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Markets regulator, the <keyword id="6355630" type="UNKNOWN" weightage="20" keywordseo="securities-and-exchange-board-of-india">Securities and Exchange Board of India</keyword> (<keyword id="35210" type="ORGANIZATION" weightage="20" keywordseo="sebi">SEBI</keyword>) on Sunday clarified that mutual funds have many options to meet requirements of the circular on asset allocation of multi-cap funds, based on the preference of their unit-holders. In a clarification issued on Sunday, the SEBI said apart from rebalancing their portfolio in the multi-cap schemes, mutual funds could facilitate switch to other schemes by unit-holders, merge their multi-cap scheme with their large-cap scheme or convert their multi-cap scheme to another scheme category, for instance, large-cum-mid-cap scheme. <keyword id="119509" type="ORGANIZATION" weightage="20" keywordseo="Kotak-Mutual-Fund">Kotak Mutual Fund</keyword> has welcomed the SEBI clarification. Nilesh Shah, Managing Director, Kotak AMC, said in a tweet: "Immense gratitude to SEBI for issuing clarification on a Sunday evening. We will ensure compliance with SEBI Regulations in letter as well as spirit &amp; optimize risk adjusted return for our Investors. Don't take Investment decisions in haste." The SEBI said it is conscious of market stability and therefore, has given time to mutual funds till January 31, 2021 to achieve compliance with the circular, through their preferred route, of which rebalancing of the portfolio is only one such route. "It is reiterated that to achieve the desired objective of True to Label and Appropriate Benchmarking, the SEBI will examine proposals of the industry, if any, received in this regard," it said. The SEBI has issued a circular dated September 11, on multi-cap schemes of mutual funds, requiring them to invest a minimum of 25 per cent each in large, mid and small-cap stocks, with the balance 25 per cent giving flexibility to the fund manager. The regulator said the circular was issued as a need was felt to review the scheme characteristics of multi-cap schemes and take necessary steps to clearly distinguish these from other category of schemes. Multi-cap schemes had flexibility in terms of allocation to large, mid and small-cap stocks. "However, it has recently been observed that some multi-cap schemes have skewed portfolios, with over 80 per cent of investment in large-cap stocks akin to large-cap schemes, and some multi-cap schemes have near zero or insignificant asset allocation to small-cap companies," it said. As per the SEBI circular, it was anticipated that there could be a large inflow of funds into small-cap stocks to meet the requirement of minimum 25 per cent asset allocation. SEE ALSO: <a href="https://www.businessinsider.in/stock-market/news/top-stocks-to-watch-future-retail-ril-irctc-bhel-tata-motors-adani-green-vodafone-idea-godrej-properties-sunteck-realty-and-more/articleshow/78097615.cms">Top stocks to watch— Future Retail, RIL, IRCTC, BHEL, Tata Motors, Adani Green, Vodafone Idea, Godrej Properties, Sunteck Realty and more</a> <a href="https://www.businessinsider.in/india/news/delhi-police-arrests-umar-khalid-connection-with-northeast-delhi-riots/articleshow/78097740.cms">Delhi Police arrests Umar Khalid in connection with Northeast Delhi riots</a> <a href="https://www.businessinsider.in/tech/news/tiktok-owner-bytedance-rejected-microsofts-offer-for-the-apps-us-operations/articleshow/78097018.cms">TikTok owner ByteDance rejected Microsoft's bid for the app's US operations, Oracle reportedly chosen as US 'technology partner'</a>

SEBI clarifies that mutual funds will have options apart from rebalancing portfolio

