Mutual Fund Roundup: April 2010
Market Overview
After showing consolidation during the month of April 2010, the equity markets did manage to close in the positive terrain. The BSE Sensex, S&P CNX Nifty and the CNX Mid Cap Index gained 0.2%, 0.6% and 4.6% respectively. Gold too became bold and ended in green, up by 4.3% on account of, spiralling inflation and junking of Greek bonds by Standard & Poor Financial Services Llc (S&P) – the global credit rating agency. Oil prices too moved upwards on the concerns of oil spills in United States and doubts about massive bailout package for Greece.
The rise of 25 basis points each in the key policy rates (Repo and Reverse Repo) and Cash Reserve Ratio, by Reserve Bank of India (RBI) also did push the yields to 8.1% for the 6.35% 10-Yr G-Sec bond. The government released the new 10-Yr G-Sec bond, which registered a bullish cut-off of 7.80% as against the market expectation of 7.85%.
Monthly Market Roundup
|
Close |
Change |
% Change |
| BSE Sensex |
17,558.7 |
30.9 |
0.2%  |
| S&P CNX Nifty |
5,278.0 |
28.9 |
0.6% |
| CNX Midcap |
8,061.1 |
356.2 |
4.6% |
| Gold (Rs/10 gram) |
17,025.0 |
705.0 |
4.3%  |
| Re/US $ |
44.4 |
0.4 |
1.0% |
| Crude Oil ($/BBL) |
85.7 |
4.4 |
5.4% |
| 10-Yr G-Sec (%) |
8.1 |
0.2 |
3.1% |
| 1-Yr FDs |
5.00% - 6.50% |
(Monthly change as on April 30, 2010)
The graph here under clearly depicts that while equity markets did correct on account of Greece and Spain’s sovereign debt rating being downgraded by S&P to ‘BB+/B’ and ‘AA’ respectively, the Foreign Institutional Investors (FIIs) continued to show investment confidence towards India, on account of good GDP growth rate (8.0%) projected by RBI (in it Annual Monetary Policy for 2010-11) and also due to IMD’s forecast of normal monsoon.
FIIs were net buyers of equities to the tune of Rs 11,477 crore in the month of April 2010 as compared to Rs 19,928 crore (net buyers in equity) in the month of March 2010.
BSE Sensex vs FII inflows
(Source: ACE MF)
February 2010 IIP (Index of Industrial Production) numbers declared in the month of April 2010, also did enthuse the FII activity. The Index of Industrial Production (IIP) for February 2010 grew by 15.1% over last year's figure (February 2009). According to the quick estimates released by the Central Statistical Organisation (CSO), the rise in IIP was broad based and was on account of:
- Strong manufacturing growth - The manufacturing index, which is the principal component of the IIP, grew by 16.0% over the last year
- Robust expansion in output - Output of capital goods grew over the last year by 44.4%, followed by growth in output of intermediate goods and consumer goods of 15.6% and 8.9% respectively
Mutual Fund Overview
The industry's Average Asset Under Management (AAUM) grew by Rs 21,640 crore or 2.9% during April. The combined average AUM of the 38 fund houses stood at Rs 7,69,165 crore. The country's largest fund house, Reliance Mutual Fund, witnessed an increase of over Rs 1,400 crore in its average assets in April. Reliance Mutual Fund witnessed an addition of Rs 1,407 crore in its AAUM to Rs 1,11,819 crore during the month, according to the data available with the Association of Mutual Funds in India (AMFI).
But overall mutual Funds faced redemption pressures at every high levels of the equity market, thus making them net sellers in equities to the tune of Rs 1,323.6 crore in the month of April 2010. Although the equity funds did see some inflows, the rise in the average AUMs was mainly due to inflows into liquid funds. Banks and corporates in March had withdrawn from funds for their advance tax payments; it is this money which is was being pumped back into funds resulting in the rise in the average AUM.
