MFs shy away from equity-linked offers

Written by Markets Bureau | Mumbai | Updated: Jan 14 2009, 04:32am hrs
The unexpected Satyam scam has further dampened the market sentiments. It has led to a dip in both the leading bourses. The bearish sentiment likely to deter the Mutual Fund (MF) houses from filing applications with the Sebi for offering equity-linked new fund offerings (NFOs) for the retail investors.

According to Sebi, out of 35 fund houses, only two have filed applications for offering equity-linked NFOs in the last one month.

The ICICI Prudential Mutual Fund has filed two applications with the regulator to offer ICICI Prudential Recovery Fund, an open ended equity fund, and ICICI Prudential Target Return Fund, an open ended diversified fund. Similarly, Tata Mutual Fund has filed an application for Tata Value Opportunities Fund, an open ended equity scheme.

A senior analyst from a broking firm said that the domestic market was effected due to the US financial tsunami leading to the global market meltdown. The BSE Sensex dipped by 52% or 10,639 points and NSE Nifty slide by 52% or 3,179 points in the calendar year 2008. The market has shown some recovery in the month of December, 2008 as Sensex gained 9% or 809 points and Nifty jumped by 10% or 276 points. However, Satyam scam was responsible for the nervousness in January as both the leading bourses are currently having south-bound journey.

In line with the equity market players, the MF industry is uncertain about the market movement. Commenting on the few applications for introducing equity-linked NFOs, a fund manager from a domestic fund house said that the overall bearish market due to the global meltdown and now the scam will influence the retail investors not to invest in the equity-linked NFOs. They will prefer to hold all their investment decisions for a while, the fund manager said.

It may be mentioned here that the meltdown in the equity market has majorly resulted in the reduction of Asset Under Management (AUM) of the MF industry. According to Amfi, the AUM has dipped by Rs 1.27 lakh crore to Rs 4.21 lakh crore as on December 31, 2008 in the calendar year 2008.