<ul><li>In October 2017, the Securities and Exchange Board of India enforced rules to make mutual-fund categories more uniform and standardised. For example, <keyword id="136469" type="PERSON" weightage="20" keywordseo="large-cap">large-cap</keyword> stock schemes had to comprise at least 80% large-cap <keyword id="6354298" type="DEFINITION" weightage="20" keywordseo="Stocks">stocks</keyword>. </li><li>The rules were meant to declutter the mutual fund industry and improve investor choice, but instead they diverted inflows from <keyword id="419945" type="PERSON" weightage="20" keywordseo="small-cap">small-cap</keyword> companies by reducing the exposure of large-cap schemes to smaller stocks. </li><li>According to data from Prabhudas Lilladher, small-cap stock schemes recorded a net outflow of ₹220 million between January and June 2018, compared to a net inflow of ₹56.5 billion a year ago. </li></ul> When the Securities and Exchange Board of India (<keyword id="35210" type="ORGANIZATION" weightage="20" keywordseo="sebi">SEBI</keyword>) order the reclassification and rationalisation of open-ended mutual fund schemes <a href="https://www.sebi.gov.in/legal/circulars/oct-2017/categorization-and-rationalization-of-mutual-fund-schemes_36199.html">in October 2017</a>, its intentions were clear. It wanted to declutter the mutual fund industry by implementing procedures for standardisation and allowing investors greater ease in choosing and comparing schemes. Among the SEBI’s many rulings, one stood out. It made the categorisation of schemes into large-cap, <keyword id="71797" type="PERSON" weightage="20" keywordseo="Mid-cap">mid-cap</keyword> and small-cap stock schemes mandatory. This created a specific category for each scheme, which limited the exposure that each scheme had to other stock types. For example, large-cap stock schemes, which involve the shares of the top 100 companies by market capitalisation, had to be comprised of at least 80% large-cap stocks. Midcap schemes, which comprise the next 150 companies by market cap, had to be overwhelmingly weighted with stocks of mid-cap companies and so on. Fast forward to mid-2018, and the rules have had an unintended effect. They have led to a significant reduction in inflows to small-cap mutual fund schemes, comprising the shares of all other companies outside the top 250. Hence, the rules have shifted the power balance in favour of large companies. According to data from Prabhudas Lilladher, a brokerage house, small-cap stock schemes recorded a net outflow of ₹220 million between January and June 2018, compared to a net inflow of ₹56.5 billion in the same period of 2017. Meanwhile, large-cap and mid-cap schemes recorded a net inflow of ₹219 billion and ₹145 billion in the first six months of 2018. Why the focus on large and mid-caps? It all stems from an investor aversion to risk. 2018 represents a markedly different year from 2017, which was characterised by a booming stock market, an influx of cheap money and high investor optimism. However, this year, domestic <keyword id="31671" type="CITY" weightage="20" keywordseo="markets">markets</keyword> have suffered amid concerns of a trade war between the US and China as well as rising oil prices, a falling rupee and widening fiscal deficit. Hence, investors have sought to play it safe by redirecting their investments into larger companies. Small-cap stocks are considered to be more volatile and risky in these kinds of market conditions. The general rule of thumb is that larger companies are safer and better-capitalised to manage risk than smaller ones. Small-cap stocks might come with higher returns but that’s offset by higher risk. And yes, India’s markets have <a href="https://www.businessinsider.in/heres-what-led-to-the-indian-stock-markets-record-highs/articleshow/65161389.cms">had a bull run as of late</a>, but this has not extended to small-cap stocks. The Bombay Stock Exchange’s Small-Cap Index is down nearly 12% since the start of the year. If global market conditions pick up, and mutual fund houses start promoting small-cap schemes, there could be a resurgence in inflows to small-cap companies. The SEBI should keep an eye on the situation, and if necessary, reduce weightage and product restrictions for mutual fund schemes in the interest of diversification.

India’s securities regulator has hurt smaller companies with its recently-implemented mutual fund rules

<ul><li>As Indian households embrace financial diversification and mutual funds become more popular, the cost per investor for fund managers is declining. </li><li>As a result, the <keyword id="35210" type="ORGANIZATION" weightage="20" keywordseo="sebi">SEBI</keyword> has decided to restrict the total expense ratio (<keyword id="2782242" type="PERSON" weightage="20" keywordseo="TER">TER</keyword>) for <keyword id="6354820" type="DEFINITION" weightage="20" keywordseo="mutual-fund">mutual fund</keyword> schemes as a percentage of assets. </li><li>The SEBI has also prohibited mutual fund promoters from paying upfront commissions to brokers, saying that they should follow a trail-commission approach instead. </li></ul>The board members of the Securities and Exchange Board of India (SEBI), the country’s securities regulator, know a thing or two about economies of scale. As Indian households embrace financial diversification and mutual funds become more popular, the cost per investor for fund managers should go down. Keeping this in mind, the SEBI has decided to restrict the total expense ratio (TER) for mutual fund schemes as a percentage of assets. For equity-oriented mutual fund schemes, the most prominent kind of scheme, the TER will be capped at 1.25% for closed-ended schemes and a maximum of 2.25% for open-ended schemes less than ₹5 billion - with a gradual reduction to 1.05% for schemes above ₹500 billion. The TER for index-tracking funds, a passive investment option, will be limited to 1% while the cap for fund of funds will be 2.25%. The SEBI has also prohibited mutual fund promoters from paying upfront commissions to brokers. This means that they can’t make direct payments to brokers from their books. Instead, they will have to pay distributors on a trail-commission basis, which is contingent on how long investors stick with a specific mutual fund scheme. The changes are expected to impact the overall revenues of the mutual fund management industry by ₹15 billion. However, demand for mutual fund schemes is likely to increase significantly. The rules come as the industry reached a record <a href="https://www.amfiindia.com/indian-mutual">₹25.2 trillion </a>of assets under management at the end of August 2018. This marks a four-fold increase from August 2008. Besides making mutual fund investments cheaper, the SEBI also reduced the period for listing shares following an IPO from six days to three and decided to open up the commodity derivatives market to foreign portfolio investors.

