Money Matters

Seven more firms get Sebi approval to sell mutual funds

livemintmoneymatters — Mon, 08 Sep 2008 07:08:02 +0000

India has 35 asset management companies offering more than 950 mutual fund schemes and managing assets worth Rs5.44 trillion as of August

Ravi Krishnan

Mumbai: Seven firms plan to offer new mutual funds, braving choppy stock markets, after receiving in-principle approval from the Securities and Exchange Board of India, or Sebi.

Nineteen firms had applied to the capital market regulator for approval to sell mutual funds, seeking to tap rising incomes and potential savings in the world’s second fastest growing major economy.

Sebi has given approval to Nikko Asset Management, Goldman Sachs Asset Management, Indiabulls Financial Services Ltd, Religare Securities Ltd, Shinsei Bank Ltd, Dawnay Day International Ltd and Matrix Financial Services, according to the regulatory body’s website. Approval for the remaining 12 is pending.

Private equity firm New Silk Route Advisors spent about Rs200 crore last month to buy Dawnay Day AV Financial Services, including UK-based Dawnay Day International’s 50% stake, chairman and managing director Alok Vajpeyi’s 25% holding and a further 25% owned by an employee trust, Mint reported on 21 August.

Also read:

Dawnay Day sold to New Silk Route

India has 35 asset management companies offering more than 950 mutual fund schemes and managing assets worth Rs5.44 trillion as of August, according to the Association of Mutual Funds in India, or Amfi, an industry body.

“The basic economic force driving this is that the number of households invested in the capital markets continues to remain small,” said Amfi chairman A.P. Kurian. “Also, the proportion of savings invested remains little.”

The total assets under management of mutual funds represents 12.5% of India’s gross domestic product, compared with 40% for Brazil and 60% for the US, according to data provided by Mumbai-based Crisil Ltd, a unit of global rating agency Standard and Poor’s.

Still, India’s mutual fund industry is growing at one of the fastest rates in the world, along with those in China and Brazil. Total assets under management have expanded five-and-a-half times since August 2002.

Total assets under management in the country are estimated to grow 33% annually to reach $440 billion (Rs19.6 trillion) by 2012 , according to a survey by consulting firm McKinsey and Co. Retail investment in mutual funds is estimated to grow between 36% and 42% annually through 2012, while institutional investments will likely increase by between 25% and 33%, the report said.

Equity market returns have shrunk this year, with the Bombay Stock Exchange’s bellwether Sensex index declining more than 28% since January after rising more than 45% in each of the previous two years. Assets under management have declined from Rs.5.48 trillion in January, according to Amfi data.

A faster Sebi approval process will see at least four new asset management companies starting operations this fiscal year, twice the number in each of the past two years.

Edelweiss Asset Management Co. Ltd started its operations a week ago; Goldman Sachs Asset Management Ltd, India Bulls Ltd and Religare Securities Ltd will launch new schemes by year-end.

The new entrants remain unfazed by the fact that foreign institutional investors have pulled out a net $6.9 billion this year from equities after investing a net $17.2 billion in 2007. India’s economic growth slowed to 7.9% for the quarter ended June, compared with 9.2% a year ago. “Any time is a good time (to start a mutual fund),” said Mumbai-based Gagan Banga, chief executive officer of Indiabulls Ltd, which wants to launch its mutual fund plans by November. “It’s for the long term and we are going to leverage our footprint in the financial services business.” Independent industry trackers such as Dhirendra Kumar, CEO of New Delhi-based Value Research, however, say that mutual funds hitting the market now will take longer to break even.

“Many firms broke even in 2-3 years during the bull run,” said Kumar. ”These people (the new entrants) won’t be so lucky…. their break-even will get elongated to, say, 10 years.” Industry observers also say that some new money managers might have to keep their focus narrow.

“To become a retail player, you need to have deep pockets and patience,” cautions Hemant Rastogi, CEO of Wise Invest Advisors. “It might be possible that some of these new entrants may become niche players,” he added, citing the example of Benchmark Asset Management Ltd, which has only exchange-traded funds.

Religare insists that it won’t restrict itself to any niche. While only insititutional firms can set up mutual funds, barriers to entry in the industry are low, with only Rs10 crore in minimum net worth required to start an asset management company, according to the Sebi regulations.

“We want to hit 100 cities in the first two years and get up all products so that anyone can buy what he requires,” said Saurabh Nanavati, CEO of Religare’s mutual fund unit, to be launched with the Netherlands-based insurance company Aegon NV.

Sanat Vallikappen contributed to this story.

