RBI's Mid-Quarter Monetary Policy Review

POLICY MEASURES – STATUS QUO ON POLICY RATES

The Reserve Bank of India (RBI) left the policy rates unchanged at 7.25%, in line with market expectations. The cash reserve ratio was also unchanged at 4.00%, as expected. After today’s decision, the reverse repo rate and the marginal standing facility rates remain at 6.25% and 8.25%, respectively.

INFLATION OUTLOOK – REDUCING PRESSURE

RBI mentioned that easing commodity prices at the global level and weaker pricing power of corporate are reducing inflationary pressures. However, it stated that food inflation remains high, and the inflation outlook will be influenced by food inflation persistence. The RBI also advised caution due to the pass-through of rupee depreciation.

FISCAL DEFICIT - BETTER THAN EXPECTED

On the fiscal deficit, the RBI sounded quite positive, saying that the most recent number on the Center’s fiscal deficit has turned out better than expected and instills confidence in the government’s commitment to contain the fiscal deficit for FY14 at 4.8% of GDP.

RBI ON CURRENT ACCOUNT DEFICIT

High current account deficit has been key risk that the market has been concerned about in the recent past. However, in the policy review, the RBI did not sound as concerned as the market had generally would have expected. It mentioned that softer global commodity prices and recent measures to dampen gold imports are expected to moderate the CAD in FY14 from its level last year. It mentioned that the trade deficit has widened sharply due to a surge in festival-related/seasonal gold imports, available evidence suggests that a moderation in gold imports could be underway in June.

FORWARD GUIDANCE – LESS HAWKISH THAN FY14 ANNUAL POLICY STATEMENT

The forward guidance by the RBI is not as hawkish as the May 3, 2013 annual policy statement. The forward guidance suggests that its policy stance is still biased towards cutting rates. Contrast this with its statement on May 3, 2013 where it mentioned ‘the balance of risk yields little space for further monetary easing. According to the statement, “it is only a durable receding of inflation that will open up the space for monetary policy to continue to address risks to growth.” It appears from the policy statement that the RBI is in data-dependent mode. If INR stabilizes and CPI inflation moderates, then rate cuts could follow.

IMPACT ON THE BOND MARKET

While the market had more or less discounted the status quo on rates, market was also expecting a hawkish statement on rate front. However, a less than expected hawkishness and a hint of its bias towards monetary easing, has been received positively by the market. The 10 year benchmark yield which has been trading around 7.33% before the policy has rallied by around 7 bps and currently trading around 7.26%. We expect the 10 year bond yields to trade in a range of 7.20%-7.40% in the near term.

LIC's JEEVAN SUGAM PLAN

LIC’s Jeevan Sugam is a non-linked single premium plan wherein the risk cover is a multiple of premium paid by you. On maturity this plan offers a Maturity Sum Assured chosen by you.

The plan will be open for sale for a maximum period of 45 days from the date of launch.

1. BENEFITS

1. Death Benefit:

  On death during first five policy years:
Basic Sum assured i.e. 10 times the single premium (net of service tax) excluding any extra        premium charged shall be payable.

On death after completion of five policy years:
  Basic Sum assured i.e. 10 times the single premium (net of service tax) excluding any extra premium charged along with loyalty addition, if any, shall be payable.

1. Maturity Benefit:

On maturity, the  Maturity Sum Assured along with Loyalty Addition, if any, shall be payable.

1. Loyalty Addition:

Depending upon the Corporation’s experience with regard to policies issued under this plan, this policy will be eligible for Loyalty Addition. The Loyalty Addition, if any, is payable on death after completion of  five policy years, on surrender during the last policy year and on maturity, at such rate and on such terms as may be declared by the Corporation.

1. ELIGIBILITY CONDITIONS AND OTHER RESTRICTIONS

1. Minimum Entry Age                                         : 8 years (completed)
2. Maximum Entry Age                                         : 45 years (nearest birthday)
3. Minimum/Maximum Basic Sum Assured        : 10 times of single premium paid (excluding extra premium if any)

1. Minimum Maturity Sum Assured                      : Rs. 60,000/-
2. Maximum Maturity Sum Assured                      : No Limit

 Maturity Sum Assured shall be available in multiples of Rs. 5,000/-.

1. Policy Term                                                        : 10 years
2. Premium payment mode                                   : Single premium only

1. LOAN

Loan can be availed under this plan any time during the policy term. Loan shall be equal to 60% of the surrender value as on the date of sanction of loan.