India, SEBI just made it a lot cheaper for you to invest in mutual funds

New Delhi, Dec 10 () Debt-oriented mutual fund schemes that have more than 10 per cent exposure to their sponsors' group companies before October 1 have been allowed to continue with such investments till respective maturity dates.
 Markets regulator Sebi's decision to provide such an exemption comes against the backdrop of debt-oriented mutual funds having a cap of 10 per cent in terms of their exposure to group firms of sponsors as well as asset management companies.
 A circular about the 10 per cent limit was issued by Sebi on October 1, 2019.
 In the latest circular, Sebi said "the investments of mutual fund schemes in debt and money market instruments of group companies of both the sponsor and the asset management company of the mutual fund in excess of the limits specified therein, made on or before October 1, 2019 may be grandfathered till maturity date of such instruments".
 The maturity date of such instruments shall be as applicable on October 1, 2019, the regulator added.
 Sebi has asked all asset management companies to publish on their respective websites a list of their group companies and those of their sponsor.
 Further, the regulator has directed mutual fund industry body Amfi to publish on its website a list of all group companies along with names and identifier of the respective group that are considered for calculation of group exposure by mutual fund schemes and also the sector to which each company belongs.
 In regard to group level exposure limit, the investments by debt mutual fund schemes in debt and money market instruments of group companies of both the sponsor and the mutual fund house should not exceed 10 per cent of the net assets of the scheme.
 Such investment limit may be extended to 15 per cent of the net assets of the scheme with the prior approval of the board of trustees.
 The regulator also said disclosure about the existing investments of mutual fund schemes in unlisted debt instruments, including non-convertible debentures (NCDs), need to be made on first working day of each calendar quarter starting from January 1, 2020.
 Besides, the disclosure is applicable for all fresh investments made by fund houses in unlisted NCDs.
 In October, Sebi allowed the maximum investment in unlisted NCDs will be 15 per cent of the debt portfolio of the scheme from March 31, 2020, and the investment limit will be 10 per cent from June 2020. SP RAM ABM
ABM

Sebi provides relaxation on group exposure limit for MFs

The Serious Fraud Investigation Office (<keyword id="54673" type="ORGANIZATION" weightage="20" keywordseo="SFIO">SFIO</keyword>) has founded group companies guilty in the multi-crore chit fund scam. The SFIO concluded that the schemes run by Saradha Group’s 14 companies ran Ponzi Schemes, which were in violation of several provisions of the Companies Act, 1956. The investigating agency has completed the investigation and shared its report with Central Bureau of Investiations (<keyword id="6354572" type="ORGANIZATION" weightage="20" keywordseo="CBI">CBI</keyword>). 
	 
	The agency in the course of its investigation found out that the promoters, directors and other officials of these firms were using funds collected from the general public rather than income generated from investments. 
	 “The companies, their promoters, directors and managerial personnel have been found to be guilty on many counts for violation of various provisions of the Companies Act, 1956 including Sections 58A and 628 dealing with illegal collection of deposits and false statements, etc. Companies of the group which were declared by SEBI to be carrying out unauthorized ‘Collective Investment Schemes’ (CIS) will be prosecuted for violation of the SEBI Act instead of Section 58A of the Companies Act, 1956, as the former carries longer terms of imprisonment,” said a statement from <keyword id="6376435" type="ORGANIZATION" weightage="20" keywordseo="Ministry-of-corporate-affairs">Ministry of Corporate Affairs</keyword>. 
	 
	It also adds that the agency has found out several instances of violation of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. “As prosecution under this law are to be initiated by the State Governments concerned, the Report along with evidence is being shared with the CBI. The Report is also being shared with SEBI for proceeding against companies which were found to be running unauthorized/ illegal Collective Investment Schemes (CIS),” states the ministry in the statement. 
	 
	In one of its findings, the SFIO has also noted that the companies have violated provisions of the Indian Penal Code. “Since, CBI is now investigating cases under the IPC under orders of the Supreme Court, it has been decided to share evidence collected by the SFIO with CBI so as to avoid duplication in prosecutions”, said the ministry in the statement.

