. Once you have the core portfolio in place, it can be a good idea to take an exposure to sectoral funds from a tactical standpoint. The additional exposure can provide a boost to the overall portfolio returns.

Higher risk 

Since this category of funds is exposed to a single sector and only a handful of stocks, it carries a higher risk compared with diversified equity mutual funds. In some funds, the top five stocks often account for more than 50% of the portfolio. A downturn in one or two portfolio holdings can hurt the return of the entire fund even if the broader sector fares well. A traditional diversified equity fund, on the other hand, will typically invest only 25-30% of the portfolio in its five largest bets, thus providing a cushion against a slide in any of its top picks. In addition, unlike a diversified fund, the fund manager of a sectoral fund does not have the liberty to move away from the sector even if its performance deteriorates. For example, if the infrastructure sector is doing poorly, an infra fund will have to remain invested in the sector because of its mandate. This leaves you with a struggling fund. In contrast, a diversified fund's manager has the flexibility to get out of a sector facing headwinds and shift his investments to a sector with better promise.

So what should you do? Here are some time-tested tips that can help you benefit from this category of funds. 

Sectoral fund success strategies

Fund selection is key 

Fund selection within the chosen sector is, of course, critical. Even though the focus is on one segment, funds within a category come in multiple flavours. This is particularly true in the case of banking and infrastructure funds. For instance, some banking funds are tilted towards private sector banking stocks and NBFCs, which have better asset quality and higher profitability. These have delivered healthy returns, unlike some public sector bank-focused funds, which have yielded poor returns in recent times. There is an even greater disparity in the infrastructure fund basket. These funds are known to invest across a variety of businesses, even those remotely connected to infrastructure. Funds in the pharma, FMCG and technology basket, on the other hand, are of the same type. 

Take limited exposure 

If you do not have the stomach for the higher degree of volatility of sectoral funds, stay away from this category. Those willing to take the risk should go only for a limited exposure. Stick with only one or two sectoral funds. Having multiple sector funds within your tactical allocation will dilute the entire purpose of taking a focused exposure. These funds should not make up more than 10-15% of your portfolio. Sectoral funds should be used purely from a tactical viewpoint. They should not be a part of your core holdings, but used to complement the existing portfolio. 

Do not look at past returns 

Do not invest on the basis of past returns. Too often, you gravitate towards the flavour of the season and latch on to a sector when the rally is already under way. The investors who entered at the height of frenzy around the technology sector in 2000 or infrastructure in 2007, ended up participating only in the slide. That is not to say that you should take a contrarian approach and invest in a sector that is out of favour.  Invest only if you are convinced that the sector's prospects are improving or it is poised for growth. 

Size matters 

Opt for funds that are relatively large-sized and have a proven track record. If the scheme is too small or a chronic underperformer, chances are the fund house may merge it with another fund from its stables.

Do not invest via SIPs 

While investing in traditional equity funds, you are advised to take the systematic investment plan (SIP) route. SIPs help ride the volatility over a period of time through cost averaging. However, this approach would not serve well if you are hoping to make the most of a sector upswing. When the sector has picked momentum, there is no point averaging your cost as it will dilute your returns. At the most, you could stagger through 4-5 smaller investments, but not through a long-term SIP. Given the smaller quantum of exposure to the fund, you would do well to buy on dips rather than invest through an SIP.

Have an exit strategy 

Sectoral funds tend to perform differently across market phases and the winners keep rotating. It is not easy for a common investor to take a call on the future prospects of a sector and time the entry into a sectoral scheme and exit at the opportune time. Some funds, particularly those that are cyclical in nature like infrastructure or power, are not buy-and-hold type of investments. Also, do not assume that sectors with stronger fundamentals, such as FMCG and pharma, will always see a secular bull run. You should invest in such funds only till the time the sector's fundamentals are on a strong footing. Greed is not good. Conversely, do not hesitate to pull out of your investment at a loss, if it does not work out as you had hoped. Needless to say, you need to monitor your investment on a regular basis. 

