FMC divided over allowing gold ETF trading on SEs

It is the most hassle-free route for retail investors to take an exposure to the yellow metal. But just as the gold exchange-traded funds (ETFs) were gaining in popularity, a tricky question has risen as to who should be regulating them, and whether gold ETFs should be allowed to be traded on the stock exchanges, as they are being now.

According to people familiar with the development, the consumer affairs ministry has posed this question to the law ministry, since the underlying for gold ETFs is a commodity, and should logically fall under the purview of the forward markets commission (FMC).

The law ministry had asked for FMC's inputs on the matter and the commission submitted its views past month. An official at FMC told ET that once the Forward Contract Regulation Act amendment bill is passed in Parliament, products like gold ETFs will become a part of the commodity markets, and will be regulated by FMC. But even before that, opinion within FMC is divided on whether gold ETFs should be allowed to be traded on stock exchanges. Some officials see this as an encroachment on the commodity market, while others argue that since gold ETFs are a spot instrument launched by mutual funds, there is nothing wrong in them being traded on the stock exchanges and being regulated by SEBI.

NCDEX chief economist Madan Sabnavis feels that logically since the underlying is a commodity, gold ETFs should fall under the purview of FMC. He added if such funds are launched in other commodities like soy oil there could be issues pertaining to prices, which FMC would be best placed to address.

Gold ETFs are gaining acceptance, but the products is yet to reach the popularity of mutual fund products. A total of six fund houses - Benchmark Asset Management Co, Kotak Mahindra Mutual Fund, UTI Asset Management Co, Reliance Capital Asset Management, Quantum MF and SBI Mutual Fund - at present offer gold ETFs in India.

According to data by the Association of Mutual Funds of India, assets under management (AUM) by gold ETF have risen 30% over the past one year to Rs 904 crore as on August 31, 2009.
Though gold collections under ETFs are growing, they remain minuscule when compared with India's gold imports of about 700 tonne annually.

Source: http://economictimes.indiatimes.com/Bullion/FMC-divided-over-allowing-gold-ETF-trading-on-SEs/articleshow/5095752.cms

Surge in equity fund offers in September

Nearly a dozen equity-based fund offer documents were filed with the Securities and Exchange Board of India during September, according to the regulator’s Web site.

This sudden spurt in the number of fund offers is despite the equity funds turning less attractive for distributors to sell after the scrapping of the entry load.

According to the Value Research data, three fund offer documents were filed with the regulator in July, four in August, while 11 of them have been filed in September. Of these 11, two are gold-based funds.

With the equity market on the upswing, mutual funds expect revival of g retail interest in the coming months, said the Taurus Mutual Fund Chief Executive Officer, Mr Waqar Naqvi.

Another attraction for retail investors is the Rs 10 face value for the new funds. For the existing funds, investors might have to pay the market price, which is higher, said fund managers.

The current environment is conducive for equity investments, fund managers said.

Mutual funds are dependent on market conditions when it comes to pushing their schemes, said a fund manager with a foreign fund house. Now, with markets in a bullish phase, it is easier to convince investors about equity products, he added.

Also, the previous rally of the Sensex, when it touched the 17,000 mark, was a very sharp rally and not many investors were able to ride that rally, said another fund manager.

Now, with the market momentum still in the upswing, analysts feel that investors would want to ride the next rally. The benchmark index Sensex rose by almost nine per cent in September.

While new fund houses would launch more plain vanilla funds , existing fund houses could go in for more of theme-based and more structured equity offerings, said Ms Lakshmi Iyer, Head of Products at Kotak AMC.

Even as there is a general positive feeling about the equity market, a section of fund managers feels that investors are still sceptical about investing at such high levels.

“The market is already at a peak and these levels may seem high for retail investors,” a fund manager said. Also the market has already priced in growth for the next 6-8 months, and there is not much scope for an uptrend for some time, he added.

Source: http://www.thehindubusinessline.com/2009/10/07/stories/2009100751830100.htm

Bank funds lead Indian mutual fund gainers in Sept

*Bank funds gain an average 15.8 pct vs 9.3 pct in BSE index *Diversified funds lag on lower gains from cap goods, FMCG
*Debt funds jump 0.75 pct as federal bond yields drop 25 bps

Indian funds investing in bank stocks recorded the sharpest jump in net values in September as shares of financial firms rose on prospects of better corporate results and hopes the credit growth would start ticking up.
Banking sector mutual funds gained an average 15.8 percent during the month, outperforming the 9.3 percent rise in India's benchmark 30-share index .BSESN, data from global fund tracker Lipper, a Thomson Reuters company, showed.
"If you are betting that the Indian economy will do well despite the global meltdown... this is the sector which will obviously outperform," J. Venkatesan, a fund manager at Sundaram BNP Paribas Asset Management, said.
"Valuation comfort is much more better here than any other sector," Venkatesan added.
He said most state-run banks were available at a reasonable 1.5 times their price to book value, while returns on equity were about 18 percent and improving.
Indian firms will start releasing their quarterly results from the second week of October, and advance tax payments indicate robust profits.
That should ease pressure on likely bad loans for banking firms and also boost prospects for credit off-take as corporates return to health and revive expansion plans.
Top lender State Bank of India climbed little over a quarter in September to 2,195.70, its highest close since February last year, as investors expected strong corporate earnings to boost the bank's profits and ease bad debt worries.
No. 2 lender ICICI Bank rose 21 percent to 904.80 rupees during the month, its highest close since May 21, 2008.
Actively managed diversified equity funds, the biggest category of stock funds by number and assets, recorded a 7.2 percent return, underperforming the main share index.
More tha 90 percent of them underperformed the benchmark index on lower returns from their large exposure in sectors such as capital goods, consumers and energy as well as exposure to small and mid-cap stocks.
The three sectors collectively controlled about a third of the equity investments of diversified funds at the end of August, data from fund tracker ICRA Online showed.

BOND, GOLD FUNDS

Indian fixed income funds investing in government securities recorded a 0.75 percent jump in net values in September as federal bond yields IN069019G=CC dropped 25 basis points. The prospect of an increase in the hold-to-maturity (HTM) limit for banks had supported prices in September on a view it would enable banks to buy more bonds and help the market better absorb the government's record borrowing programme in 2009/10.
The government plans to sell 1.23 trillion rupees of bonds in the second half of the fiscal year after raising 2.95 trillion rupees in the first half.
Gold exchange traded funds gained 3.4 percent during the month as the yellow metal rose primarily due to a weak dollar overseas, which spurred buying in the alternative investment.
Gold futures on the continuation chart MAUc1 ended September at 15,703 rupees per 10 grams, up 3.8 percent during the month.

Source: http://in.reuters.com/article/companyNews/idINBOM50357820091006?sp=true