FUND FULCRUM
July-August 2015
Buoyed by strong inflows in equities, the asset base
of the country's mutual fund industry surged by around Rs 39,000 crore to jump
over Rs 12 lakh crore during the April-June 2015 quarter of the current financial
year. The country's 44 fund houses together had an average assets under
management (AUM) of Rs 11.88 lakh crore during January-March quarter of 2014-15
as compared to Rs 12.27 lakh crore in the first quarter of the current
financial year, according to the latest data available with AMFI. The assets
base figure could rise further as few fund houses are yet to disclose their
quarterly numbers. The quarterly rise in AUM is largely on account of
inflows in equities. Besides, retail participation in equity schemes has
increased significantly during the recent months. HDFC Mutual Fund has
retained its top position with an average AUM of Rs 1.65 lakh crore, a surge in
asset base by 2.1%, while ICICI Prudential Mutual Fund's asset base grew by 4.7%
to Rs 1.55 lakh crore. In the top league, HDFC Mutual Fund and ICICI
Prudential Mutual Fund are followed by Reliance Mutual Fund (Rs 1.45 lakh
crore), Birla Sunlife Mutual Fund (Rs 1.25 lakh crore), and UTI Mutual Fund (Rs
92,730 crore) in terms of average AUM in the first quarter of 2015-16.
HDFC Mutual Fund's AUM retained its top position across fund houses in the June
quarter with respect to the total assets managed. The fund's average AUM moved up
2.1% or by Rs 3379 crore to Rs 1.65 lakh crore. ICICI Prudential Mutual Fund
maintained the second position at Rs 1.55 lakh crore, up 4.7% or by Rs 6963 crore. Reliance
Mutual Fund was ranked third at Rs 1.45 lakh crore; its average assets rose by
5.5% or by Rs 7569 crores. In terms of asset gainers, Mutual fund managers
continue to keep faith in equities, putting in nearly Rs 33,000 crore in
April-June 2015, primarily driven by strong participation of retail investors. This
compares with an inflow of more than Rs 70,000 crore for the whole of 2014-15. Fund
managers invested a net amount of Rs 32,933 crore in equities and equity-linked
saving schemes during the first quarter (April-June) of the current financial
year, data from the Association of Mutual Funds in India (AMFI) showed. Of the
total, equity Mutual Funds attracted Rs 12,273 crore in June 2015 while the
same stood at Rs 10,076 crore in May 2015 and Rs 10,584 crore in April 2015. In
comparison, equity mutual funds saw an inflow of Rs 9,066 crore in the April-June
quarter of 2014-15.
Equity mutual funds witnessed an
addition of over 11 lakh investor accounts or folios in the first four months
of the current fiscal (2015-16), primarily on the back of strong retail
participation. This follows an addition of 25 lakh folios for the entire
fiscal, 2014-15. Folios are numbers designated for individual investor
accounts, though one investor can have multiple ones. According to Securities
and Exchange Board of India (SEBI) data on investor accounts with 44 fund houses,
the number of equity folios jumped to 32,858,830 in July 2015 from 31,691,619
in March 2015, translating to a gain of 11.67 lakh. April 2014 saw the first
rise in more than four years. Mutual funds reported net inflows of nearly Rs
39,000 crore in equity schemes in the April-July period of 2015-16, helping the
industry grow its folio count. Besides, addition in equity folios helped
increase overall folio base to 4.32 crore in June 2015 from 4.17 crore at the
end of March 2015.