The bottomline

The concentrated portfolios of sector funds can produce tremendous gains or losses, depending on whether the chosen sector is in or out of flavor. No particular sector can perform in all market cycles. Thus placing all your eggs in the same basket would never be a wise decision. A portfolio must be diversified across different sectors to ensure capital protection, reduce volatility and generate better returns in the long term. Before investing you need to analyze your portfolio and mark all sectors to which you already have a considerable exposure. A particular sector/stock can be added when you are sure about the performance of the sector /stock but your portfolio lacks the same. Now, investing in a particular sector/stock can also be done in two ways - direct stock picking and sectoral mutual funds. Direct stock picking requires an in-depth analysis and still would be a too risky bet. Against these, an advantage through sectoral mutual funds would be diversification across stocks in that particular sector with considerably lower amount of investment. This increases the overall width in the portfolio even with limited amount of funds. Buying individual stocks in a sector would neither be possible nor feasible but mutual funds allow buying units with small amounts and in turn the investor gets exposure to the diversified stock list of those particular sectors. Thus, sector funds should be kept as an add-on to your existing portfolio. Moreover, allocation to any particular sector should not go overweight in comparison to other sectors.

Sector funds expose your portfolio to concentrated risk, in fact, it can incur you a huge loss, if you do not keep yourself abreast of business cycles. On the other hand, if you are well-versed with the sector fundamentals and have the capability to assess the volatility that is bound with such funds, you can make a good profit. However, always be very careful when investing in sector funds and invest only a limited portion of capital!

Monday, September 25, 2017

September 2017

Despite decline in key market indices, the average assets under management (AAUM) of the mutual fund industry touched an all-time high of Rs.21 lakh crore in August 2017. AMFI’s latest data shows that AAUM of the mutual fund industry has reached Rs.20.97 lakh crore in August 2017. The average AUM of the mutual fund industry has increased from Rs.19.92 lakh crore in June 2017. However, the monthly AUM of industry stood at Rs.20.59 lakh crore in August 2017. While AAUM is the average assets of the entire month, which is calculated by factoring in all working days of the month, month end AUM is the assets of the industry as of the last working day of the month. The growth has come largely because of higher inflows in arbitrage funds and equity funds through SIPs. AMFI data shows that the industry has received net inflows of Rs.61,700 crore across all categories. The good news is that the industry has mopped up Rs.31,000 crore in equity funds including ELSS, ETFs that tracks indices and balanced funds. AMFI said, “The AUM in the retail schemes (i.e. equity + ELSS + balanced schemes) increased by 3% from Rs.750,699 crore as on July 31, 2017 to Rs.772,246 crore as on August 31, 2017 and registered an increase of 48% YOY. Retail AUM constitutes about 37.5% of the overall Industry AUM, and including debt funds, the overall retail participation in mutual funds was little over 50% of the overall Industry AUM.” Another positive trend for the industry is increasing contribution in mutual funds through SIP. The latest AMFI data shows that the mutual fund industry received a monthly inflow of Rs.5,206 crore through SIPs. The monthly SIP inflows increased by Rs.1,709 crore from Rs.3,497 crore in August 2016, a growth of 48%.

Investors have pumped in close to Rs 62,000 crore into various mutual fund schemes in August 2017, driven by equity and money market funds. With this, total net inflow in mutual fund schemes has risen to Rs 2.2 lakh crore in the first five months (April-August) of the ongoing fiscal, as per the latest data available with Association of Mutual Funds in India (AMFI). The Indian mutual fund industry has been witnessing phenomenal growth since 2014. According to data from AMFI, investors have poured in a net of Rs 61,701 crore in MF schemes in August 2017 as compared to Rs 63,504 crore in July 2017. The latest inflow has been mainly driven by contribution from liquid funds and money market funds. Besides, investors continued to maintain bullish stance on the equity schemes. Liquid or money market fund category witnessed Rs 21,352 lakh crore being poured in August 2017. In addition, equity and equity linked schemes attracted Rs 20,362 crore. Further, balanced and debt funds received Rs 8,783 crore and Rs 8,390 crore respectively. However, gold ETFs continued to see net outflow of Rs 58 crore.