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Oil prices rebound sharply in Asian trade

livemintmoneymatters — Mon, 08 Sep 2008 07:01:36 +0000

Brent North Sea crude for October surged $2.57 to $106.66 a barrel

AFP

Singapore: World oil prices rebounded sharply in Asian trade Monday on worries Hurricane Ike will threaten production facilities in the oil-rich US Gulf Coast, analysts said.

In Asian morning trade, New York’s main contract, light sweet crude for delivery in October rose $2.37 to $108.60 a barrel from its close in New York floor trading on Friday.

Brent North Sea crude for October surged $2.57 to $106.66 a barrel.

The hurricane slammed into Cuba on Sunday, becoming the second major storm to hit the island in little over a week, making landfall in the eastern province of Holguin, weather officials said.

Ike, packing 120 mile (195 kilometre) per hour winds, earlier left dozens of people dead in a rampage across Haiti.

“Oil prices are reacting to the threat of Hurricane Ike, which is heading toward the Gulf of Mexico,” said Victor Shum, an analyst with energy consultancy Purvin and Gertz in Singapore.

“In the short term, hurricanes will determine the price direction of crude oil,” he added.

Prices had been declining due to weakening energy demand as global economies slow down.

Shum said the market was also closely watching the results of a policy meeting on Tuesday by oil ministers of the Organisation of Petroleum Exporting Countries (Opec) in Vienna.

Opec ministers are expected to wrestle with the issue of falling oil prices. Some analysts were expecting the ministers to agree to trim output to help keep crude above $100 a barrel.

Dollar gains against yen in Asia on US mortgage bailout

livemintmoneymatters — Mon, 08 Sep 2008 06:57:18 +0000

The US Treasury announced that it will put Freddie Mac and Fannie Mae under strict federal control and may invest up to a total $of 200 billion in them

AFP

Tokyo: The dollar gained against the yen in Asian trade on Monday after US authorities bailed out two mortgage finance giants, easing investor worries over the future of global markets, dealers said.

The dollar firmed to 108.32 yen in Tokyo noon trade from 107.67 in New York late on Friday, 5 September. The euro gained to $1.4350 from $1.4260 and to 155.42 yen 153.57.

The US Treasury Department announced on Sunday, 7 September when markets were closed, that it will put Freddie Mac and Fannie Mae under strict federal control and may invest up to a total $of 200 billion in them, dealers said.

Fannie Mae and Freddie Mac, government-chartered, shareholder-owned firms that provide liquidity to the US housing market, have been whipsawed by the financial meltdown in the past year.

The companies have lost some 90% of their value on fears of further losses from mortgage defaults by “subprime” customers, who were given loans despite patchy credit histories.

“Markets reacted positively at first glance to the news because it dispelled uncertainty about credit and fears of a worsening housing market,” said Masatsugu Miyata, forex dealer at Hachijuni Bank.

After a volatile morning session, trade started to calm down “as investors were taking a second glance at the bailout plan and its details and are unsure whether it will solve the financial crisis. They are cautious,” he added.

The US government plan could potentially cost taxpayers billions of dollars and Washington’s decision to buy back preferred stock would mean common shareholders still risk losing millions of dollars, dealers said.

The market was further relieved by reports that South Korean and Japanese banking companies were considering investing in Lehman Brothers, one of the Wall Street banks worst-hit by the subprime debacle.

The euro firmed against the dollar as market players raked in profit from the single European currency’s recent one-year lows against the greenback, dealers said.

But the rise did not signal a shift in market sentiment over the outlook in the eurozone, whose 15-nation economy contracted in the second quarter for the first time since the bloc’s creation in 1999.

The pound firmed to $1.7845 from $1.7653 in Tokyo morning trade.

The Canadian dollar slipped to $1.0560 US from $1.0591 after Prime Minister Stephen Harper called snap elections on Sunday.

Rupee appreciates by 11 paise against US dollar

livemintmoneymatters — Wed, 27 Aug 2008 08:04:06 +0000

Shows signs of breaking a two-day sliding string appreciating by 11 paise against the US currency

PTI

Mumbai: The Indian rupee showed signs of breaking a two-day sliding string as it appreciated by 11 paise against the US currency during morning trade as demand for dollar petered out amid rising global oil prices.

In quiet trade at the Interbank Foreign Exchange (Forex), the domestic currency resumed stronger at Rs43.72/73 a dollar from its last close of Rs43.85/86 a dollar and later was quoted at Rs43.74/75 a dollar in late morning deals.

The rupee yesterday breached the crucial 44-level to hit over a 17-month intra-day low of Rs43.16 and had fallen by nearly 1% in the last two days.

Forex dealers said there was not much activity in the foreign exchange market as dollar demand from oil refiners was almost nil during morning trading.

They expected traders to cover rupee positions aiding to the rupee sentiment during the day.