BSE Sensex vs MF inflows
(Source: ACE MF)
Monthly top gainers: Open-ended equity funds
| Diversified Equity Funds |
1-Mth |
Balanced Funds |
1-Mth |
Banking Funds |
1-Mth |
| Escorts High Yield Eq (G) |
9.30% |
Escorts Balanced (G) |
6.73% |
Reliance Banking (G) |
8.35% |
| Magnum Emerging Businesses (G) |
6.88% |
JM Balanced (G) |
5.10% |
Sahara Banking & Fin. Serv (G) |
7.57% |
| Reliance Long Term Equity (G) |
6.80% |
Canara Robeco Balance (G) |
3.69% |
Reliance Media & Ent. (G) |
6.74% |
(1-Mth returns as on April 30, 2010)
(Source: ACE MF)
Monthly top gainers: Open-ended debt funds
| Monthly Income Plans |
1-Mth |
Long-Term Floating Rate Funds |
1-Mth |
Short-Term Gilt funds |
1-Mth |
| HSBC MIP-Savings (G) |
1.90% |
Sundaram BNPP Flexible-FIP (G) |
0.82% |
IDFC Savings Advt (G) |
0.48% |
| HDFC Multiple Yield 2005 (G) |
1.67% |
HDFC FRF-LT (G) |
0.60% |
Principal Money Mgr (G) |
0.45% |
| Tata MIP Plus (G) |
1.67% |
Birla SL FRF-LT (G) |
0.46% |
JP Morgan India Liquid(G) |
0.40% |
(1-Mth returns as on April 30, 2010)
(Source: ACE MF)
In contrast to what happened in the month of March 2010, where domestic mutual funds were net sellers in debt instruments to the tune of Rs 3,798 crore; the month of April 2010 turned them net buyer in debt instruments to a whopping Rs 65,559 crore. In our opinion, this renewed excitement towards debt instruments, seems to be on account of persistent hike in key interest rates done by RBI, which is making the bond prices appear attractive to fund managers.
Performance across various categories of mutual funds
(Source: ACE MF)
(1-Mth average returns of funds in various categories as on March 31, 2010)
As per the above graph, the equity oriented funds, especially banking funds performed outstandingly well. In the diversified equity funds, mid caps showed a stunning performance, as compared to large caps. Index funds turned negative as the equity markets experienced consolidation in the month of April 2010. Gold also experienced an impulse as S&P downgraded ratings for Greece and Spain. Debt funds too ended in the positive terrain, as RBI did not hike the interest rates drastically.
Other News
- Mutual fund houses have come under the scanner of the Securities and Exchange Board India (SEBI) as they have been allegedly showering their agents with cash incentives and trips to exotic locations in India and abroad, in return for higher sales.
According to a SEBI top official, the practice of providing such incentives has been adopted by mutual fund houses; post the entry-load ban. He also said that SEBI finds such practices unethical and is also examining whether these incentives are being funded by investors' money, in the name of fund expenses. But, interestingly, some senior officials of leading fund houses are defending the cash payout and junkets, saying that, "such practices are prevalent across various industries like pharmaceuticals and consumer goods where distributors are treated with much more expensive gifts and more frequent foreign trips".
- In order to combat spiraling inflation, the Reserve Bank of India (RBI) increased short-term lending and borrowing rates by 25 basis points each in its Annual Monetary Policy for 2010-11. The repo rate has been increased from 5.00% to 5.25% and the reverse repo rate has also been increased from 3.50% to 3.75%. CRR too was been raised from 5.75% to 6.00%.
- Franklin Templeton Mutual Fund has announced winding up of Franklin India International Fund (FINTF). The scheme will stand wound down as on April 30, 2010. The major reason for it is, strengthening of Indian rupee against the US dollar since the scheme's launch, together with the scheme's performance profile, resulted in a sharp reduction in the demand for FINTF. Hence, as a part of the ongoing product rationalization exercise, the scheme will be wound down.
- SBI Mutual Fund’s ownership may soon see a change, with its shareholder Societe Generale Asset Management merging with Credit Agricole Group’s asset management arm globally earlier this year to form a new entity, “Amundi”. Currently State Bank of India (SBI) owns 63% in SBI MF, while France’s Societe Generale Asset Management owns 37%.
- SBI Funds Management Pvt. Ltd. (a joint venture between SBI & SGAM) has introduced an online payment option in SBI Mutual Fund schemes through State Bank of India's ATM-cum-debit card. This facility is available for all mutual funds (equity and debt). SBI Mutual Fund is the first fund house to launch this new payment option.
- DSP BlackRock Investment Managers launched “DSP BlackRock Focus 25 Fund”, a focused” diversified equity funds, showing its conviction towards 20 – 25 stock holdings in its portfolio.
- Religare Mutual Fund launched “Religare Monthly Income Plan (MIP) Plus Fund”, which seeks to generate regular income, provide adequate liquidity and attractive returns through an actively managed portfolio of debt, money market instruments, equity and gold.
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