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Thursday, June 22, 2017

Mutual Funds See Rs 1.7 Lakh Crore Net Inflow In April

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New Delhi: Investors pumped in a staggering Rs 1.7 lakh crore into various mutual fund (MF) schemes in April with liquid or money market segment contributing the most.

In comparison, a total of Rs 1.10 lakh crore was invested in April last year.

Generally, liquid funds witness heavy outflow towards the end of March and the trend gets reversed in April as banks and corporates reinvest the surplus, which they had withdrawn to pay their financial and advance taxes.

Investors poured in a net of Rs 1,70,161 crore in MF schemes last month as against an outflow of Rs 73,113 crore in March, data from the Association of Mutual Funds in India (Amfi) showed.

The inflow was mainly driven by contribution from liquid funds or money market category. Besides, inflows have resumed in equity schemes on strong retail participation.

The liquid or money market segment witnessed Rs 1.34 lakh crore being poured in last month while equity and equity-linked schemes saw a net inflow of Rs 4,438 crore. In addition, net inflow in balanced fund stood at Rs 31,448 crore.

“Every year in March, high outflow is a routine phenomenon and we should not read much into it. It happens due to high redemptions in liquid funds by big corporate for the year closing. Like the trend of many years, ever this year also, more than 90 per cent of the redemptions for the March is in liquid funds.

“These funds generally come back in the month of April as per the trend,” Bajaj Capital senior VP and national head-mutual funds Anjaneya Gautam said.

Money market fund’s portfolio comprised short-term (less than one year) securities representing high-quality, liquid debt and monetary instruments.

Overall, the asset base of the country’s fund houses surged to an all-time high of Rs 14.22 lakh crore last month from Rs 12.33 lakh crore at the end of March.

Mahindra forays into MF business, eyes rural, semi-urban markets

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New Delhi: Mahindra Asset Management Company (AMC), which has received an approval from capital markets regulator Sebi to set up mutual fund business, Friday said it will focus on rural and semi-urban markets. The company is also in the process of setting up its products and marketing.

Mahindra AMC, a wholly-owned subsidiary of Mahindra and Mahindra Financial Services, is the latest Indian conglomerate to enter the mutual fund segment.

At present, there are over 40 mutual fund houses operating in the country. The company will focus on rural and semi-urban markets where its non-bank lender parent Mahindra Finance has a strong presence.

“We are committed to reaching out to semi-urban and rural markets. We believe that many of the investors from these markets are new to mutual funds,” Mahindra AMC managing director and chief executive Ashutosh Bishnoi said.

Interestingly, smaller towns have contributed 44% of total inflows in the past fiscal.

“Our primary focus is to meet the investment needs of semi-urban and rural investors. Mahindra Finance has been serving the borrowing needs of such customers for two decades, and now we are aligning ourselves to the investment needs of the same customers,” he said.

Mahindra AMC has filed papers with the Securities and Exchange Board of India (Sebi) for launching at least four schemes. These schemes are Mahindra MF Bachat Yojana, Mahindra MF Kar Bachat Yojana, Mahindra MF Bal Vikas Yojana and Mahindra Liquid Fund, as per information available with Sebi.

“Our idea is to explain the investment opportunities to customers in our priority markets in their own language starting with the product names. Among our prospects there are both, the service class as well as self employed occupational groups. We have created a product for each customer profile. “We believe that helping each such group of customers to understand the role of a specific mutual fund product in his or her life will be the key to our success,” he added.

Earlier in February, Mahindra AMC had received an approval from Sebi to set up mutual fund business.

Good News For Employees: Inoperative PF Accounts To Earn Interest

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New Delhi: The Employees’ Provident Fund Organisation (EPFO) on Tuesday decided to provide interest on inoperative accounts from April 1, a move which will benefit over nine crore such account holders having total deposits of over Rs. 32,000 crore.

The decision was taken by EPFO’s apex decision-making body, Central Board of Trustees, headed by Labour Minister Bandaru Dattatreya.

“UPA government stopped interest on inoperative accounts. Now we have taken a pro-worker decision. The UPA government which was claiming to be a pro-worker, stopped the interest on inoperative accounts.”