Mutual fund houses saw a surge of over 40 lakh investor accounts during the first four months of this fiscal, taking the total count to an all-time high of 5.94 crore on strong participation from retail investors. This comes following an addition of 77 lakh folios in the entire 2016-17 and 59 lakh in 2015-16. According to SEBI data on total investor accounts with 42 active fund houses, the number of folios rose to a record 5,9,420,864 at the end of July 2017 from 5,5,399,631 at the end of March 2017, a gain of 40.21 lakh. The rise in investors’ accounts has come mainly from the retail category, which is evident by the strong double-digit growth in folios in equity, balanced and debt categories. Notably, participation from retail investors, especially from small towns, has been growing. Besides, steps taken by the Securities and Exchange Board of India such as giving extra incentives for fund houses expanding into smaller cities, coupled with increasing investor education programmes to increase the penetration of mutual funds, is paying dividend. Retail investor accounts — defined by folios in equity, equity-linked saving schemes (ELSS) and balanced categories — grew over 36 lakh to more than 4.8 crore during the period under review.
According to CAMS data, IFAs have created over 11 lakh new SIP accounts between January and June 2017. IFAs are truly the SIP kings as they have created the highest number of SIP accounts. The latest CAMS data, which covers 63% of the industry AUM shows that mutual fund distributors and distributors empanelled with national distributors have created 11.19 lakh new SIP accounts in the first six months of the calendar year i.e. between January and June 2017. While mutual fund distributors have created 5.50 lakh new SIP accounts, national distributors such as NJ India and Prudent who partner with distributors under sub-broking model added over 5.60 lakh folios in January-June 2017. Surprisingly, IFAs have added more SIP accounts in B15 cities than T15 cities. The CAMS data shows that IFAs have created 3.06 lakh SIP folios in B15 cities compared to 2.51 lakh SIP folios in T15 cities. On the other hand, national distributors have created 2.58 lakh SIP folios in B15 compared to 3.04 lakh SIP accounts in T15 cities. The data shows that both IFAs and NDs account for 60% (30% each) of new SIP accounts. Many IFAs cater to retail clients who are salaried employees. These salaried employees are comfortable contributing small amounts every month through SIP instead of lumpsum amount. Banks account for 22% of new SIP registrations with 4.20 lakh SIP accounts. While private banks have created 2.40 lakh SIP accounts, their PSU counterparts registered close to 1.90 lakh new SIP accounts in January-June 2017. However, in B15 cities, PSU banks have created 1.39 lakh SIP folios compared to 1.14 lakh SIP folios of private banks. Overall, the mutual fund industry has created close to 18 lakh SIP accounts in CAMS serviced fund houses.

Piquant Parade

IDFC Mutual Fund has released a short movie titled ‘Return of One Idiot’ to spread financial awareness among people. This movie is a sequel to its first movie ‘One Idiot’ that was released in 2012. This movie highlights the need to save for retirement. The fund house will screen this movie across the country through cinema halls and distribution networks. In fact, the fund house has received approval from Central Board of Film Certification. The film aptly captures a common challenge in our society and proposes a simple solution to avoid a pitfall of not saving enough for retirement. The idea that your savings will always provide you support, no matter what the future holds is both empowering and liberating. The movie attempts to deliver a simple message in an engaging manner, making it relatable to all. The videos are meant for both advisors and investors. Advisors can use these videos in their IAPs. Another initiative of the fund house is IAP platform for IFAs. The fund house has recently launched a website for IFAs called to help IFAs with content and literature that may come in handy to them to conduct IAPs. The fund house will provide templates such as invitation, presentation and videos. The fund house will also provide financial support to IFAs who conduct IAPs using this content. IFAs need not take formal approval from the AMC official to conduct IAPs. They just need to register themselves with the AMC platform. The AMC will help them with all the support they need to conduct IAPs.

Regulatory Rigmarole

In line with the Government’s instructions to link Aadhaar number with mutual fund folios, Karvy Computershare introduced a host of facilities through which clients can update their Aadhaar number. To start with, Karvy Computershare launched Aadhaar linking facility on their website. Investors can link their Aadhaar through one time password sent to their registered email id and mobile number with Karvy. All the clients need to do is SMS (ADRLNK ) to the designated mobile number mentioned on their website. For example, if the pan number of client is BJQPP5878J and Aadhaar 512245739980, he will have to type ADRLNK BJQPP5878J 512245739980 Y. "Y" in the SMS stands for investor consent to authenticate and seed Aadhaar.  A reply SMS will be sent to the investor saying, thanks for visiting our website, sharing Aadhaar and consent of investors to authenticate and seed, followed by a link to the site as well. However, this facility is not available for PAN exempted mutual fund folios. Another option for investors is to send a self-attested Aadhaar update form available on Karvy’s website. Investors can either submit the forms at Karvy branches, dispatch to Karvy’s HO or submit to their distributors, who in turn will scan & upload on Karvy’s portal, through Distributor log-in services. This mode helps the investors from B15 locations. The mutual fund investors will have to update their Aadhaar number before December 31, 2017. The government will freeze the non-compliant folios after this date.

