MUMBAI: Nearly 80% of all redemption made by retail investors — even during adverse market conditions — are profitable. Systematic investment plans, or SIPs, are gaining popularity with about 22.5 lakh live SIPs in 2010 against 7 lakh in 2003. The first quarter of 2010 witnessed SIP subscriptions accounting for 19% of total inflows into equity mutual funds, compared with 2% in 2005, said a Boston Consulting Group (BCG) and Computer Age Management Systems (CAMS) report on equity mutual funds.
According to the BCG-CAMS report, equity MFs are increasingly gaining acceptance as a financial savings instrument by retail investors. MF investments as a percentage of gross household savings have increased from 1.1% in 1994 to a significant 7.9% in 2008. The growth in equity AUM has not, however, been backed by truly differentiated products from fund houses. Sectoral and mid-cap funds have lost significant market share and now represent only around 13% of total AUM. Large-cap and multi-cap funds have grown rapidly and now account for 87% of total AUM, the report said.
Retail customers continue to dominate equity MFs with over 90% of the investment volume coming from ticket sizes of less than Rs 1 lakh; nearly 99% of investment volume is in ticket sizes of less than Rs 5 lakh. Currently, there are nearly 40 lakh active SIPs with an average ticket size of Rs 2,300 every month and 97% of all retail SIP transactions are electronic, the report adds.
The BCG-CAMS report states that average tenure of equity money staying invested in one scheme is about 30 months; nearly 50% of the AUM has an investment tenure greater than two years. And nearly 70% of equity money has investment tenure exceeding 12 months. Only 30% of the equity asset base has a tenure of less than 12 months. “Going forward, retail consumers will continue to play an essential role in the equity fund space. The focus of fund houses should be to develope a plan that will bring in more retail money,” said Alpesh Shah, Partner & Director, BCG. “The focus of fund houses should be to support small distributors and strengthen the PSU bank network for widening distribution reach,” Mr Shah added.
The concentration of equity AUM in top cities is fast diminishing, the BCG-CAMS report says. The share of AUM beyond top-10 cities has shot up from about 10% in March 2003 to around 26% in March 2010. Mumbai and Delhi together account for nearly 45% of total equity AUM, and the top-30 cities account for around 90% of total equity AUM. “There has to be a focus on defining a geographic footprint strategy. Fund houses will have to move out of top-10 cities to cater to more investors,” said NK Prasad, president & CEO, CAMS.
The share of bank ranges from 19% to 38%; the share of IFAs has gone up to 34% from 20% and distributors’ share has gone up to 42% from 29% earlier.
While large-sized distributors, including large and well-networked IFAs, are gaining in market share, small IFAs are losing out the battle to larger players; the trend is more relevant post-entry load ban, notes the study,
The total share of small IFAs has fallen to less than 1% in 2010 from about 6% in 2004. Further analysis indicates that small IFAs are largely inactive, with no sales recorded. On an average, nearly 80% of all small IFAs are inactive every month, the BCG-CAMS report added.
Source: The Economic Times. June 22nd, 2010
Tuesday, June 22, 2010
Monday, June 21, 2010
United Stock Exchange receives RBI authorisation
United Stock Exchange of India Limited, India's newest stock exchange for currency derivatives, said it has received authorisation from the Reserve Bank of India (RBI) to start operations.
USE had earlier received final approval from SEBI to launch operations in currency futures, the exchange said in a statement here. USE is a public-private partnership with equity participation by PSUs, public sector and private sector banks and corporate institutions.
All 21 Indian public sector banks, leading private sector banks, public sector undertakings and corporates are shareholders of the Exchange. "The RBI authorisation is another step forward towards the launch of the Exchange. We have recently started conducting mock trading to familiarise members with the platform," USE's CEO and Managing Director, T S Narayanasami, said. USE has planned to commence commercial operations in July 2010, the release said.
Courtesy: Hindustan Times
IRDA to frame new guidelines on ULIPs
After winning the turf war with market watchdog SEBI on ULIPs, insurance regulator IRDA on Monday said it would frame new guidelines for these products to make them more attractive for policyholders.
"Certainly, yes," Insurance Regulatory and Development Authority (IRDA ) chairman J Hari Narayan told PTI when asked whether the insurance regulator would unveil new guidelines for ULIPs to make them attractive for investors.
The government has ended the turf war between IRDA and SEBI, saying unit linked insurance plans (ULIPs) will be regulated by IRDA.
On Friday night, President Pratibha Patil issued the Ordinance, explaining that the life insurance business shall include any unit-linked policy or scrips or any such instruments.
The government has also constituted a high-level committee chaired by Finance Minister Pranab Mukherjee, which will sort out all issues of jurisdiction regarding hybrid products.
The committee on hybrid products will include the Finance Secretary, the Financial Services Secretary and heads of RBI, IRDA, SEBI and the Pension Fund Regulatory and Development Authority (PFRDA).
SEBI in April took the market by surprise when it banned 14 life insurance firms from issuing fresh ULIP schemes.
However, IRDA asked the life insurers to ignore the SEBI order and the matter then went to the Finance Ministry, which advised them to move the court. In the meantime, the ministry had asked them to maintain the status quo.
ULIPs account for more than 50 per cent of the life insurance business and the money collected from policyholders is invested in equities.
Source: Hindustan Times. June 21st 2010.
RBS India Unit Up for sale
Royal Bank of Scotland (RBS) is close to selling its Indian business to HSBC and may shortly sell its investment bank arm in Chile as an overseas retreat accelerates, a person familiar with the matter said.
RBS, 83 per cent owned by the UK government, could fetch over $8 billion from a trio of big asset sales in the coming months and is also selling a number of smaller non-core business to refocus on its core strengths.
The business offers equities, corporate finance and advisory, cash management and trade finance.
RBS is also near to selling its Indian unit to HSBC after over a year of talks. The business is one of the biggest foreign owned operations in the hard-to-enter Indian market, with 1.3 million customers, 28 branches and 1,800 staff.
HSBC has about 2 million customers and 50 branches across 29 cities in India.
RBS Chief Executive Stephen Hester is reversing a decade-long international expansion drive and has raised over $2.5 billion from exiting or selling over 20 businesses in the last 14 months.
It last week announced the sale of businesses in Kazakhstan, the United Arab Emirates, Pakistan and Argentina.
The bank is also being forced to sell some major assets by European authorities as a cost of taking stake aid, including a network of 318 UK branches, its payment processing business and its stake in RBS Sempra's North American commodities business.
Source: Business Standard. 21st June, 2010.
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