“Now, we have decided to credit interest in inoperative accounts. There will not be any inoperative accounts,” Mr Dattatreya told reporters after the Central Board of Trustees meeting here.

He also informed that interest on deposits in inoperative accounts will be credited from April 1.

Inoperative accounts are accounts wherein the contribution has not been received for 36 months.

Retirement fund body EPFO had stopped payment of interest to such accounts from April 1, 2011. The move was aimed at discouraging parking of funds with EPFO in these dormant accounts.

The decision will benefit over nine crore such account holders having total deposit of around Rs. 32,000 crore.

When asked about a proposal on enhancing proportion of incremental investments of EPFO in government securities (G-Sec) from 50 per cent to 65 per cent, Labour Secretary Shankar Aggarwal said, “It has already been decided by the Ministry of Finance.”

The Secretary said that the limit of 50 per cent was enhanced as they were getting good offers but unable to invest in such instruments as the limit had been exhausted.

“If we get higher returns in G-Secs then we should be allowed to invest more in these instruments,” he added.

The Board also gave in-principle approval to restructuring of EPFO as recommended by a sub-committee.

“We have taken decision regarding (cadre) restructuring of the EPFO. There will be a Career Advancement Scheme for over 20,000 employees of EPFO. They are waiting their due promotions for 19 years,

A Modi Lecture Berating Tax Breaks For Rich Rattles India Funds

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In the run-up to India’s annual budget, a speech last month by Prime Minister Narendra Modi has become the focus of this year’s market chatter, unsettling some investors.

Many local mutual funds, who bought record Indian stocks in 2015 just as foreigners were fleeing, fear Modi may dilute a tax break on equity gains, curbing inflows. Setting off the alarm was Modi’s tirade at a business summit on Jan. 29 against “experts” who disdain subsidies for the poor but are quick to welcome tax breaks for businesses.

At stake for money managers is a favorable tax regime that helps millions of investors channel their savings into the stock market. As the benchmark S&P BSE Sensex tumbled into a bear market, mutual funds have helped counter outflows spurred by the U.S. rate outlook and the turmoil in China. Their plea now to Modi: Don’t screw it up.

“Such a move won’t be positive for equities when the market sentiment is down,” Sunil Subramaniam, chief executive officer at Sundaram Asset Management Co., which oversees $3.2 billion, said in an interview in Mumbai. “Equity being risk capital needs incentives to persuade people to save.”

Money managers are concerned Finance Minister Arun Jaitley, in his budget on Monday for the fiscal year starting April 1, may tax profits from stocks sold within three years of purchase, instead of one year applicable now. At present, gains from equity investments held for less than 12 months attract a tax of 15 percent. Several local media including the Economic Times reported the government is weighing an increase in the holding period for the capital-gains tax waiver after Modi’s speech.

The fear has played its part in putting the S&P BSE Sensex on course for its steepest monthly drop since November 2011. The gauge traded little changed on Thursday. Finance Ministry Spokesman D.S. Malik declined to comment on the speculation, saying budget discussions are confidential. After buying $10.2 billion of shares in 2015, local funds have put $2.9 billion into equities this year. Overseas investors have withdrawn $2.3 billion.

Making the tax exemption less attractive may accelerate the shift to bond funds, which got 150 billion rupees ($2.2 billion) in January, the most since October, data from the Association of Mutual Funds in India show. Inflows to stock funds was the smallest in 21 months, the data show.

Retail investors have been a force behind mutual funds’ growing heft since Modi took office in May 2014. As many as 3.4 million accounts were opened in the April-January period, versus 2.5 million in the year through March 2015, data from the regulator show.

“This is really a wrong time to do it,” Sridhar Sivaram, investment director at Mumbai-based family office Enam Holdings Pvt., said by phone on Tuesday. “Retail investors are coming back and funds have started to see inflows. All of this can reverse.”

In his speech at the summit organized by the Economic Times daily in New Delhi, Modi compared subsidies for the poor with tax breaks for the rich. The federal budget for the year that started April 1, 2015, put the subsidy bill at 2.43 trillion rupees.