In a circular, SEBI has announced certain changes in the REITs and InvITs regulations to facilitate growth. SEBI has allowed real estate investment trusts (REITs) and infrastructure investments trusts (InvITs) to raise capital by issuing debt securities, introduced the concept of Strategic Investor for REITs on similar lines of InvITs, allowed single asset REIT on similar lines of InvIT, allowed REITs to lend to underlying Holdco/SPV and amended the definition of valuer for both REITs and InvITs. Further, the Board has, after deliberations, decided to have further consultation with the stakeholders on a proposal of allowing REITs to invest at least 50% of the equity share capital or interest in the underlying Holdco/SPVs, and similarly allowing Holdco to invest with at least 50% of the equity share capital or interest in the underlying SPVs. SEBI rule mandate fund houses to invest up to 10% of NAV in REITs and InvITs. Currently, fund houses can also invest up to 5% in single issuer. REITs invest in rent yielding commercial and residential properties to generate regular income while InvITs invest in infrastructure projects to generate income by way of toll. 

The capital market regulator has asked Registrar and Transfer (R&T) agents to incorporate multi-level encryptions and firewalls ensuring safety of data. In a move to minimise cyber threats and protect investor data, SEBI has asked R&T agents like CAMS and Karvy Computershare to level up their cyber security system by maintaining a robust cyber security framework in the organisation. The recent ransomware attacks and increasing cyber threats have catalysed this move. R&T agents act as a storehouse for maintaining records of mutual fund transactions on behalf of the fund house through a wide network of their offices across the country. Commenting on the same lines, SEBI said, “Since RTAs perform important functions in providing services to holders of securities, it is desirable that RTAs have robust cyber security and cyber resilience framework in order to provide essential facilities and perform systemically critical functions relating to securities market.” The circular highlighted the broad norms such as authorised access to systems, annual audits, monitoring of suspicious activities and so on that R&T agents will follow. SEBI has clarified that the circular is applicable for R&T agents servicing more than two crore folios.

The Securities and Exchange Board of India (SEBI) is set to usher in rules that will require the mutual fund industry to introduce asset categories, a move that will spark scheme mergers and is aimed at helping investors identify the right plan from within the product heap. The capital market regulator intends to classify mutual fund schemes into three broad product groups — equity, debt and hybrid — which will be sorted further into subcategories as per the investment mandate. There is currently no official classification for mutual fund schemes. Once products are brought under these categories, asset managers will have to merge those that are similar. For instance, a fund house operating two separate schemes that invest in mid-caps will have to merge them or scrap one. SEBI will issue a circular with the list of classifications asking fund companies to comply with the requirement within six months. The regulator's decision to simplify the process of investing in mutual funds comes at a time when retail investors are pouring money into various schemes. India's 42-member mutual fund industry handles over Rs 19.5 lakh crore in assets across 2,000 schemes. Unhappy about the number of products, SEBI has been informally asking fund houses to consolidate the schemes. But with this falling on deaf ears, the regulator has decided to push them into consolidation through new rules. The SEBI-appointed panel has identified a little over 30 subcategories to classify schemes. Within the equity category, there will be eight to 10 divisions such as large-cap, multicap, mid-cap and small cap funds among others. In debt, there will be around 16 categories such as liquid, ultra short term and dynamic schemes among others. In hybrid, there will be four subsections depending on the scheme's exposure to stocks and bonds. The regulator will issue guidelines defining all the categories. For instance, if a scheme has to be classified as a large-cap scheme, it should have invested 80% of its corpus in such stock. The definition will be based on the IISL (India Index Services and Products Ltd) indices. IISL is a National Stock Exchange unit that provides indices and services related to that. SEBI will ask mutual funds to describe the product in a tagline, currently restricted to whether they are open ended or close ended. Once the rules are implemented, the taglines will need to provide more details. The new classification will bring the legitimacy of superiority of comparability and it would be usable. The SEBI-appointed committee also discussed aligning mutual fund regulations with the Companies Act with regard to the appointment of directors, independent directors, trustees and auditors. As per the Companies Act, there has to be a rotation of directors every three years. In addition, there will be an upper age limit of 70 years for directors. The panel also recommended easing rules for mutual funds' exposure to interest rate futures. Till now, mutual funds could only do securities-based hedging in their bond portfolio. Now, SEBI could allow duration based hedging. 

The last three years and especially 2016 have been characterised by large inflows into equity and balanced funds, with increasing participation from retail and HNI investors. Indian investors have now eventually assimilated mutual funds and the credit goes to awareness programmes and endeavours by regulators and asset management companies.