1. SURRENDER VALUE

The policy can be surrendered for cash at any time during the policy term.  The minimum Guaranteed Surrender Value allowable shall be as under:

1. First year: 70% of the Single premium (net of service tax) excluding all extra premiums, if any.
2. Thereafter: 90% of the Single premium (net of service tax) excluding all extra premiums, if any.

Corporation may however pay Special Surrender value as applicable on the date of surrender provided the same is higher than the Guaranteed Surrender Value.

The Special Surrender Value will be the discounted value of the Maturity Sum Assured as on date of surrender. If the policy is surrendered during the last policy year it shall be eligible for loyalty addition, if any.

1. SERVICE TAX:  Service tax, if any, shall be as per the Service Tax laws and the rate of service tax as applicable from time to time.

The amount of service tax as per the prevailing rates shall be payable by the policyholder on the premium.

1. COOLING-OFF PERIOD

If you are not satisfied with the “Terms and Conditions” of the policy, you may return the policy to the Corporation within 15 days from the date of receipt of the policy stating the reason of objections. On receipt of the same the Corporation shall cancel the policy and return the amount of single premium deposited after deducting the risk premium, expenses incurred on medical examination, if any, and stamp duty.

1. EXCLUSIONS

The policy shall be void if the Life Assured (whether sane or insane at the time) commits suicide at any time within one year from the date of commencement of risk and the Corporation will not entertain any claim under this policy except to the extent of a maximum of (i) 90% of the single premium paid excluding any extra premium paid or (ii) third party’s bonafide beneficial interest acquired in the policy for valuable consideration (but limited to applicable death benefit of this policy) of which notice has been given in writing to the branch where the policy is being presently serviced (where the policy records are kept) at least one calendar month prior to death.

19 AMCs add Rs. 23,480 crore in assets, despite a falling market and increased redemptions

The mutual fund industry has seen consolidated AUM dropping by Rs. 39,405 crore over the last fiscal from Rs. 7 lakh crore to Rs. 6.64 lakh crore as on March 2012. A total of 22 AMCs shed Rs. 62,889 crore in assets. But a few major players have managed to report a good performance.

IDFC, Deutsche and HDFC were the biggest gainers. IDFC gained the most (Rs. 4,158 crore added to its kitty, AUM up from Rs. 21,292 crore to Rs. 25,450 crore as on March 2012). Deutsche was the second biggest gainer (Rs. 3,958 crore) and HDFC MF was the third largest gainer, it added Rs. 3,597 crore.

In the same period, the BSE Sensex shed 9% from 19,136 points to 17,404.

Baroda Pioneer and Taurus also saw their assets bulge by Rs. 1,606 crore and Rs. 1,184 crore respectively. IDBI Mutual Fund, which launched its AMC business in March 2010, recorded the fifth largest growth in assets. Its AUM went up from Rs. 3,528 crore in March 2011 to Rs. 5,482 crore in March 2012.

But it was also worried because as per my view it is also churning it's a change to one scheme to to other scheme and one company to other company if it is not happened total industry AUM go up very sharply. According to me without IFA MF industry never grow because those are one player who goes door to door.

Mutual Fund AUM goes below 6 lakh crore

Industry’s AUM falls 13% in March to Rs. 5.87 lakh crore from Rs. 6.75 lakh crore in February due to heavy redemptions in liquid funds.

Equity funds saw net outflow for the third consecutive month to the tune of Rs. 196 crore in March. The redemption was lower in March compared to February,during which a whopping Rs. 2,680 crore went out of the industry. The gross redemption in equity schemes stood at Rs. 4,533 crore in March while sales from existing schemes stood at Rs. 4,337 crore, resulting in net outflow of Rs. 196 crore.

The highest redemption was seen in liquid funds at Rs. 76,537 crore followed by Rs. 7,654 crore from income funds.

The industry’s AUM slipped 13% in March to Rs. 5.87 lakh crore from Rs. 6.75 lakh crore in February due to heavy redemptions in liquid and income funds.Sales from new schemes stood at Rs. 36,361 crore. The total net outflow in March stood at Rs. 83,765 crore compared to Rs. 1,271 crore net inflow in February.