Investors have pulled out a
little over Rs 25,000 crore from various mutual fund schemes in June 2015, with
money markets contributing the most to the outflow. The move comes following an
inflow of about Rs 1.12 lakh crore into mutual fund products in the preceding
two months (April-May). According to data from the Association of Mutual Funds in
India, investors withdrew a net Rs 25,085 crore in mutual fund schemes last
month. Investors withdrew capital from the liquid or money market instruments
last month but they continued to be bullish on the equity schemes. Equity and
equity linked schemes saw an inflow of Rs 12,273 crore last month, the
second-highest into equity mutual funds ever. The June 2015 net inflows are
second only to Rs 13,700 crore seen in January 2008. However, liquid or money
market category witnessed an outflow of about Rs 47,330 crore, while Gold
ETF (Exchange Traded Funds) saw a pull out of Rs 76 crore. With the latest
outflow, the net inflow in the schemes was at Rs 85,727 crore in the first quarter
(April-June) of the current fiscal, 2015-16. There are 44 mutual funds in the
country and their total Average Asset Under Management stands at Rs 11.73 lakh
crore at the end of June 2015.
Piquant Parade
In a fresh crackdown on Saharas, regulator SEBI cancelled the
registration of Sahara Mutual Fund saying it was no longer 'fit and proper' to
carry out mutual fund business and ordered transfer of its operations to
another fund house. Sahara group has been engaged in a long-running
regulatory and legal battle with SEBI ever since the regulator ordered refund
of a massive amount of over Rs 24,000 crore by two Sahara entities. Recently, SEBI
had also cancelled the Portfolio Management licence of a Sahara firm. In the
latest order, SEBI directed cancellation of Sahara Mutual Fund's certificate of
registration on expiry of a six-month period. Sebi also directed Sahara Mutual
Fund and Sahara Asset Management Company to stop accepting subscription from
its existing or new investors with immediate effect. Besides, Sahara Mutual Fund
has been asked to "make efforts to transfer the activities of Sahara India
Financial Corporation Limited (Sahara Sponsor) and Sahara Asset Management
Company Private Limited (Sahara AMC) to a new Sponsor and a Sebi-approved Asset
Management Company at the earliest." Sahara Mutual Fund's Board of
Trustees have been asked to "oversee and ensure protection of the
unit-holders' interests during the above period". The Board of Trustees
would need to be re-constituted after the transfer, according to SEBI. If
Sahara Mutual Fund fails to complete the process of transition within five
months, it would have to compulsorily redeem the units allotted to its
investors and credit the respective funds to its investors, without any
additional cost, within a period of 30 days thereafter and wind up the
operations of the Mutual Fund.
UTI Mutual Fund has introduced a facility called
"CanServe" for investments under UTI Balanced
Fund, UTI Spread Fund, and UTI Mastershare Unit Scheme. "CanServe" will enable investors to
contribute their dividend payouts if they are under dividend payout option or
specified amounts as desired, if they are under growth option towards a medical
cause. To provide this platform to investors, UTI Mutual Fund has entered into
an agreement with St. Jude India ChildCare Centres. Contributions under "CanServe" facility
will go to St Jude India ChildCare Centres as donation for needy and
under-privileged children who are being treated for cancer and their families,
during the period of the child's treatment. Under the Dividend payout
option, investors by opting for 'CanServe' Option can donate the dividend
payout to be declared on a prospective basis. The investors will have a choice
to donate either i) 50% of the dividend declared or ii) 100% of the dividend
declared, in future subject to a minimum amount of donation of Rs.1000/-. Under
the Growth option, investors by opting for 'CanServe' facility can contribute
by indicating a specified amount (Minimum Rs. 1000/- at each half yearly
payout) to be paid out under this facility by redeeming corresponding units on
semi-annual basis.
ICICI Securities, one of India's leading onlineinvestment service providers, has launched a completely
online and paperless investment account under the name 'Insta Account' to allow
KYC compliant resident Indian to invest in the country's mutual fund schemes. There
are no extra charges to open an Insta Account on its website www.icicidirect.com. With an ICICIdirect
Insta Account, ICICI Direct has done away with the traditional way of paper
documents and has ensured ease and convenience to investors by leveraging the
efficiency of technology. Investors who are already KYC compliant would be able
to use any of their existing internet banking account to make an investment and
utilize the in-depth research reports for their mutual fund investment. However,
the step from ICICI Securities has come at a time when several of the
leading fund houses in India are offering this service for more than a year
now. Further, going through individual fund houses' website, an investor is
treated as direct investor (if he choses the direct option), thereby he incurs
less expenses.