Monday, September 18, 2017


September 2017

It is a common practice across the mutual fund companies to launch NFOs (New Fund Offers) when markets are doing well. As more and more people invest only when markets perform well, automatically it becomes an opportunity for mutual fund companies to come out with new products. In the last few months of bull-run many NFOs have been launched out of which most of them are close ended funds. Hardly there is any company left which has not launched an NFO. In addition, the number of NFOs which were launched in the bear phase of 2009-2013 equals the number of NFOs launched in the last year.

NFOs of various hues adorn the September 2017 NFONEST.

ICICI Prudential Sensex Index Fund
Opens: September 14, 2017
Closes: September 18, 2017

ICICI Prudential Mutual Fund has launched a new fund named as ICICI Prudential Sensex Index Fund, an open ended index fund. The objective of the fund is to invest in companies whose securities are included in the S&P BSE Sensex Index and subject to tracking errors, to endeavour to achieve the returns of the above index as closely as possible. This would be done by investing in all the stocks comprising the S&P BSE Sensex Index in approximately the same weightage that they represent in S&P BSE Sensex Index. The fund will not seek to outperform the S&P BSE Sensex Index or to underperform it. The fund will invest 70%-100% of its assets in debt instruments including government securities and invest up to 30% of assets in money market instruments with low to medium risk profile. The fund will not have any exposure to derivatives and if the fund decides to invest in securitized debt (Single loan and / or Pool Loan Securitized debt), it could be up to 25% of the corpus of the Plan. Benchmark Index for the fund is S&P BSE Sensex Index. The fund manager is Kayzad Eghlim.

Sundaram Long Term Micro Cap Tax Advantage Fund Series VI
Opens: June 23, 2017
Closes: September 22, 2017

Sundaram Mutual Fund has launched a new fund named as Sundaram Long Term Micro Cap Tax Advantage Fund Series VI, a 10 year close ended equity linked savings scheme. The tenure of the fund is 10 years from the date of allotment of units. The investment objective of the fund is to generate capital appreciation over a period of ten years by predominantly investing in equity and equity related instruments of companies that can be termed as micro-cap. For the purpose of investment by the fund Micro cap stock is defined as one whose market cap is equal to or lower than the 301st stock by market cap (after sorting the securities in the descending order of market capaitalization) on the National Stock Exchange of India at the time of investment. The fund will allocate 65%-100% of assets in equity and equity related securities of companies of micro-caps as defined in the objective, invest up to 35%-100% of assets in other equity and equity related securities with high risk profile and invest up to 20% of assets in fixed income and money market securities with low to medium risk profile. The performance of the fund will be benchmarked against Nifty Small Cap 100 Index. The fund will be managed by S Krishnakumar & Dwijendra Srivastava.

SBI Dual Advantage Fund –Series XXIV
Opens: September 11, 2017
Closes: September 25, 2017

SBI Mutual Fund has unveiled a new fund named as SBI Dual Advantage Fund - Series XXIV, a close ended hybrid fund. The tenure of the fund is 1100 days from the date of allotment. The primary investment objective of the fund is to generate income by investing in a portfolio of fixed income securities maturing on or before the maturity of the fund. The secondary objective is to generate capital appreciation by investing a portion of the fund’s corpus in equity and equity related instruments. The fund will invest 55%-95% of assets in debt and debt related instruments, invest up to 10% of assets in money market instruments with low to medium risk profile and invest 5%-35% of assets in equity and equity related instruments including derivatives with high risk profile. Benchmark Index for the fund is CRISIL MIP Blended Fund Index. Rajeev Radhakrishnan shall manage debt portion and Ruchit Mehta shall manage investments in equity and equity related instruments of the fund.

UTI Focussed Equity Fund –Series IV
Opens: September 13, 2017
Closes: September 25, 2017

UTI Mutual Fund has launched the UTI Focussed Equity Fund, an open ended growth fund. The investment objective of the fund is to generate long term capital appreciation by investing predominantly in equity and equity related securities of listed companies. The fund is benchmarked against S&P BSE 200 and the fund managers are Anoop Bhaskar / Lalit Nambiar.

BNP Paribas Focused 25 Equity Fund
Opens: September 15, 2017
Closes: September 29, 2017

BNP Paribas Mutual Fund has launched the BNP Paribas Focused 25 Equity Fund, an open ended growth fund. The investment objective of the fund is to generate long-term capital growth by investing in a concentrated portfolio of equity and equity related instruments of up to 25 companies and the balance in debt securities and money market instruments. The fund is benchmarked against Nifty 100 and the fund managers are Mr. Abhijeet Dey and Mr. Karthikraj Lakshmanan.