Meanwhile, global crude oil prices rose to near $117 a barrel in Asian trade this morning.

Nu Tek shares list at 4.7% higher

livemintmoneymatters — Wed, 27 Aug 2008 08:02:27 +0000

The company’s shares were trading at Rs208 today after hitting a high of Rs225 on the BSE

Reuters

Mumbai: Shares of telecoms infrastructure services provider Nu Tek India Ltd listed at Rs201.10 on the BSE on Wednesday, a 4.7% premium over its issue price of Rs192 each.

The companies shares were trading at Rs208 today morning, after hitting a high of Rs225 on the BSE.

Nu Tek raised Rs864 million through its offer of 4.5 million shares via a book-built issue, which opened on 29 July closed on 1 August. The issue was subscribed 1.63 times.

The firm will use the funds for overseas acquisitions and capital expenditure, it had said in its offer document.

The company offers all services related to design, installation, construction, operation and maintenance of telecom networks.

Oil rises near $117 on supply concerns

livemintmoneymatters — Wed, 27 Aug 2008 07:59:07 +0000

Crude for October delivery rose 44 cents to $116.71 a barrel, after settling up $1.16 on Tuesday

Reuters

Tokyo: Oil rose for a third straight session to near $117 a barrel on growing worries over Tropical Storm Gustav, which headed towards US oil and natural gas installations in the Gulf of Mexico.

Crude for October delivery rose 44 cents to $116.71 a barrel, after settling up $1.16 on Tuesday. London Brent crude rose 42 cents at $115.05 a barrel.

Oil touched a high of $122.04 last Thursday, as bad weather threatens the Gulf of Mexico and helped stem oil’s slide from a record above $147 a barrel hit in mid-July.

Hurricane Gustav was downgraded to a tropical storm on Wednesday after it slammed into Haiti on Tuesday, killing at least two people.

Forecasters expect wind speeds to pick up again to hurricane force and Gustav could become the first major storm to threaten US oil and gas production in the Gulf of Mexico since 2005.

Computer models showed Gustav could track towards Louisiana and Texas, where rigs produce a quarter of US crude oil and 15% of its natural gas.

“I’m afraid that Gustav could potentially cause an impact similar to hurricanes Katrina and Rita, although I certainly do not wish such things,” said Tetsu Emori, a fund manager at Astmax Co in Tokyo.

Three years ago, Hurricanes Katrina and Rita slammed into the region, crippling production and flooding New Orleans.

Royal Dutch Shell, the largest oil and natural gas producer in the region, said it would begin evacuating non-essential personnel from offshore facilities on Wednesday if the storm’s forecast remains unchanged.

Tensions between the West and Russia over Georgia and threats by Russian President Dmitry Medvedev of a military response to the deployment of a US missile shield in Poland also supported prices.

Demand slows

US oil demand in June fell 5.6% from a year ago, the US Energy Information Administration reported on Tuesday, hurt by high fuel prices and the wider economic crisis.

But US retail gasoline demand rose 1.3% last week as average gasoline prices dipped below $4 nationwide, MasterCard Advisors said on Tuesday.

Traders also focused on the latest oil inventory data in top consumer the United States.

According to a poll, analysts showed an average forecast for a 1 million-barrel rise in US crude stocks and a 500,000 barrel build in distillates.

Gasoline inventories are projected to fall 2.9 million barrels, a fifth straight weekly decline, as refiners were seen drawing down inventories of summer-grade gasoline.

Gold futures recover on better global trend

livemintmoneymatters — Wed, 20 Aug 2008 09:57:23 +0000

The far-month February contract of the precious metal shot up by 2.26% at Rs11,945 per 10 grams on the Multi Commodity Exchange

PTI

New Delhi: Gold prices recovered by 2.26% in futures market on fresh buying by traders in line with firming trend in global markets.

The gold, which fell in previous day’s trading, gained substantial ground after the metal prices rose in overseas markets as crude oil rebounded to $115 a barrel.

The far-month February contract of the precious metal shot up by 2.26% at Rs11,945 per 10 grams on the Multi Commodity Exchange with a trading volume of four lots.

A likewise trend was also extended to the December contract which gained 0.59% at Rs11,841 per 10 grams. The contract recorded business volume of 91 lots. Near-month October contract was up by 0.66% at Rs11,740 with trading volume of, 2700 lots.

Traders said market sentiments turned better after reports that gold prices have advanced to near one week high in Asian market on the back of recovery trend in crude oil prices, which spurred buying interest for the precious metal as better investment.