UTI Buddy is a Mobile Application which is aimed at helping the IFA by
simplifying the operational requirements. With UTI Buddy an IFA can
initiate transaction recommendations easily to their investors and complete the
entire purchase cycle in a couple of clicks. This application is available on
Android and Apple devices.
UTI Buddy offers the following
features to its IFAs:
·
Recommend Funds: IFAs can recommend schemes to
their mandate registered investors. Post which an SMS is sent to the investor.
Investors can then confirm the transaction by replying to a given short code
along with a one time password.
·
Commission Structure: IFAs can now check scheme
wise commission structures and view commission statements on the go.
·
UTI Summit (Reward & Recognition Program):
Enables IFAs to track their Summit reward points and view program brochure
and reward structures.
·
My Account: Includes view of IFAs last 20
commercial transactions, view of IFA portfolio summary and track investor
portfolio for transactions attributed to the IFA.
·
IFAs can watch various fund manager videos and
also track scheme NAVs etc.
The
singular objective of this mobile application is to aid IFAs in the financial
planning process for their investors by reducing the leg work required. In the
first phase UTI Mutual Fund is launching this mobile application with
transaction initiation facility. Subsequently it will enable other facilities
like switchover, registering of SIP mandates, and redemptions.
Regulatory Rigmarole
Industry body AMFI has eased the norms for
upfront commission payments of systematic investment plan schemes. This
would help AMFI provide incentives to mutual funds’ distributors. The revised
commission structure is in effect since July 1, 2015. Mutual fund houses are
permitted to pay up to one per cent upfront commission for a three-year period,
rather than monthly commission on the installments for SIPs, as per the new
relaxed norms. Owing to SEBI objecting the high commissions going to the mutual
fund agents, the fund houses had earlier been asked to keep the fee as 1%
starting April 1, 2015. Owing to decline in fresh sales after huge inflows
witnessed in the last one year, AMFI decided to take this step and the new fee
structure would help in drawing retail clients.
The liability to pay the service
tax will fall on the mutual funds and the asset management companies, according
to CBEC. However, the mutual funds and AMCs can set off the service tax
paid by them against the service tax payable on their output services. This
CBEC stance has come as big relief for mutual fund distributors who had cried
foul over the Budget announcement to withdraw service tax exemption and bring
them under the service tax net. Small-time distributors of mutual funds were
finding the going tough as they faced some squeeze in margins given that they
had to pay the tax out of their pockets. With the Centre increasing the service
tax rate to 14% in this year’s Budget, the levy was seen to be harsh if imposed
on the distributors, who anyway were working on slim high commissions. The
commission structure in mutual fund distribution had come down drastically over
the recent years, leading to an exodus of people from the industry. Currently,
there are only about 6,000 people actively engaged in mutual fund distribution
among the registered universe of over one lakh individuals. Nearly 95% of the
investments into mutual fund schemes in India come through distributors.
The long-awaited
shift of household savings from physical to financial assets is finally
happening. One lament among economic commentators was the average Indian
household’s tendency to funnel its savings into physical assets—gold and real
estate. Physical assets accounted for more than two-thirds of household savings
in 2012-13 (the last year for which data is available), up from 48% five years
earlier. It was widely believed that high inflation was the reason for
households turning away from financial assets. That trend is changing as
households return to financial savings. Net inflows into equity mutual funds
are reaching levels last seen in the heyday of the bull run in 2008. As long as
financial assets continue to hold the promise of higher yields, savers would
move away from physical assets. That is extremely positive for the markets, as
domestic inflows into mutual funds would support equity prices at a time when
foreign inflows are likely to dwindle due to concerns about the US Federal
Reserve raising rates.