Group Companies Found Guilty In Saradha Scam

Markets regulator <keyword id="19901201" type="General" weightage="100" keywordseo="Sebi" source="keywords" meta.keywordsubtype="org" meta.entityname="Sebi" meta.hostid="153" meta.entityid="Sebi">SEBI</keyword> has asked the <keyword id="20677983" type="General" weightage="20" keywordseo="mutual-fund-industry" source="keywords">mutual fund industry</keyword> to proactively conduct stress tests, a key component of <keyword id="20383727" type="General" weightage="20" keywordseo="risk-management" source="keywords">risk management</keyword> for the financial sector, which will help strengthen the ecosystem, its whole-time member Ananth Narayan Gopalakrishnan said on Friday. The regulator's stress testing emphasizes the need to assess and manage liquidity risks, especially in small and midcap equity schemes. Speaking at a mutual fund event, Gopalakrishnan highlighted the importance of modelling stress scenarios not just for individual schemes or fund houses, but for the entire mutual fund ecosystem. "It is also important to model stress scenarios for the entire composite mutual fund ecosystem. I would strongly encourage the industry and <keyword id="20090036" type="General" weightage="20" keywordseo="AMFI" source="keywords" meta.keywordsubtype="org" meta.entityname="AMFI" meta.hostid="153" meta.entityid="AMFI">AMFI</keyword> to take the lead and proactively conduct objective and credible industry wide stress tests. themselves," Gopalakrishnan said. He also emphasized the need to find better ways to communicate the risks associated with different mutual fund schemes. The SEBI official mentioned that while the current risk measurement system is straightforward and has had a significant impact, it doesn't fully capture the differences in risks among various investment schemes. According to him, many schemes are just labelled as high risk, even though they have different kinds of risks. The goal is to improve this system to better reflect those differences, while keeping it simple and easy to understand. One possible approach is to consider the portfolio's volatility and liquidity from stress tests to give a clearer picture. "While ensuring simplicity and ease of understanding remains a key objective, perhaps the underlying volatility of the portfolio along with the liquidity of the portfolio from stress tests could be used to provide better colour all around," he added. This comes at a time when the holdings of mutual funds by <keyword id="20234284" type="General" weightage="20" keywordseo="domestic-institutional-investors" source="keywords">Domestic Institutional Investors</keyword> (DIIs) and individuals have risen from about 54.3% of free float of all mid cap and small cap companies, as of March 2020 to 60.6% as of March 2024. Several fund houses have proactively stopped lump sum investments in some small-cap schemes and also capped the amount that can be invested through <keyword id="20675888" type="General" weightage="20" keywordseo="systematic-investment-plan" source="keywords">Systematic Investment Plan</keyword> (SIP) into small-cap schemes. He also highlighted the potential mismatch between the demand for paper and the supply of fresh paper coming into the ecosystem. Gopalakrishnan said the industry can make more progress in streamlining operations and improving efficiency for investors. "At a time when instantaneous fund transfers have become ubiquitous in our country, perhaps we should look to improve our internal processes and the security settlement ecosystem, to ensure that funds are passed on to investors on the day of the settlement itself, rather than a day after or two days after," he added. Over the last few years, the mutual fund industry has made impressive strides, and is now playing a crucial role in channeling financial savings towards risk capital formation. This was driven by stable macros, increased formalization, robust corporate earnings, digitisation and user friendly access. Moreover, the number of mutual fund investors has grown significantly from about 2 crore as of March 2019 to nearly 4.7 crore as of June 2024, an impressive compounded annual growth rate of 18% during that period. Gopalakrishnan mentioned that several exciting initiatives are in the works, developed with input from all stakeholders. These include a proposed low-ticket SIP, further breaking down regular SIPs into smaller, more accessible units (sachetisation and tokenization), and the introduction of "mutual funds lite" regulations. These new regulations will simplify rules for passively managed funds, reducing the compliance burden and encouraging competition and innovation. Additionally, a new class of higher-risk schemes is proposed for investors with a greater capacity to handle risk.