Nikkei falls 0.1% as global economy jitters weigh

livemintmoneymatters — Wed, 20 Aug 2008 09:55:06 +0000

Worries about the overall global economy weighed on exporters and especially automakers, which are suffering from falling demand in the European and US markets

Aiko Hayashi / Reuters

Tokyo: The Nikkei average dipped 0.1% on Wednesday, with Toyota Motor and other exporters sliding on a bleak outlook for the global economy, while bank shares fell on worries about the US financial system.

But a surge in Chinese stocks on hopes for a government stimulus package sparked buying of stocks linked to demand from emerging economies such as trading house Mitsubishi Corp briefly helping the Nikkei into positive territory.

“The short covering that we saw earlier doesn’t mean we will be seeing a large rebound in the market,” said Zenshiro Mizuno, senior managing director of the equity trading division at Marusan Securities.

“Financial worries haven’t been solved and they continue to exist,” Mizuno added.

The benchmark Nikkei shed 13.36 points to end at 12,851.69, the lowest close since 18 July. The broader Topix edged down 0.2% to 1,233.37.

“Worries about the overall global economy weighed on exporters and especially automakers, which are suffering from falling demand in the European and US markets,” said Soichiro Monji, strategist at Daiwa SB Investments.

Toyota shed 1.8% to 4,830 yen and Canon Inc lost 2% to 5,040 yen, the top drag on the Nikkei 225.

Most banks shares were weak after US stocks fell for a second straight session on Tuesday on fears that US home finance firms Fannie Mae and Freddie Mac may need a government bailout.

Top lender Mitsubishi UFJ Financial Group fell 1.5% to 817 yen, while Sumitomo Mitsui Financial Group the third-biggest bank, slid 1% to 675,000 yen.

However, No.2 Mizuho Financial Group added 0.2% to 468,000 yen.

Mitsui O.S.K. Lines and other shippers also weighed on the market after the Baltic Exchange’s chief sea freight index fell 1% on Tuesday, its first decline in five days.

Mitsui declined 2.5% to 1,262 yen, while Nippon Yusen KK shed 2.7% to 852 yen. Kawasaki Kisen Kaisha slipped 1.5% to 774 yen.

Indian rupee rises from 17-month low, cbank suspected

livemintmoneymatters — Wed, 20 Aug 2008 09:50:26 +0000

India’s central bank uses state-run banks to intervene if it wants to slow a rupee decline or prevent it from rising too quickly

By Reuters

Mumbai: State-run Indian banks were seen selling dollars to help the rupee recover from a 17-month low hit in early trade on Wednesday in action traders said was likely to be intervention on behalf of the central bank.

India’s central bank uses state-run banks to intervene if it wants to slow a rupee decline or prevent it from rising too quickly, and private bank dealers said Wednesday’s dollar selling looked like intervention.

The chief dealer with a private bank said there had been heavy dollar buying by companies in the morning. “But later there was correction after some state-run banks sold dollars around 43.80 levels,” the chief dealer said.

The partially convertible rupee fell to 43.87 per dollar in early trade, its lowest since 20 March 2007.

By 12:30 p.m., it was at 43.7350/7550 per dollar, 0.3% weaker than Monday’s close of 43.59/60. Tuesday was a central bank holiday.

The chief dealer at another private bank said state banks sold dollars between 43.85 and 43.75 in what he also suspected was intervention on behalf of the central bank.

Two state-run bank traders said there had been dollar selling by state banks, although they said it was not heavy, and some of the rupee’s recovery was down to dollar sales by exporters.

The rupee has fallen 9.9% against the dollar since the start of the year as foreign investors have pulled funds out of the stock market.

Dealers said the prospect of state bank action meant the rupee was unlikely to weaken back past 43.80 this session, and further gains in the stock market could help it towards 43.60 per dollar.

The main share index was up 0.5% on Wednesday, on track to snap a five-day slide.

Unions representing some bank employees were on strike on Wednesday, but traders said this was not affecting volumes.

BSNL hopeful of winning union nod for IPO

livemintmoneymatters — Tue, 12 Aug 2008 12:47:58 +0000

BSNL is trying to woo employees by offering them shares at nominal value

New Delhi: State-owned telecom company Bharat Sanchar Nigam Ltd (BSNL) is hopeful of getting its unions on board for its proposed initial public offer (IPO), which could raise up to $10 billion in the country’s biggest-ever share sale, its chairman said on 12 August.

“There are positive responses,” Kuldeep Goyal said on the sidelines of a company event.

BSNL has more than 300,000 employees and several unions. Its major unions are opposing a planned 10% IPO on fears the move will lead to job losses, while BSNL is trying to woo employees by offering them shares at nominal value.

Asked whether the company would go ahead with the IPO if the employees continued to oppose, Goyal said: “Let us first come to that. When we will come to the bridge, we will cross it.”