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Why RGESS is not finding investors?

Monday, January 14, 2013
By Anand Birai

It was a big announcement when the Union Finance Minister introduced Rajiv Gandhi Equity Savings Scheme (RGESS) in the last Union Budget. Apprehensions were that it would give a direct competition to the mutual funds in India. Even the MF industry raised its concerns and urged if they could distribute the product to tame the competition with the government machinery if it was employed to distribute RGESS.

The Securities & Exchange Board of India (SEBI) issued final guidelines over a month ago. However, except one private mutual fund player, there are still not takers for the scheme. Among three fund houses which have filed draft offer documents, two are sponsored by the state-owned banks — State Bank of India and IDBI. DSP BlackRock is the only private fund house to have shown interest.

There are two reasons why other fund houses have not yet come forward include, the focus of mutual fund houses on corporate business and secondly, uncertainty over the future of the scheme.

The data of Assets Under Management (AUM) for the last calendar year suggest that over 90% of business for the fund houses is from the corporate sector and that too in the debt schemes. Short term funds, gilt funds and even Gold funds attracted majority of the AUM from corporate India. Despite the improving equity markets, retail participation in mutual funds has been falling in terms of net AUM and number of folios. Hence, the fund houses have realigned their focus more on the corporate investors than the retail investors.

Secondly, RGESS is aimed more as a tax saving instrument. By the time the fund houses get all clearances for introducing it in the market, the financial year deadline for tax saving investment season could be well over. The fund houses would take a good time to review the investors’ reactions and response to the new product.

In totality, it would be the next calendar year around which there could be some momentum expected.

MF UPDATE
Motilal Oswal MOSt 10 Year Gilt Fund announces dividend  

Motilal Oswal Financial MF has announced dividend for Motilal Oswal MOSt 10 Year Gilt Fund under its dividend option. The quantum of dividend for distribution will be Rs. 0.5850 per unit on the face value of Rs. 10 per unit. The record date for dividend distribution is 8th January 2013.

JM Arbitrage Advantage Fund announces dividend  

JM Financial MF has announced dividend for JM Arbitrage Advantage Fund under its dividend option. The quantum of dividend for distribution will be Rs. 0.25 per unit on the face value of Rs. 10 per unit. The record date for dividend distribution is 7th January 2013.

BNP Paribas modifies exit load under BNP Paribas Short Term Income Fund   
BNP Paribas MF has announced a change in the exit load of BNP Paribas Short Term Income Fund with effect from 7th January 2013. A load of 0.50% will be charged if units are redeemed within 3 months from the date of allotment. At present, no exit load is being charged.

UTI Bond Fund announces change in load structure  
UTI MF has announced to revise exit load structure under UTI Bond Fund. Accordingly, the revised structure of an exit load of 1% will be charged if units are redeemed or switched out within 365 months from the date of allotment. The revised exit load structure will be effective from 7th January 2013.

Tata Equity P/E Fund announces dividend  
Tata MF has declared dividend for Tata Equity P/E Fund under its dividend Trigger Option and direct plan A-5. The quantum of dividend will be Re. 0.50 per unit on the face value of Rs. 10 per unit. The record date for dividend distribution has been fixed as 11th January 2013.

Principal announces change in exit load under its schemes  
Principal MF has announced to revise exit load structure under Principal Smart Equity Fund and Principal Retail Money Manager Fund. Accordingly, the exit load will be 1% if units are redeemed or switched out within 2 years from the date of allotment under Principal Smart Equity Fund. Moreover, for Principal Retail Money Manager Fund, the exit load will be 0.5% if units are redeemed or switched out within 1 month from the date of allotment. The revised exit load structure will be effective from 7th January 2013.

DSP BlackRock Technology.com Fund announces dividend  
DSP BlackRock MF has announced dividend for DSP BlackRock Technology.com Fund under its dividend option. The quantum of dividend for distribution will be Rs. 0.50 per unit on the face value of Rs. 10 per unit. The record date for dividend distribution is 11th January 2013.
  
Tata Balanced Fund announces dividend  
Tata MF has declared dividend under the monthly dividend options of Tata Balanced Fund – Plan A and Tata Balanced Fund – Direct Plan. The quantum of dividend will be Re. 0.35 per unit on the face value of Rs. 10 per unit. The record date for dividend distribution has been fixed as 14th January 2013.

Axis announces change in exit load structure under its scheme  
Axis MF has announced a change in the exit load of Axis Constant Maturity 10 Year Fund with effect from 9th January 2013. Accordingly, if the investment is redeemed or switched out within 6 months from the date of allotment, the exit load will be Nil.

Quick Facts
Who can invest in RGESS?

  •     New retail investors with an annual income of less than 10 lakhs

How much can I invest?

  •     The maximum amount eligible for claiming benefit under RGESS is Rs. 50,000

Tax Benefit

  •     Deduction u/s 80 CCG, is available on 50% of the amount invested.  The benefit is in addition to deduction available u/s Sec 80C.

Lock-in Period

  •     3 years.  Fixed lock-in during first year followed by a flexible lock-in for subsequent two years.

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