Schemes Net Inflow (Outflow) in March Net Inflow (Outflow) in February

Income (7,654) (2,527)
Equity (196) (2,680)
Balanced 105 (243)
Liquid/Money Market (76,537) 6,860
Gilt 53 (88)
ELSS 267 (129)
Gold ETFs 231 85
Other ETFs (31) (40)
FOF(investing overseas) (3) 33
Total (83,765) 1,271

WEEKLY MARKET UPDATE

• Worries about the Euro area debt crisis have not been quelled as Spanish and Italian
bond yields are rising once again. The long-term problem is infl exible labor markets,
particularly sky-high youth unemployment.
• Equity markets sold off mid-week as the minutes from the last Federal Reserve (Fed)
meeting seemed to indicate there was a higher bar to more monetary easing than
expected. Chairman Ben Bernanke clearly thinks there is enough slack in the labor
force to warrant keeping interest rates ultra-low for the foreseeable future.
• The U.S. payroll report was disappointing with only 120,000 new jobs in March.
Much of the drop is likely payback from spurious statistical seasonal adjustment that
overstated activity during the winter. U.S. growth should pick up in the second half.
• In total, 17 of the 25 countries that report manufacturing Purchasing Managers’
Index (PMIs) had a reading above 50, indicating expansion (using the logistics
federation Chinese PMI). Of the eight with readings below 50 that show
contraction, six were in Europe.
• The U.S. manufacturing PMI was up a point to 53.4; the services PMI cooled to 56.0
from 57.3, bringing the composite PMI (a sector weighted average) down to 55.6
in March, from 56.5 in February. This is consistent with our view of softer growth in
the fi rst quarter.
• China’s economic data show no signs of further deterioration: manufacturing PMIs
hover around 50; the March service PMI ticked up to 58; and the Soufun 100-city
survey of house prices show a modest 0.3% decline in March with prices about the
same as the year before.
• The China Securities Regulatory Commission (CSRC) raised the quota for foreign
institutional investors to invest in Chinese fi nancial securities from $30 billion to $80
billion. This is another small step to opening financial markets.

WEEKLY MARKET UPDATE

• Worries about the Euro area debt crisis have not been quelled as Spanish and Italian
bond yields are rising once again. The long-term problem is infl exible labor markets,
particularly sky-high youth unemployment.
• Equity markets sold off mid-week as the minutes from the last Federal Reserve (Fed)
meeting seemed to indicate there was a higher bar to more monetary easing than
expected. Chairman Ben Bernanke clearly thinks there is enough slack in the labor
force to warrant keeping interest rates ultra-low for the foreseeable future.
• The U.S. payroll report was disappointing with only 120,000 new jobs in March.
Much of the drop is likely payback from spurious statistical seasonal adjustment that
overstated activity during the winter. U.S. growth should pick up in the second half.
• In total, 17 of the 25 countries that report manufacturing Purchasing Managers’
Index (PMIs) had a reading above 50, indicating expansion (using the logistics
federation Chinese PMI). Of the eight with readings below 50 that show
contraction, six were in Europe.
• The U.S. manufacturing PMI was up a point to 53.4; the services PMI cooled to 56.0
from 57.3, bringing the composite PMI (a sector weighted average) down to 55.6
in March, from 56.5 in February. This is consistent with our view of softer growth in
the fi rst quarter.
• China’s economic data show no signs of further deterioration: manufacturing PMIs
hover around 50; the March service PMI ticked up to 58; and the Soufun 100-city
survey of house prices show a modest 0.3% decline in March with prices about the
same as the year before.
• The China Securities Regulatory Commission (CSRC) raised the quota for foreign
institutional investors to invest in Chinese fi nancial securities from $30 billion to $80
billion. This is another small step to opening fi nancial markets.

NFO : KOTAK FMP SERIES 86

The New Fund Offer of the scheme Kotak FMP Series 86 (370 Days FMP). FMP opens on April 12, 2012 (Thursday) and closes on April 18, 2012.

MINIMUM INVESTMENT during NFO:

Rs. 5,000/- and in multiples of Rs 10 for purchase and switch-ins.

OPTIONS:
Growth and Dividend Payout.

INVESTMENT OBJECTIVE:
The investment objective of the Scheme is to generate returns through investments in debt and money market instruments with a view to significantly reduce the interest rate risk. The Scheme will invest in debt and money market securities, maturing on or before maturity of the scheme.

LISTING:
The units of the scheme(s) will be listed on BSE on allotment. The units of the scheme(s) may also be listed on the other stock exchanges.

BENCHMARK:
CRISIL Short Term Bond Index.

LIQUIDITY:
Units of this scheme will be listed on Bombay Stock Exchange. Investors may sell their units in the stock exchange(s) on which these units are listed on all the trading days of the stock exchange. The units cannot be redeemed with KMMF until the maturity of the scheme.

MATURITY:
370 Days after the date of allotment of units.