LIC's investment in MF's rises 3 folds

After banks, it’s the country’s largest insurer Life Insurance Corporation of India (LIC) that has come to the aid of cash-strapped mutual funds (MFs), which are reeling under redemption pressure on liquid and fixed maturity plans (FMPs).The public-sector insurer has pumped in over Rs 14,000 crore into liquid funds of various fund houses. This is more than three times its investment of around Rs 4,500 crore in such instruments last year.

It could not be ascertained as to how much the corporation has invested in its own mutual fund arm, LIC Mutual Fund.
According to Irda norms, LIC can invest 50 per cent in government securities, 15 per cent in the infrastructure sector, and the remaining 35 per cent in other channels, including equity, mutual funds, fixed deposits, non-convertible debentures, certificate of deposits, and commercial papers.

Liquid or money market funds earn returns in the range of 10-12 per cent. LIC parks money in short- term liquid funds and FMPs, where the average tenure varies from two weeks to a month.

Equity MFs see worst fourth quarter

Equity funds, which are fast becoming the preferred investment vehicle for a substantially large population, have turned out one of their worst quarterly performances during the three-month ended March 31.

A study by Value Research, a firm that specialises in mutual fund industry research, showed that the average returns of almost all categories of equity funds had their worst three months since January 2001. Between January and March this year, funds belonging to the most popular 'diversified equity category', lost an average of 28.3%in value.

Individually, funds in the diversified category lost between 16.2% and 40.6% during the first three months of the current year while the Bombay Stock Exchange Sensex and the NSE Nifty both lost nearly 23%, the study by Value Research pointed out.

The recent study showed that of the 277 equity funds available in the market, only 35outperformed their respective indices while the rest 242 lagged. What's worse, of the 35 funds that beat their benchmarks, just seven managed to do so by a margin greater than 5%.

Read more in The Times of India article.

Allahabad bank ties up with Franklin Templeton

Allahabad Bank, a leading public sector bank has signed an MoU with Franklin Templeton Investments (India), for distributing its mutual fund products through its 2107 branches across the country.

Mr Vivek Kudva, President, Franklin Templeton India and Mr AC Mahajan, CMD, Allahabad Bank, signed the MoU and reaffirmed their commitment towards creating a basket of services that could enable their valued customers to make holistic financial solutions.
Templeton India aims to reach out to a larger number of retail investors and this tie-up offers the way forward for the Indian mutual fund industry to attain the critical mass necessary for growth.

He is convinced that the coming months will see a larger proportion of household savings finding their way into mutual funds. He hopes to develop a new user base of customers who were so far not accessing their investment products.

Nelcast IPO subscribed over 7 times

Initial public offer of Nelcast today got oversubscribed seven times on the last day of its Rs 95.26 crore offer.

The IPO received 3.20 crore bids for its offer of 43.50 lakh equity shares, latest data available on the stock exchanges shows.

The company's offer received decent response from Qualified Institutional Buyers, including Foreign Institutional Investors, mutual funds among others, with the portion reserved for them getting subscribed over 11 times, the data shows.

While, the retail investors portion received over 4 times demand for the part reserved for them in the total offer.

Nelcast, a castings and component manufacturing company, which entered the capital market with a 43.50 lakh share initial public offering, IPO.

The issue made through 100 per cent book building process, with the price band between Rs 195 and Rs 219 for the shares of face value Rs 10 each.

FIIs on a shopping spree, MFs liquidate

Domestic mutual funds have remained sellers in the five months to May, quite unlike foreign institutional investors (FIIs), which have been big buyers.

While mutual funds liquidated stocks worth Rs 700 crore between January and May this year, FIIs have continued to shop for Indian equities, the tab at Rs 17,267 crore, a 73 per cent rise over the amount they invested in the same period last year.

Mutual funds seemed to be quite bullish on the market last year, putting in Rs 13,811 crore in the first five months. This year, however, despite having seen a fairly strong increase in their corpuses — approximately Rs 7,000 crore between January and April — their appetite for stocks has shrunk.

Interestingly, FII inflows into the Indian market — which now has a market capitalisation of Rs 1 trillion—are strong despite the fact that Asian funds have been pulling out money from India.

Against an inflow of $1.6 billion into India from dedicated Asian equity funds between January and May 2006, there has been an outflow of $1.2 billion this year, according to EPFR Global.

Read more in The Business Standard article.

Mutual fund Lotus India sees assets grow to $2 bn

Lotus India Asset Management, a Mumbai-based mutual fund group, expects funds under management to nearly treble to $2 billion (Rs8,112 crore) in the next 10 months as it targets Indian retail investors, an executive said on Thursday.

Lotus is a joint venture between Fullerton Fund Management, a unit of Singapore’s state investor Temasek Holdings, and London-based Sabre Capital Worldwide, which was founded by former Standard Chartered chief executive Rana Talwar.The group has launched seven mutual funds, raising $700 million, since November 2006 and plans to launch 10 to 12 more funds.

Indian mutual funds had total assets of Rs3.5 trillion ($86 billion) in April, up 36% from a year earlier, according to data from the Association of Mutual Funds in India.
Bagga, who previously worked at Citibank and GE Capital in India, said growth was likely to come from retail investors, thanks to higher savings, and from the pension industry as the government opens up the sector to fund managers.

Read more in The Live Mint article.

PSUs likely to invest in MFs

The Cabinet Committee on Economic Affairs (CCEA) will discuss the proposal to lift the ban on state-owned companies from investing in mutual funds in its weekly meeting tomorrow.

This opens significant opportunities for cash-rich public sector units (PSUs) to earn higher returns and provide a fillip to the stock-markets. Mutual funds account for less than 1 per cent of total stock market investment.

According to data compiled by the Business Standard Research Bureau, the 78 listed public sector units had reserves worth Rs 3,04,292 crore at the end of March, 2006. Oil and Natural Gas Corporation (ONGC) with reserves of Rs 52,534 crore topped the list.

This is the second recent move by the government to strengthen PSUs. A month ago, it allowed the chairmen of such companies a role in the appointment of independent directors, also allowing them greater flexibility to make investment and operational decisions.

Read more in The Business Standard article.

French MF to enter India

French mutual fund major Credit Agricole Asset Management (CAAM) is eyeing a pie of the Indian mutual fund industry. The fund house that manages assets worth 534.8 billion euro globally would be the fourth French mutual fund giant to enter India.

While AXA has collaborated with Bharti, BNP Paribas has a tie-up with Sundaram and Société Générale Asset Management with SBI.

Like the early French entrants, CAAM, too, is looking for a joint venture partner. In the other eight countries that CAAM operates in, the AMC has either entered singly or through a joint venture.

“The due diligence process has begun,” Thierry Mequillet, CAAM’s chief executive Asia, said. However, he said the percentage of stake the French company would have in the mutual fund JV would be decided during negotiations.

SEBI allows MFs to invest up to $4bn overseas

Market regulator SEBI has allowed mutual funds to invest up to four billion dollars in ADRs, GDRs, foreign securities and overseas exchange traded funds.

"Pursuant to the enhancement in overseas investment limits by RBI, it has now been decided that mutual funds can invest in ADRs, GDRs, foreign securities within overall limit of four billion dollars," the Securities and Exchange Board of India (SEBI) said in a circular.

The circular was issued following the announced by the Reserve Bank of India (RBI) in its annual credit policy.

The investment will be with a sub-ceiling for individual mutual funds. This should not exceed 10 per cent of the net assets managed by them as on March 31 of each relevant year, and subject to a maximum of 200 million dollars per mutual fund, it said.