The Securities and Exchange Board of India (SEBI) has indicated that Real estate funds and gold indexed mutual funds are likely to get positive nod very soon. SEBI is presently working on the final modalities to permit the real estate funds. Benchmark mutual fund had already filed an offer document with the SEBI for its Gold indexed mutual fund and SEBI has assured that it would try and clear the scheme as soon as possible. SEBI has clarified to the stock exchanges that liquid mutual fund units can be treated as cash or cash equivalent for margins and additional capital purposes. Liquid BeES, the first money market ETF in the world would stay invested in a basket of call money, short term government securities and money market instruments of short and medium term maturities, much like a money market fund.

Mastek's disappointing performance has saddened the spirits of the mutual funds to the point that they have been compelled to sell large portions of the stock holding in the company in the last quarter. MFs have sold almost 5.3 per cent of the company's equity in the last quarter and the FII's holding has come down too, by 11.3 per cent. According to the shareholding pattern filed by the company with the stock exchanges, MFs holding in Mastek has fallen 10.76 per cent at the end of June as compared to 16.12 per cent at the end of March 2003. The heavy selling has the bad quarter results for March 2003 to blame for.

Securities and Exchange Board of India has asked the mutual funds to focus on the retail investors. SEBI mildly chastised the mutual funds that, it thinks, are running like portfolio management entities. The mutual funds industry has been asked to grow by expanding their investor base by expanding in the rural areas. The issue of expansion into rural areas was broached in a meeting called by SEBI to receive a debriefing on the performance of the mutual funds and the issues confronting the operations of the fund houses. At the meeting the issue of some of the mutual fund having just a few investors in their schemes was discussed. SEBI stressed that mutual funds would have to be broad in character.

The recent decision by the RBI to cap NRE deposit rates is having a domino effect on the domestic mutual funds. The arbitrage opportunities have been squeezed dry by the RBI decision compelling Indian mutual fund industry to chalk out plans for offshore funds. The funds might decide in the next two to three months on the intensity and quantum with which to hit the market. The US yield curve has shown a dramatic correction from low levels of 3.11 per cent to 4.02 per cent which makes the investment opportunities in the triple A rated papers look attractive. It is being widely believed that the rupee-dollar exchange rate is all set to stabilize as the supply of dollars would ease down making the overseas investment opportunities all the more attractive.

UTI-I, the mutual fund monolith, has thought of an innovative mechanism to offload shares without depressing the markets. It would swap a basket of index shares for SUNDER units which are listed and traded on the NSE. It might be known that SUNDER (S&P CNX Nifty UTI Notional depository Receipt Scheme) is a recently launched exchange traded fund. Also the fund house has received a go ahead from SEBI in this regard but it has yet to make any investments in the scheme. It has been reported that UTI-I may invest upto 10 per cent of its bluechip holdings via this route. SUNDER also happens to be the first scheme launched by UTI-I. It has mopped up Rs.388 cr. through the IPO and clocks a volume of 60000 to 80000 units daily. Several large investors, including banks and insurance companies have used SUNDER for offloading Nifty stocks.

The continuing and seemingly sustainable bull-run in the stock markets is attracting more and more retail as well as institutional investors towards the equity schemes. The fund managers are responding by lining up schemes that could protect the investors against any downside shock caused by extreme volatility. UTI Mutual Fund has plans to launch a new variable investment scheme titled TAAP'tical Asset Allocation Plan. Besides, IL&FS Mutual Fund will shortly be launching a liquid institutional plan and a floater fund. UTI MF has joined hands with Credit Rating Information Services to work out the mathematical model for a scheme based on the future earnings of stocks. The plan would be flexible enough o move from debt to equity and vice versa. The mathematical model would have earnings yield, risk free rate of return, future expected earnings growth and market risk premium as explanatory factors.

The Government has announced the foreclosure of seven assured return schemes managed by UTI-I, the reason being is the returns assured under these schemes are far higher than the prevailing yields in the market. The seven schemes that are to be foreclosed are MIP 99, MIP 98 (V), CCGF 86, RUP-II, CGGF 99, RUP 99 and BGV MIP. The returns assured under these schemes are in the range of 12-14 percent, which are much higher than the prevailing interest rates in the market. These schemes have a maturity ranging from 15 to 20 years and the projected shortfall at the maturity is more than 16,000 crores. The government is also looking at the option of replacing these units by issuing tax-free bonds. Though, this would help the government in medium term, it would only mean that the repayment of these schemes would get postponed to a future date.

