Global fund giant Invesco did something extraordinary last week, and there may be a lesson or two to learn for the Indian mutual fund industry. The Atlanta-headquartered firm had failed to rebalance an S&P 500 equal-weight passive fund in April, a mistake that cost investors $105 million. So, the fund house compensated investors for the omission. When investment managers charge fees for managing money, they must be obliged to recompense investors for their lapses and inefficiencies. Maybe, they should be made to forefeit fund management fees when a fund closure or sidepocketing happens, or made to return entire investor money when schemes below a certain risk grade go belly up.
MARKET CUES: Where we stand >>>  | Nifty futures on the Singapore Exchange traded 124 points higher at 7 am (IST) in signs that the market may attempt a rebound on Dalal Street. |
| Nifty tech charts signalled a negative bias on Friday as it fell below its 13-day moving average, formed a 'Bearish Belt Hold' on the daily chart and a bearish candle on the weekly chart. Analysts said Nifty bias will remain negative as long as it remain below the 9,350-9,382 range. |
| F&O data showed Nifty has been forming lower highs since last four sessions and needs to negate that for a bounceback, else weakness could persist. India VIX moved down 3.20 per cent to 39.93 level. Which means we may see further pressure on any bounce in the index |
| Elsewhere in Asia, shares followed Wall Street higher on Monday as investors looked ahead to more countries restarting their economies, even as some reported an unwelcome pickup in new coronavirus cases. Japan's Nikkei added 0.7% and South Korean stocks 0.3%. MSCI's broadest index of Asia-Pacific shares outside Japan firmed 0.1%. |
| US stocks rose on Friday even after the ugliest monthly jobs report. Dow jumped 455 points, or 1.9%; S&P500 48.61 points or 1.6%; and Nasdaq 141.66 points or 1.5% |
| Oil prices opened 1% lower as a persistent glut continued to weigh on prices and the coronavirus pandemic eroded global oil demand. Brent crude was down 29 cents, or 0.9%, at $30.68 a barrel while WTI crude fell 26 cents, or 1.1%, to $24.48. |
| The rupee appreciated 18 paise to provisionally settle at 75.54 against the US dollar on Friday, tracking higher domestic equities and weakness in the American currency. |
| The dollar traded a shade firmer on the yen at 106.94, but was well within the 105.97-109.37 band that has lasted since late March. The euro was a fraction softer at $1.0830 but above last week's low at $1.0765. Against a basket of currencies, the dollar was idling at 99.837. |
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Stimulus this week?... The government is likely to unveil a much-awaited second stimulus package starting this week and it's expected to include a credit guarantee scheme to ease fund flows to small businesses and cash support for migrant workers, said officials with knowledge of the matter. Contours of the package have been nearly finalised and announcements will take place in a staggered manner as the government reviews the state of the economy with the third phase of the lockdown ending on May 17.
Read More Limited train services from tomorrow… In the first cautious step towards restoring mass transport, limited passenger train services will resume from Tuesday, connecting Delhi with 15 major cities. The resumption of train operations in the country would be gradual, the railway ministry said. Bookings can be done only through IRCTC website and no one will be able to purchase tickets from counters or buy platform tickets. Only asymptomatic passengers with confirmed and valid tickets will be allowed to enter the station and they will need to wear face masks. They will be allowed to board the trains after medical screening.
Read More Investors stay put in MFs… Indian savers appear to have finally learnt the art of sticking to their long-term wealth-building goals. In earlier periods of market downturn, mutual fund investments would get the chop, with redemptions far outweighing inflows on an average. Industry data showed that the gross sales to redemption ratio reflects no panic from local savers. Gross buy-to-sell ratio — total inflows divided by outflows — of equity mutual funds stood at 1.75 at the end of April, compared with a medium ratio of 1.60 in the past 12 months.
Read More PM to strategise next step with CMs… PM Narendra Modi will have a lengthy, open-ended discussion, which may run into several hours on Monday, with chief ministers on the next steps of a graded exit from the lockdown. The talks will take note of the continued rise in Covid-19 cases, particularly in states like Maharashtra and Gujarat, while considering measures to increase the pace of economic activities. The ongoing return of migrant workers to their home states and problems this may cause in restarting the economy is also likely to be discussed.
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Franklin debt fund investors in limbo... Hundreds of investors in the six debt schemes of Franklin Templeton Mutual Fund that were wound up last month are in a limbo over the fate of their investments. While unitholders remain unclear about when they would get their money back, an outcome which many of them are yet to grasp is the possibility of losses. Wealth advisers and mutual fund industry officials estimate that investors could end up taking a 20-30% hit on what they have earned so far.
Read More FTSE Russell delays India rejig... Stocks such as Shree Cement and Asian Paints, which climbed lately on expectations of increased inflow of passive overseas funds, could lose steam after index provider FTSE Russell postponed until September the decision to increase India's weight in its global indices due to the Covid-19 lockdown. About $2 billion was expected to flow in after the rebalancing. Other stocks expected to benefit from the move included L&T, Bajaj Finance, Nestle India, Divi's, Britannia, Tata Steel, Bharti Infratel, Colgate, Cipla and NTPC.
Read More Now, China FPIs under watch… After FDI, the government is looking to clamp down on unbridled access to the Indian market by Chinese portfolio investors as it seeks to plug a possible loophole that investors from across the border can use to acquire shares in listed domestic companies. The department of economic affairs in the finance ministry is looking at options, including the possibility of mandating the "approval route" for Chinese FPIs as well. FPI investors typically acquire smaller shares and keep churning their investment. The government will initiate the steps in consultation with Sebi.
Read More Top PE funds write down investments... Players like KKR, Blackstone, Warburg Pincus, Apax Partners, TPG, Brookfield, Carlyle, Bain Capital, Hines and Multiples may have to take a write-down on their portfolio companies following a drop in valuations due to disruption in business and volatility in financial markets. Industry trackers say the writedown was triggered as market capitalisation of companies is now less than net assets and there have been significant changes in the environment in which the companies operate.
Read More Meanwhile... IT hiring slows down... India's top five IT services firms — Tata Consultancy Services, Infosys, HCL Technologies, Wipro and Tech Mahindra — added 25% fewer employees in fiscal year 2019-20, as automation picked up pace amid slower business growth. The five software services providers added a net 66,500 employees, against net hiring of 87,060 people in financial year 2018-19. They together employ nearly 1.14 million people, a quarter of India's 4.3 million technology workforce.
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