Impact 
The Sahara Group as you may know has been sailing through tough times. It has engaged in long running legal battle with the Securities and Exchange Board of India (SEBI) ever since regulator order refund of a massive amount of over Rs 24,000 crore collected through Optionally Fully Convertible Debentures (OFCDs) by two Sahara entities – Sahara India Real Estate Corp and Sahara Housing Investment Corp (SHICL).
SEBI recently also cancelled the portfolio management license of a Sahara firm. And now here’s a new blow to the Sahara Group…
SEBI has cancelled the registration of Sahara Mutual Fund (the Asset Management Company) vide an order dated July 28, 2015 stating that it was not ‘fit and proper’ for the company to carry this business.
Hence pursuant to the above, the fund house has been ordered:
- Not to take any new subscription from investors (including existing investors in Systematic Investment Plans (SIPs) and Systematic Transfer Plans (STPs))
- Not to levy any penalties / loads on SIPs / STP investors for not depositing the instalments
- Transfer the activities of the fund house to a new sponsor and a SEBI approved Asset Management Company (AMC) at the earliest
- Board of Trustees of Sahara Mutual Fund to oversee and ensure protection of unitholders interest during the above period
- In the event of failure of the fund house to complete the process of transition within a period of 5 months from the date of the order, then compulsory 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
- Return of certificate of registration to SEBI on the expiry of 6 months from the date of this order
Is there recourse?
Sahara Mutual Fund has the option to contend this order in the courts by appealing to the Securities Appellate Tribunal (SAT). However it is unlikely that SAT would accept Sahara’s appeal as it had rejected it before on the issue of the OFCDs. It is likely that Sahara would have to sell its asset management business to a new sponsor and a SEBI approved AMC at the earliest.
So what should investors in Sahara Mutual Fund schemes do?
The fund house as on June 30, 2015 held Average Assets Under Management (AAUM) worth Rs 134.29 crore. The fund house at present has 10 equity and 6 debt mutual fund schemes.
How have mutual fund schemes fared?
Equity Funds
Debt Funds
LT – Debt Funds
Scheme
Name |
3-mths
(%) |
1-Yr
(%) |
3-Yr
(%) |
5 -Yr
(%) |
SD
(Annualised) (%) |
Sharpe
Ratio |
| Sahara Gilt(G) |
1.7 |
7.7 |
7.9 |
7.6 |
0.22 |
0.55 |
| Sahara Income(G) |
1.7 |
7.7 |
8.2 |
8.5 |
0.30 |
0.75 |
| Crisil Composite Bond Fund Index |
1.4 |
11.6 |
8.8 |
8.1 |
4.10 |
0.09 |
| I-Sec Composite Gilt Index |
0.9 |
11.5 |
9.1 |
8.7 |
4.23 |
0.11 |
Liquid Fund
Scheme
Name |
6-mths
(%) |
1-Yr
(%) |
2-Yr
(%) |
3-Yr
(%) |
SD
(Annualised) (%) |
Sharpe
Ratio |
| Sahara ST Bond(G) |
3.5 |
7.7 |
8.3 |
8.3 |
0.32 |
0.09 |
| Sahara Inv-Qtrly-1(G) |
3.6 |
7.6 |
8.1 |
7.9 |
0.28 |
-0.18 |
| Crisil Short Term Bond Fund Index |
4.1 |
9.7 |
10.2 |
9.2 |
1.35 |
0.22 |
Scheme
Name |
3-mths
(%) |
6-mths
(%) |
1-Yr
(%) |
2-Yr
(%) |
SD
(Annualised) (%) |
Ratio |
| Sahara Liquid-Fixed Pricing(G) |
1.7 |
3.6 |
7.6 |
8.3 |
0.06 |
-1.77 |
| Crisil Liquid Fund Index |
2.0 |
4.2 |
8.7 |
9.5 |
0.13 |
0.30 |
Data as on July 29, 2015
Note1: Returns below 1-Yr are expressed in absolute terms, while those over a year are calculated on CAGR
Note 2: SD which refers to Standard Deviation and Sharpe Ratio are calculated over a 3-yr period for equity funds and long term debt funds assuming a risk-free rate of 7.38% p.a. For a short term debt funds they are calculated over a 2-yr period assuming a risk-free rate of 8.10% p.a., while for liquids funds they are calculated over 1-Yr period assuming a risk-free rate of 8.07% p.a.