HDFC Mutual Fund declares dividends for its newly acquired equity schemes of Zurich India Mutual Fund and the first ever dividend for HDFC Mutual Fund. The dividend declared under the respective dividend options of HDFC Equity Fund, HDFC Top 200 Fund, taxsaver fund and prudence fund is Rs.2 per unit. A dividend of Re.1 has been declared for the balanced fund. After having acquired Zurich MF, this is the first ever dividend in these schemes that had hitherto been managed by Zurich AMC. The last time these schemes declared a dividend was in March 15, 2002. Meanwhile SEBI has declared that the certificate of registration given to Zurich India Mutual Fund and the approval given to Zurich AMC has also been withdrawn.

Franklin Templeton Mutual Fund is all set to introduce a novel concept into the market called the 'fund of funds'. The offer document for the scheme is lying with SEBI for approval. The scheme is to be called 'Franklin Templeton India Life Cycle Fund'. This would be an open-ended fund. One might recall that the fund of funds concept has been doing the rounds of the domestic mutual funds industry and has very recently been cleared by the stock market watchdog, Securities and Exchange Board of India (SEBI). The units of the funds would be offered at Rs.10 per unit during the Initial Offer Period. The primary objective of the scheme is to generate superior risk adjusted returns to investors in line with their chosen asset allocation. The scheme will invest in a combination of Franklin Templeton India's equity and income funds. The scheme will offer three plans with varying debt and equity proportions and each plan will have Growth and Dividend option. The scheme will have an inbuilt half-yearly rebalancing objective to ensure maintenance of defined asset allocation. Specifically, the investments would be made in the following schemes under equity fund: Franklin India Bluechip Fund, Franklin India Prima Fund and Templeton India Growth Fund. Under income funds, the investments would be made in Templeton India Income Fund and Templeton India Income Builder Account.

Subsequent to the acquisition of Zurich India Mutual Fund by HDFC Mutual Fund. Zurich India MF has handed over all their existing schemes to HDFC MF after giving an exit option at prevailing NAV without any exit load to all the unitholders in accordance with SEBI (Mutual Fund) Regulations 1996. As a result, SEBI has now cancelled the certificate of registration to Zurich India Mutual Fund and the approval granted to Zurich Asset Management Company (India) Private Ltd, the asset management company has been withdrawn. Consequently, the mutual fund, trustee company or asset management company cannot carry out any activity as a mutual fund, trustees or asset management company, as the case may be, in accordance with the regulations.

SUN F&C MF has 'rightsized' itself by around 25-30 employees. According to sources, 25-30 employees have been asked to leave the company with a severance package. Prior to the acquisition by Principal MF, SUN F&C had a staff strength of 40-45 employees. The majority of the employees detrenched are in the junior or middle management level. SUN F&C's top management, comprising CEO Nikhil Khattau, Chief Investment Officer Gul Tekchandani and COO Anurag Madan is still in place. Industry sources have said that the remaining employees have floated their resumes in the job market, what with the career prospect at SUN F&C looking anything but rosy. Also an issue that still remains shrouded in a blanket of uncertainty is the future role of SUN F&C AMC. Some feel that the AMC would be wound up.

The Reliance Capital Mutual Fund declared a dividend of 30 per cent in its equity-diversified scheme called Reliance Growth Fund. All the unit-holders under the dividend plan of the fund on the close of business on July 18, 2003 were eligible for the payout of the dividend. Earlier this year the fund had declared a dividend of 20 per cent in February this year. Reliance Vision Fund is an open-ended equity growth scheme launched in September 1995. It seeks to generate long-term growth of capital through a research based investment approach.