“When a benefit is given to farmers or to the poor, experts and government officers normally call it a subsidy,” he said. “However, I find that if a benefit is given to industry or commerce, it is usually called an ‘incentive’ or ‘subvention.’ We must ask ourselves whether this difference in language also reflects a difference in our attitude? Why is it that subsidies going to the well-off are portrayed in a positive manner?”

The market is reading too much into those comments that weren’t made in the context of the budget, said Gautam Chhaochharia, head of research at UBS Securities India Pvt. in Mumbai. “There isn’t any credible insight from the finance ministry on it,” he said.

Still, investors including Enam’s Sivaram say the securities transaction tax, a same-day tax credit system introduced in lieu of long-term capital gains tax in 2005, is efficient. Should the long-term capital gains tax break be diluted, the damage to share prices may exceed any revenue gain for the government, he said.

The STT has on average fetched the government 60 billion rupees annually in the past six years, according to budget documents. The levy is in addition to brokerage on trades done on exchanges, and sale and purchase of equity funds. Revenue gain from extending tenure of the capital gains tax is difficult to predict, said Sudhir Bassi, executive director at law firm Khaitan & Co. in Mumbai.

“If you can’t boost the market, at least don’t take anything away,” Vikram Kotak, managing partner at Crest Capital & Investment Pvt. in Mumbai, said in an interview with Bloomberg TV India. “That’s what I would say to the government.”

Vijay Mallya Resigns From United Spirits, Gets Rs. 515 Crore

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United Spirits shares surged as much as 6 per cent on Friday following the resignation of its Chairman Vijay Mallya from the company’s board. Vijay Mallya, who had sold most of his shares in United Spirits and gave management control to UK-based Diageo in 2012, will now be designated as founder emeritus of United Spirits, a company founded by his family.

Here are the latest developments:

1) Vijay Mallya’s exit from United Spirits comes months after the company’s board begun a process to remove him as its chairman for alleged financial irregularities. Mr Mallya had denied the allegations.

2) “The time has now come for me to move on and end all the publicised allegations and uncertainties about my relationship with Diageo and United Spirits Limited,” Vijay Mallya said in a statement issued on Thursday. “Accordingly, I am resigning (from) my position with immediate effect,” he added.

3) Diageo-controlled United Spirits will pay Vijay Mallya Rs.515 crore ($75 million) as part of the agreement announced on Thursday. Vijay Mallya will get $40 million immediately, while the balance amount will be paid in equal instalments over five years.

4) Diageo’s payment to Vijay Mallya will be provided for asexceptional items in United Spirits’ balance sheet for the year ending June 30, the company said.

5) Diageo has signed a five-year global non-compete (excluding the UK) agreement with Vijay Mallya. The liquor baron will not pursue any claims against Diageo, United Spirits and their units as part of the deal.

6) Vijay Mallya will have no personal liability to Diageo in relation to the findings of the inquiry set up by United Spirits (announced on 25 April 2015) to look into alleged financial irregularities in the company.

7) Vijay Mallya’s son Siddharth Mallya would remain on the board of the United Spirits group company which holds the Royal Challengers Bangalore IPL franchise and Diageo cannot “seek to remove him from that board for a period of two years”.

8) Diageo said it has extended Smirnoff’s sponsorship of theForce India Formula 1 team of which Vijay Mallya is team principal and part-owner for the next five seasons. The cost of this sponsorship continues to be $15 million per season.

9) Vijay Mallya, once known as the “King of Good Times” for his flamboyant lifestyle, sold his shares in United Spirits to Diageo at a time when his Kingfisher Airlines was grounded by debt. He, along with his associate companies, were guarantors to a Rs. 6,900 crore loan Kingfisher Airlines had taken from a consortium of 17 lenders in early 2010. Vijay Mallya remains chairman of United Breweries, maker of Kingfisher beer.

10) With Vijay Mallya’s resignation, Diageo will sever all ties with United Spirits former owners and take full management ownership. Diageo owns about 55 per cent of United Spirits, which has 39 per cent of the Indian spirits market. India is Diageo’s second-largest market by sales.

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