Now, mutual funds switching to sell-mode

With markets remaining patchy due to concerns about poor monsoon and the strength of the global
recovery, mutual funds (MFs) are slowly moving to the sell-mode. MFs have net sold equity worth Rs 756.7 crore in this month (up to August 17), data with Sebi shows.
The volatility in markets has hurt performance with returns from diversified equity funds slipping in August. Only 23 out of the 280-odd equity MFs have managed to post gains in the month (till August 18). The gainers too managed to deliver only single digit returns.
"Valuations are a little stretched. QIPs and new issues (IPOs such as NHPC) have taken out some liquidity," said Sameer Narayan, head, equity, Fortis Investments. "The poor monsoon and the strong rally of the dollar, which made people to move away from risk, have also played a role," he said. "Markets have given strong returns and so some amount of profit booking is happening now."
"Investor confidence in India has softened in recent days," according to Moody's Economy.com economist Sherman Chan. Investors are worried that poor agricultural performance could derail overall recovery, she said in her latest note on India. Though the concern on monsoon remained, the strong industrial production data has evoked a lot of optimism and it would be too early to conclude a downtrend, Fortis' Sameer said. MFs turned net buyers of equity in March. They have continued to invest in stocks after remaining on the sidelines for most of April. While net equity purchases by MFs topped Rs 2291.3 crore in May it came down to Rs 839.3 crore in June but recovered in July when net investments stood at Rs 1825.5 crore.
Fund houses recorded their best performance for the year in May. More than 100 diversified equity schemes registered 30-40% growth for the month in a strong post-election rally. However, they couldn't keep up the pace and came up with a tepid performance in June. Only 50 funds registered gains and out of this just two funds managed a growth of above 5% during the month, Value Research data shows. MFs turned in a better show in July buying equity worth Rs 22,559.5 crore, the highest in a month in 2009, Sebi data shows.

Source: http://timesofindia.indiatimes.com/news/business/india-business/Now-mutual-funds-switching-to-sell-mode/articleshow/4912828.cms

MFs asked to live with new charge structure

Domestic mutual funds returned empty handed from a meeting between them and Sebi on Tuesday. In the meeting called by SEBI chairman CB Bhave to receive feedback from mutual funds on its recent decisions on entry and exit loads, he is believed to have made it very clear that the industry will have to live with new norms.
According to fund officials, who attended the meeting, Mr Bhave patiently heard out the issues related to the new commission structure, but reiterated that the new steps will only be beneficial for the long-term growth of the industry.
He suggested that mutual funds need to be investor-centric and should have a uniform cost structure to avoid conflicts within the industry. Mr Bhave is believed to have told the officials that the period for charging exit loads should be one year for all mutual funds, capped at 1%, irrespective of the amount invested by any client.
While rules say that funds can charge unitholders up to 7% on exit, they were imposing this load on the basis of the quantum of investments. A fund official said: “In short, SEBI has hinted that mutual funds should compete on the basis of performance of its schemes and not on the commission structure.”

Source: http://economictimes.indiatimes.com/Personal-Finance/Mutual-Funds/MFs-asked-to-live-with-new-charge-structure/articleshow/4913156.cms

Sebi wants MF exit load only for 1st year

Within weeks of shaking up the mutual fund industry by abolishing entry load in all schemes and moving
to a uniform exit load regime, Sebi has given another jolt to the fund houses. In a late evening meeting on Tuesday, Sebi suggested fund houses to move to a regime of charging exit loads only for the first year of investments. Tuesday's meeting with Sebi chairman was attended by all the heads of fund houses, the chief of Association of Mutual Funds in India (AMFI), the MF industry trade body and some top Sebi officials from the mutual fund department.
After Sebi mandated that all entry loads should go and exit loads should be uniform across-the-board, fund houses had gone into a rejig mode with their finances so that they could compensate MF distributors. The change in the compensation structure was done with the assumption that exit loads could be there for perpetuity.
But ‘‘the recent Sebi suggestion on exit load has sent all those changes to the compensation structure for a toss,'' said a top official at a fund house. ‘‘Our capacity to pay to the distributors will reduce substantially,'' said the head of a local fund house.
MF industry officials said that limiting exit load to a year could lead to increased inclination among investors to move out of a scheme if the returns over one year are good. ‘‘It has the potential to lead to large-scale churning in the fund industry,'' said the official. Earlier, as part of the rejig exercise to change the compensation structure, a host of fund houses had increased exit load period. Now if Sebi's advice becomes a rule, all those will have to be reversed, industry players said.
However, as the CEO of a fund house pointed out that so far Sebi has not come out with any formal letter. ‘‘It's still evolving. I believe a lot of things can happen before it is formally notified,'' said the fund house CEO.

Source: http://timesofindia.indiatimes.com/news/business/india-business/Sebi-wants-MF-exit-load-only-for-1st-year/articleshow/4912829.cms

Sebi rejects mutual funds' concerns over new norms

The Securities and Exchange Board of India (Sebi) has ruled out rolling back its order banning entry load and parity in exit loads for all classes of investors.

On Tuesday, Sebi Chairman CB Bhave met chief executive officers (CEOs) of all fund houses to take stock of the ground realities after the new guidelines.
Industry sources said while the fund houses explained that the industry was still in a nascent stage and imposition of stringent guidelines would stifle its growth, the market regulator told them to adjust within the new guidelines.
Industry players, while admitting that the step was in the right direction, said such developments were much ahead of their time.
“Sebi’s moves have moderated the distributors’ compensation and they certainly are not happy. There is no overnight solution to this new development,” said the CEO of a large domestic mutual fund house who did not wish to be named.
While fund managers said there would be three-four months before the industry would be able to gauge the impact of the guidelines, they felt their collections could be hurt. “The market regulator may have to come up with corrective measures if things do not improve,” said the CEO.
Sources added that fund houses with high cost structure would become increasingly uncomfortable in case the adjustment takes longer. “The trend will be visible from the industry’s August numbers,” said another leading fund manager.
Sebi had banned the entry load charged by fund houses from August 1. In the new regime, distributors would have to negotiate the commission with customers and be paid through a different cheque.
Also, distributors would have to disclose the commission they were being paid for similar products.
In yet another move, the market regulator had asked fund houses to stop discriminating between high networth and retail investors and charge them the same exit load.

Source: http://www.business-standard.com/india/news/sebi-rejects-mutual-funds%5C-concerns-over-new-norms/367518/