Deutsche Mutual Fund has filed an offer document with SEBI for a new mutual fund called the Dynamic Bond Fund which would be an open ended Income scheme with the investment objective to actively manage a portfolio of good quality debt as well as Money Market Instruments so as to provide reasonable returns and liquidity to the unitholders. The initial issue price of the scheme would be at a par value of Rs.10 per unit. The benchmark index would be CRISIL Composite Bond Index. The scheme would have the conventional options, both, the 'dividend option' and the 'growth option' available. Te scheme would have the Institutional Plan and Regular Plan available to the investors. Under the Institutional Plan the investment amount would have to be a minimum amount of Rs.10000000 (Rs.1 crore). Under the Regular Plan, however, the minimum amount of investment would have to be a minimum of Rs.5000. Under the Institutional Plan, there would be no entry or exit load. However, under the Regular Plan, the entry load would be nil but the exit load would be 0.5 per cent if a sum of Rs.10 lacs is withdrawn within 3 months. The offer document awaits ratification by SEBI.

Franklin Templeton seems all set to come out with another offering styled in the 'Fund of Funds' genre. This one would most probably be a union between two equity and income funds held by Franklin Templeton Mutual Funds. The proposed FT India Low Volatility Equity Fund will maintain a dynamically balanced portfolio, the equity portion of which will be determined on the basis of month-end weighted average price-earning (PE) ratio of the NIFTY index of the national stock exchange. The proposed fund would have an inbuilt sell and buy mechanism based on the valuations on the stock markets. It will pare valuations to equity if the markets get overvalued. The PE ratio of the index is the weighted average of the PE ratios of the stocks that make up the index. FT India Low Volatility Fund would be the second fund of funds after FT India Life Cycle Fund.

HDFC Mutual Fund, India's second largest mutual fund has come up with a new concept. In a first incident of its kind, HDFC Mutual Fund it ahs developed a new concept of AAUM or Average Assets Under Management. This move would set new standards in corporate governance. This figure would give the investors a better picture of the goings on in the asset management business. HDFC Mutual Fund has declared an AAUM of Rs.11860 cr. in June compared to It might be known that under the present guidelines issued by SEBI, it is mandatory on the part of the fund houses to declare month end assets under management. Often this rule compels the fund houses to race for a higher AUM in the eleventh hour at the fag end of the month. Distributors are offered higher commissions who in turn pump in hot money, summarily withdrawn after the very first week of parking such funds. This leads to artificial inflation of the AUM. AAUM is calculated by adding the day ending AUM for each day during the month and dividing the figure by the total number of day sin the month.

Cholamandalam Mutual fund is seeking to change its closed ended scheme CHOLA MI-98 to an open-ended Monthly Income plan. It would predominantly invest in Debt and Government securities with active component of up to 20% in Equities. The objective of the scheme would be to generate regular income mainly through investments in debt and money market instruments. Under normal circumstances, 90 percent of the investment would be in Debt and Government securities and the allocation would be modified based on the changes in the market conditions. The scheme has generated an annualized return of over 16 percent since inception. The roll over would be effective from 31 July 2003.

SBI Mutual Fund has declared dividends in its schemes. In Magnum Insta Cash Fund Short Term Plan, the Fund house has declared a dividend of 0.60 per cent for the month ended July 25, 2003 and the scheme has generated an annualized return of around 6.5 percent since inception. While Magnum Monthly Income Plan (Monthly Dividend) has announced a dividend of 0.65 per cent for the month ended July 25, 2003. Magnum MIP has generated an annualized return of around 8.9 percent since inception. In Magnum InstaCash Fund a dividend of 0.088 per cent has been declared for the period July 19-25, 2003. The scheme has produced an annualized yield of around 8 percent since inception.

IL&FS Mutual Fund is introducing an additional plan styled as the "Institutional Plan" under the IL&FS Liquid Account, an open ended liquid scheme with an investment objective to generate reasonable returns with low risk and high degree of liquidity, from a portfolio of money market securities and fixed income securities. The per unit applicable NAV of the growth plan of the IL&FS Liquid account fund as on the initial offer date shall be purchase price (Initial Offer Price) of the units of the growth option under the Institutional Plan. The minimum application amount has been fixed at Rs.1 cr. and in multiples of Rs.1000 thereafter. The target fir mobilization has been fixed at Rs.2 cr. IL&FS Liquid Account has given a since inception return of 6.83 per cent.