SEBI asks mutual fund industry to proactively conduct stress test

(Eds: Incorporating related stories) Mumbai, Feb 17 () Continuing its efforts to further strengthen and deepen the capital market, Sebi on Monday approved stricter eligibility norms for investment advisers, capped their fees as well as green signalled regulatory sandbox for live testing of new products. Sebi board, which met for the first time after presentation of the 2020-21 Union Budget, also cleared amendments to fast track issuance of units to existing investors by REITs and InvITs. Addressing media after the meeting here, Sebi Chairman Ajay Tyagi, whose current tenure is ending later this month, said the regulator is actively looking at re-categorising mid-cap and small cap mutual fund schemes. Under the revised framework for investments, those dealing in distribution of securities would be barred from using titles like independent "financial advisers" or "wealth advisers", unless they are registered as investment advisers also. An individual adviser cannot provide distribution services, while firms would need to segregate advisory and distribution activities at client level to avoid conflict of interest, as per the watchdog. The new rules, framed after considering four consultation papers and public comments, also seek to bring in more clarity in payment of fees and introduction of upper limit on fees charged to investors. As part of measures to facilitate latest fintech innovations in the market, Sebi would permit live testing of new products, services and business models on select customers. Besides, a cross domain approach for the regulatory sandbox would be allowed, wherein a regulated entity can test solutions even for those activities for which it is not registered. Among others, changes in investment manager eligibility norms for Infrastructure Investment Trusts (InvITs) have been approved, a move that would help a mega offering worth an estimated Rs 20,000 crore by the National Highways Authority of India (NHAI). Asserting that whatever action is required would be taken, Tyagi said the watchdog would soon come out with a circular to prevent incidents like Karvy Broking Services Ltd (KSBL), which had allegedly misused clients's securities. Last November, the watchdog barred KSBL from taking new brokerage clients after it was found that the brokerage firm had allegedly misused clients' securities. According to him, only half of the top 500 companies complied with mandate to segregate the post of Chairman and Managing Director and practicalities resulted in Sebi extending the deadline by another two years. In January, Sebi deferred the requirement for splitting post of Chairman and Managing Director of the companies by two years to April 2022. Reflecting on his current tenure, Tyagi described it as "quite a good experience" and mentioned transparent working ways and consultative approach without "regulatory capture" as among the achievements. AA SP RAM RVK

Stricter norms for investment advisers, regulatory sandbox get Sebi board's green signal

The <keyword id="20340200" type="General" weightage="100" keywordseo="assets-under-management" source="keywords">Assets Under Management</keyword> (<keyword id="20019621" type="General" weightage="20" keywordseo="AUM" source="keywords">AUM</keyword>) of <keyword id="20300870" type="General" weightage="20" keywordseo="equity-mutual-funds" source="keywords">equity mutual funds</keyword> have <keyword id="20641508" type="General" weightage="20" keywordseo="surged" source="keywords">surged</keyword> by 5.37 per cent sequentially to Rs 25,12,845.59 crore in July 2024 from Rs 23,84,727.69 crore in June 2024, <keyword id="22838645" type="General" weightage="20" keywordseo="PL-Wealth-Management" source="keywords" meta.keywordsubtype="org" meta.entityname="PL Wealth Management" meta.hostid="261" meta.entityid="PL Wealth Management">PL Wealth Management</keyword> said in a statement. The observation, which is based on 283 open-ended equity diversified funds, cited that 39 per cent of these funds have outperformed their respective benchmarks over the past month, ending July 31st, 2024, The cumulative total of funds that outperformed stood at 109 during the month ending July 2024 (one month). AUM measures the total market value of assets that a person or entity manages for clients or on behalf of investors. Under the <keyword id="21184260" type="General" weightage="20" keywordseo="large-cap-funds" source="keywords">large-cap funds</keyword>, about 58 per cent of <keyword id="19915334" type="General" weightage="20" keywordseo="schemes" source="keywords">schemes</keyword> outperformed on S&amp;P BSE 100 - TRI benchmark, out of 31 schemes observed by <keyword id="19999821" type="General" weightage="20" keywordseo="Prabhudas-Lilladher" source="keywords" meta.keywordsubtype="org" meta.entityname="Prabhudas Lilladher" meta.hostid="261" meta.entityid="Prabhudas Lilladher">Prabhudas Lilladher</keyword>'s wealth management arm. About 24 per cent of schemes outperformed under the large and mid-cap funds, of which 29 were observed. Under the multi-cap funds about 40 per cent of schemes outperformed, whereas in the flexi-cap funds, the percentage of schemes outperforming was 33 per cent. Going further, about 38 per cent of schemes under the midcap outperformed. Interestingly, the data observed that not a single scheme in small-cap funds manages to outperform their respective benchmarks. According to the observations made by L Wealth Management, Value Contra Div Yield Funds was the best-performing category, where 78 per cent of the schemes outperformed the benchmark. It was followed by schemes of large-cap funds and multi-cap funds, which outperformed their respective benchmarks by 58 per cent and 40 per cent respectively, during July 2024. Large and mid-cap funds were the least performing fund category, with only 24 per cent of funds outperforming the benchmark, as shown in the analysis. <keyword id="22838646" type="General" weightage="20" keywordseo="PL-Capital-Group" source="keywords" meta.keywordsubtype="org" meta.entityname="PL Capital Group" meta.hostid="261" meta.entityid="PL Capital Group">PL Capital Group</keyword> specialises in research-driven advisory services in the Indian capital markets. The company's business is spread across 200 plus cities in India, catering to institutions, corporations, family offices, HNIs, and retail clients in India and globally.

