Page 19 - Banking Finance July 2022

MUTUAL FUND

The Nifty Smallcap 50 Index captures Market regulator Sebi has now al- On June 22, Nippon India Mutual Fund
the movement of the small cap seg- lowed mutual funds (MFs), with a rider, had announced opening up of its
ment of the market and was launched to resume subscriptions for interna- schemes – Nippon India US Equity Op-
on April 1, 2016. It represents the top tional funds and invest in foreign secu- portunities Fund, Nippon India Japan
50 companies selected based on the rities. Equity Fund, Nippon India Taiwan Eq-
average daily turnover from the top uity Fund, Nippon India Multi Asset
The total foreign investment by the
100 companies selected based on full Fund and Nippon India ETF Hang Seng
fund house shall remain capped at the
market capitalisation in the Nifty BeES- after SEBI allowed fund houses
investment made as of 1 February. It
Smallcap 250 Index. The index repre- to invest in overseas stocks to the ex-
implies that any limit available due to
sented about 2% of the free float mar- tent they have sold since February 1,
redemptions in the past few months
ket capitalization of the stocks listed 2022.
can be used by the AMCs for fresh in-
on the NSE as on March 29, 2019.
flows. (Fund-of-funds investing in over- “Post the resumption of the subscrip-
As of May 31, 2022, the top five sec- seas ETFs have a separate $1 billion tion in certain NIMF schemes investing
tors represented in the index were fi- limit which has not yet been in overseas securities, there has been
nancial services (34% weight), informa- breached.) substantial utilization of available over-
tion technology (17%), chemicals 9%), seas investment limit. Therefore, with
For example, say, a fund house invested
telecommunications (6%) and con- a view to avoid breach of the overseas
Rs. 100 crore (purchase cost, not the
sumer durables (5%). Going by stock investment limit as of EOD of February
market value) abroad, as of February
weights, the top holdings were Central 1, 2022, we propose to suspend
2022, and thereafter sold some secu-
Depository Services India (5%), KPIT lumpsum subscription, switch-ins and
rities due to redemptions by investors.
Technologies (4%), PVR (3.9%), Com- fresh registration of SIP/STP or such
The new regulation says that the fund
puter Age Management Services other special product under the follow-
house can now accept inflows until it
(3.7%) and Multi Commodity Exchange ing NIMF schemes, w.e.f June 29,
reaches the Rs. 100 crore limit again.
of India (3.4%). The Nifty Smallcap 50 2022,” the AMC said in a notice.
TRI has returned 9.9% since its incep-
Nippon India Mutual Fund Analysts expect many fund houses to
tion. Over the last one year, the index
follow suit because the actual limit of
has returned -8.3%. stops inflows in five inter-
investing in international stocks hasn’t
national funds been increased by Sebi. There is an
MFs resume fresh invest-
A month after resuming inflows into its overall industry level limit of $7 billion
ments in overseas funds international funds, Nippon India Mu- for mutual funds to invest in overseas
securities and an individual limit of $1
Many mutual funds have started ac- tual Fund has decided to stop fresh in-
cepting fresh inflows into their over- vestments in the schemes. The fund billion for each scheme. This limit was
seas funds, after suspending them for house has suspended lumpsum subscrip- breached on February 1st, this year.
almost five months. In February 2020, tion, switch-ins and fresh registration of Later, Sebi had allowed mutual funds
asset management companies (AMCs) SIP/STP under the five schemes that in- to invest in accordance with the out-
investing in overseas securities were vest in international stocks. The move flows from the international funds.
advised to stop subscriptions to avoid is to protect the breach of the available However, the new limit has been de-
the breach of industry-wide overseas overseas investment limit put by the pleted within a month for Nippon In-
limits of $7 billion. Securities and Exchange Board of India. dia MF.

Banks stare at huge MTM losses as yields rise
Banks are staring at significant mark-to-market losses in April-June quarter as some of them approached the Reserve
Bank of India seeking a one-off relaxation following rises in bond yields.
Banks are seeking to spread the losses over four quarters instead of the June quarter alone. Lenders with IFR provi-
sions are much better placed for the June-quarter earnings. During the three-month period, the benchmark bond
yields surged as much as 76 basis points to a high of 7.60% on June 13. When yields rise, prices fall.

BANKING FINANCE | JULY | 2022 | 19