Sebi’s decision to extend the deadline for debt valuation norms by one month has come as a respite for mutual funds.
Debt funds had been facing massive redemptions in the current month with close to Rs 1,00,000 crore expected to be redeemed by investors ? mostly banks and large corporate houses ? facing liquidity crunch. In its release in February, Sebi had stated that debt and money market securities with maturity of more than 91 days (earlier 182 days) shall be marked to market. Now, the deadline of July 1 had been extended till of August 1.
The new valuation norms are expected to affect NAVs of liquid funds ? particularly those having higher average maturity. Average maturity indicates the average holding period of fund as measured by remaining days of maturity of debt papers, weighted by amount of investments. Liquid schemes like LIC MF income plus, IDFC Saving Advantage Fund A and DWS Treasury Investment Regular might see some NAV adjustments in the coming days as their maturity is much higher than 91 days, according to the data from Value research.
K Ramkumar, head of fixed income at Sundaram BNP Paribas Mutual Fund said, ?There were already some liquidity crisis is the market and with June being the quarter end the redemption is likely to continue. However, the breather of one month to the fund houses will have not much impact as we were already prepared for it.? In May, debt schemes had seen huge redemption’s of over 65,000 crore following banks pulling-out money to lend to telecoms companies for the 3G auctions.
Market experts expect this norm to reduce the practise of short-ended funds going long ? by buying long dated securities, in its quest for higher returns. Now, such investments will increase volatility and affect overall fund performance, according to experts. Sebi in its release stated that, floating rate securities with floor and caps on coupon rates, and a residual maturity of up to 91 days should be valued on amortisation basis taking the coupon rate as floor price.
Sebi rider for stock market courses
The Securities and Exchange Board of India (Sebi) has said that persons above the age of fifty years or having at least ten years experience in sale or distribution of mutual fund will be given the option of obtaining the certification either by passing the National Institute of Securities Markets (NISM) certification examination or qualifying for Continuing Professional Education (CPE) by obtaining such classroom credits.
Sebi in its release said, ?However, to facilitate the transition process from AMFI to NISM, it has been decided that a person holding a valid AMFI certification whose validity expires between June 01, 2010 and December 31, 2010, would be required to comply with the CPE requirements as laid down by NISM under the relevant clauses of the Certification Regulations, by December 31, 2010.?