(Source: ACE MF, PersonalFN Research)
But as depicted by the table above not all schemes have clocked luring returns.
Diversified equity funds which at the outset appear to have clocked appealing returns, have exhibited inconsistency in performance and have trailed their respective peers. Likewise, thematic funds have shown tendency to plunge more when negative undercurrents for the theme / sector(s) were in play. Hence on this backdrop, it would be worthwhile for investors in equity mutual fund schemes of the fund house to exit the respective schemes.
As far as the debt mutual fund schemes are concerned, only a couple of funds are worth holding - Sahara Income Fund and Sahara Interval Fund - Quarterly Plan - Series I. Sahara Income has shown superior performance and has adequately compensated its investors in the past. Hence, one can hold the fund with a long term view. Speaking about Sahara Interval Fund - Quarterly Plan – Series I, it being an interval fund, hold till the stipulated time line and reinvest only if you are satisfied with returns and if it is capable of meeting your financial goals.
Yes, there is uncertainty over who would be the new sponsor and how the funds will be managed; but one can stay put until then at least in the case of Sahara Income Fund. It is vital to track how things transpire in the time to come as so far no one has shown interest in buying assets of Sahara Mutual Fund.
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Impact
Delicate handmade gold jewellery is a weakness of many Indian women, no matter old or young. However, when it comes to purity of gold, most of Indians solely rely on the Jeweller’s word. It’s a fact that, international customers have little faith about the purity of gold jewellery manufactured in India. Despite of several efforts made by Bureau of Indian Standards (BIS), success of hallmarking of gold jewellery in India is limited at least for now.
Let's see what World Gold Council has to say about India’s hallmarking system in one of its recently released reports, ‘Developing Indian hallmarking, a roadmap for future growth';
"Controls around quality and consumer protection have historically been relatively light. Across the value chain, the Indian gold industry has been dominated by small, often artisanal outlets, operating without licence or accreditation. This has had several adverse consequences. Jewellery has suffered from under-caratage and there has been a widespread concern over this issue of under-caratage by Indian consumers."
What is hallmarking?
Hallmarking is synonymous to certificate of purity. So when you buy hallmarked jewellery, you are supposed to be assured about quality standards of gold used. Unfortunately, in India, even hallmarked jewellery may also suffer some impurities.
Here are the reasons…
- It is not mandatory for the jeweller to sell only hallmarked jewellery
- The same store can sell hallmarked and non-hallmarked jewellery which may allow the seller to hallmark only the high value jewellery and sell the low value jewellery at his discretion
- Many hallmarking centres have poor equipment and they often follow slack processes
- Little awareness about hallmarking among rural masses and even among educated people make it difficult for the hallmarking centres to operate at optimum capacity and stay in profits. As per the findings of World Gold Council, because of lack of secured business, “some centres resort to pre-arranged deals with jewellers, agreeing to be less robust in their processes so as to secure more business.”
PersonalFN is of the view that, for all aforesaid reasons you must be careful while buying hallmarked jewellery. You may buy jewellery from a jeweller who has good reputation and is known for selling pure gold. However, PersonalFN suggests that, you shouldn’t buy gold jewellery as investment. Making charges and wastages make jewellery an unattractive option for investors. Therefore, if you want to invest in physical gold, prefer hallmarked gold coins and bars instead. PersonalFN believes that, gold Exchange Traded Funds (ETFs) is one of the best options for taking exposure in gold. From the diversification point of view, you may invest about 10% to 15% of your portfolio in gold.
How do you read these findings of the World Gold Council? Share your views here.
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DISCLOSURE AS PER SECURITIES AND EXCHANGE BOARD OF INDIA (RESEARCH ANALYSTS) REGULATIONS, 2014
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