Assets Under Management of equity mutual funds surged 5.4% sequentially in July: PL Wealth Management

In essence, mutual fund investing is about trusting your money to a professional <keyword id="135622" type="POSITION" weightage="80" keywordseo="investment-manager">investment manager</keyword> and letting them take investment decisions for you. You take a high-level decision to invest through <keyword id="6357979" type="ORGANIZATION" weightage="80" keywordseo="mutual-funds">mutual funds</keyword> and then let the professionals take over from there. 
 
The investment manager collects a pool of money from a large number of investors and makes the day-to-day decisions to invest it in a portfolio of securities or other assets. These could be <keyword id="6354298" type="ORGANIZATION" weightage="80" keywordseo="stocks">stocks</keyword>, bonds, gold, real estate, or some other securities. Each investor in the fund gets a share of the total assets. 
 Then you only need to monitor if the <keyword id="109711" type="POSITION" weightage="80" keywordseo="Fund-manager">fund manager</keyword> is doing a good job for you. If not, fire them by taking your money out. 
<h2>
	How it works in practice is as follows:</h2>
 
 A reputed financial service company with a track record of managing <keyword id="6362476" type="ORGANIZATION" weightage="80" keywordseo="investments">investments</keyword> sets up what is called an Asset Management Company (Also referred to as an <keyword id="6358378" type="CITY" weightage="80" keywordseo="AMC">AMC</keyword>, mutual fund company, or fund house). Not everyone can set up an AMC. They have to get a license from <keyword id="35210" type="ORGANIZATION" weightage="80" keywordseo="sebi">SEBI</keyword> (the regulator that governs mutual funds in India) by demonstrating a track record and solid financial standing. 
 
After getting a license, the AMC decides what kind of mutual fund they want to offer. They can offer just one or many options. Each is called a Mutual Fund Scheme (commonly shortened to scheme, mutual fund or just fund). They will also appoint one or more named individuals to act as the fund manager for that scheme. While offering the Scheme, the AMC clearly defines the investment objective and the mode of operation of the scheme in a set of Offer Documents the format of which has been specified by the regulator. This ensures that the public investor knows exactly how their money is going to be invested. 
 
Let’s say the fund house offers two schemes: 
 
Scheme 1: invests in stocks 
 
Scheme 2 invests in bonds. 
 
As an investor, you can choose to invest in whichever one suits your purpose. Like you, thousands of investors will ‘subscribe to’ or ‘buy’ that scheme. The money so collected is the pool of money or ‘corpus’ available for the fund manager. He or she will then take the decisions about which specific stocks to invest that money in. 
 
The total corpus of the mutual fund scheme is sub-divided into units (or shares), which the investors buy. To begin with the corpus is divided into units of Rs 10. 
 
As the value of the investments made by the mutual fund changes, the value of the units changes as well. This is called the NAV (Net Asset Value) of the unit. It’s calculated by dividing the total value of the net assets of the fund by the number of units. This is published daily so you know how your money is doing. You also get periodic statements with information about your holdings. 
 
The AMC does not do all this for free. They charge a fee for managing the money. In addition there are other costs such as brokerage fees, costs of publishing statements etc. These need to be borne by the investors and are deducted from the corpus periodically. These are called Expenses of the fund and the ratio of expenses to the total money managed by the fund is called Expense Ratio. To protect investors, the regulator SEBI has specified the maximum expense ratio that can be charged. Most fund houses manage to control costs and keep the expenses below the maximum cap. 
 
That was probably a lot of new stuff to learn in one go. But now you can hold your own when your advisor throws these terms at you: 
<ul>
	<li>
		Asset Management Company (AMC, Mutual Fund Company or Fund House)</li>
	<li>
		SEBI (Securities &amp; Exchange Board of India)</li>
	<li>
		Mutual Fund Scheme (Scheme, mutual fund or fund)</li>
	<li>
		Offer Documents</li>
	<li>
		Units or shares</li>
	<li>
		NAV (Net Asset Value)</li>
	<li>
		Expenses, Expense Ratio</li>
</ul>
The next Lesson in this series will be: Why should you consider investing in mutual funds? If you would like to learn more, stay tuned! 
 
(About the author: This article has been contributed by Sanjiv Singhal, CEO, <a href="http://scripbox.com/" target="_blank">scripbox.com</a>.)

Investment
series part 1: What is a mutual fund?

New Delhi, Mar 22 () Equity-oriented mutual fund schemes delivered a negative return of about 25 per cent to investors over the last one month as the broader market witnessed significant downtrend amid coronavirus-triggered recession fears. The 44-player mutual fund industry is not immune to the economic blowback of COVID-19, and going ahead, small and mid-cap equity schemes will continue to remain under pressure in the short to medium term on account of volatility in the markets, said Krishna Karwa, Senior Research Analyst, at iFAST Financial India.According to data compiled by Morningstar India, all the equity scheme categories -- equity linked saving scheme (ELSS), mid-cap, large &amp; mid-cap, large-cap, small-cap, mid-cap and multi-cap have given negative return in the range of 25-26 per cent between February 19 and March 18, 2020.Individually, large and mid-cap funds have given a negative return of 26.63 per cent followed by large-cap (26.58 per cent), ELSS (26.47 per cent), multi-cap (26.45 per cent), small-cap (26.32 per cent) and mid-cap (24.84 per cent).Notably, all the funds fell less than their respective benchmark indices during the bear market.The benchmark Sensex crashed about 30 per cent during the same period, falling from 41,000 level to 29,000 level, following the coronavirus pandemic, decline in international crude oil price and the Yes Bank fiasco."We have seen such falls in the market multiple times before, while pessimism may remain for sometime given the uncertain situation with the spread of the coronavirus. But as we have seen in the past over the long term markets will recover," Morningstar India Director- Manager Research Kaustubh Belapurkar said.He, further, said that investors should continue to focus on asset allocation and continue with their investment and systematic investment plans (SIPs). If an investor was underallocated to equities as per his risk profile, it would be a good time to start increasing the equity exposure at current low valuations. He advised investors to keep at least 7-10 year investment horizon in mind with a volatile asset class like equities.Echoing similar views, iFAST Financial India's Karwa said that corrections have made the valuations pretty attractive, and investors should consider going long on small and mid-cap funds. "Despite witnessing a marked dip in net asset value (NAV) in recent times, large-cap and blue chip funds should be able to bounce back at a faster pace. Quality businesses and industry leaders with superior fundamentals will always command a premium multiple over the rest, and would be the first ones to see investment inflows on major dips," he added.With regard to the debt schemes, Karwa expects stress in the credit markets to persist. From a defensive standpoint, an investor should focus more on short duration debt funds (typically up to one year) with good liquidity. Those with a higher risk appetite can keep long duration credit risk funds on their radar as well, he added."The current market downturn has led to both concerns as well as a sense of potential wealth creation opportunity due to this increased awareness," said Satyen Kothari, Founder &amp; CEO, Cube Wealth. SP DRR

Coronavirus: Equity mutual funds give 25 pc negative returns to investors

New Delhi, Mar 9 () Market regulator Sebi has revised mutual fund regulations to permit non-bank Sebi-registered custodians to manage gold or gold-related instruments. Currently, only the banks that are registered as custodians with Securities and Exchange Board of India (Sebi) are permitted to manage gold exchange-traded funds (ETFs) and other gold-related products. "In case of a gold exchange-traded fund scheme, the assets of the scheme being gold or gold related instruments may be kept in the custody of a custodian registered with the board," Sebi said revising the mutual fund norms. After the revision of norms, non-banking custodians as well as banking custodians can manage gold ETFs and other gold-related products.For this, the regulator has amended Securities and Exchange Board of India (Mutual Funds) Regulations, 1996. The amendments to the regulation were made after Sebi's board in February approved a proposal to allow bank and non-bank custodians to offer custodian services for gold or gold related instruments such as gold ETFs.The move is aimed at reducing concentration of custodial services for gold or related instruments, Sebi had said.Additionally, Sebi has also allowed sponsors or asset management companies (AMC) to invest in close-ended mutual fund schemes. The sponsor or asset management company has to invest either at least one per cent of the amount which would be raised in the new fund offer or Rs 50 lakh, whichever is less "provided that the investment by the sponsor or asset management company shall be made in such option of the scheme, as may be specified by the board," Sebi said.Presently, the investment by the sponsor or AMC is mandatory in all schemes, except closed-ended schemes. Sebi in its board meeting said, "in order to bring uniformity across schemes, the board has decided that sponsor or AMC shall invest in close ended schemes also." SRS ANSANS

Sebi allows non-bank custodians to manage gold, related instruments

In the Jeff Bezos vs <keyword id="3820" type="PERSON" weightage="20" keywordseo="Mukesh-Ambani">Mukesh Ambani</keyword> battle royale for the Indian retail market, which is now also evolving into a 'videshi vs swadeshi' battle, questions are being raised by corporate watchers. Eight absolutely unknown facts are emerging in the <keyword id="10174110" type="UNKNOWN" weightage="20" keywordseo="Bezos-vs-Ambani">Bezos vs Ambani</keyword> battle. 1. Has <keyword id="18635" type="CITY" weightage="20" keywordseo="Amazon">Amazon</keyword>'s Jeff Bezos disclosed all of the Amazon-<keyword id="23644" type="COMPANY" weightage="20" keywordseo="future">Future</keyword> agreements to Future Retail Ltd (FRL) shareholders? To this, corporate watchers say no. Bezos has invested 49 per cent in Future Coupons Ltd (FCL), a promoter company of FRL. 51 per cent of FCL is held by Kishore Biyani, an Indian resident. FCL, in turn, has 9.82 per cent holding in FRL. It looks as though that FCL is controlled by Biyani with his holding of 51 per cent. This is a requirement under India's FDI Regulations. Bezos cannot hold directly even one share in FRL. On the face of it, he seems to be in compliance with FDI Regulations. But, the reality is different. In a two-tier structure, Bezos has taken control of FRL, which is prohibited under FDI Regulations: (i) Tier 1 is a shareholders' agreement between FRL, FCL and other promoters of FRL – in terms of this agreement, without FCL's consent, FRL cannot transfer its assets or business to any third party and its board cannot even consider such a proposal. (ii) Tier 2 is a shareholders' agreement between FCL, Amazon and other promoters of FRL – in terms of this agreement, Bezos has taken over the rights of FCL under the FRL shareholders' agreement. (iii) Thus, effectively Bezos controls FRL. The Future Retail shareholders agreement and the Future Coupons shareholders agreement have never been disclosed to any Indian regulator. If they are disclosed: (i) SEBI will find that Bezos has taken control of FRL and will mandate him to make an open offer at a price of Rs 500 per share. (ii) ED will find that Bezos has invested in and taken control of a multi-brand retail company without Government approval and hoodwinked the Government of India. 2. Has FRL amended its Articles? Amazon's rights in FCL were carried as part of the amendment to the Articles of FCL. FRL Articles have not been amended. This is because, had the amendment been proposed to the shareholders disclosing that Amazon will exercise the rights of FCL under FRL shareholders' agreement, the public shareholders would have never approved it. 3. Amazon could not have invested in FRL through FDI route under FDI Policy. Then, how does it have enforceable rights against FRL? For this, Amazon has gone through the above mired (and convoluted) structure; FRL is engaged in Multi Brand Retail Trade (MBRT); Foreign Direct Investment (FDI) - up to 51 per cent - in MBRT is allowed only with prior permission of the government, which will also be subject to veracious conditions, including sourcing of materials within India and management control etc.; Amazon wants to control multi brand retail space, but without any of the legal hassles; therefore, in a convoluted manner, it went ahead with the mired illegal structure; if the veil is pierced and the transaction structure is studied in detail, it will be found illegal, corporate watchers said. The fact that Amazon has obtained an interim order from the Emergency Arbitrator injuncting the public company, FRL not to proceed with the scheme, inspite of not having any direct shareholding in FRL, shows that the contractual rights are nothing but "control", in violation of SEBI and FDI Regulations. Bezos is learnt to have followed a similar investment structure while investing in More Retail; where he invested Rs 4,200 crore; For FDI violations, the consequence is, apart from annulment of transactions, Bezos is exposed to penalty of up to three times the investment – ~Rs 5,630 crore x 3 times = Rs 16,890 crore, sources said. For violation of SEBI Takeover Regulations, apart from penalty, they may also be liable to be prosecuted. 4. How as a foreign company Amazon asserted control over FRL and its Board? And on FRL shareholders? The assertion shows that Amazon has violated FDI and SEBI Regulations. If Amazon asserts control, it needs to make an open offer. 5. Amazon is asserting control over FRL. Does it violate FDI policy? Yes. 6. Have all of the agreements been disclosed to regulators – SEBI, ED, etc.? No – details of transaction selectively provided – in an obfuscated manner Enforcement Directorate, SEBI, Ministry of Company Affairs, and other authorities etc, must direct Amazon to disclose the agreements and details of actual arrangements in and commence inquiry. 7. What is the crux of the SIAC'd Interim Order? It records that Amazon's entire investment was for its direct interests in FRL. 8. Is Mukesh Ambani a competitor of Bezos? Bezos cannot carry on multi brand retail in India. He can carry on only market-place e-commerce in India. Yet, his Amazon is referring to Ambani's <keyword id="10926" type="CITY" weightage="20" keywordseo="Reliance">Reliance</keyword> as its competitor. Reliance can be Amazon's competitor only if the latter is permitted to do MBRT.

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