FINANCIALINTERMEDIARIESASSOCIATIONOF INDIA

NOVEMBER2 0 1 6

FINANCIALINTERMEDIARIESASSOCIATIONOF INDIA

DIARYNOVEMBER, 2016 FOR PRIVATE CIRCULATION

ABOUT FIAI

The demonetisation event was a big news for the country last month. The entire country including the financial system stands to benefit with this great move of the Government. The Indian mutual fund industry also stand to gain from the huge inflows reaching the Banking system. The retail investors and Bank as institutional investors are likely to pump in a large sum of money in the Mutual Fund Industry.

The equity funds folios increased by 20 lacs folios in the first seven months of the financial year. Last month the Industry saw a net inflow of INR 32,000 crs

FIAI along with United Forum presented a detailed response to the consultative paper to amend its Investment Adviser Regulations 2013 on the Investment Advisory business. FIAI engaged the Industry stakeholders and its members to give a detailed feedback back to SEBI on the paper.

As we enter the last month of the calendar year and the effects of demonetisation likely to favourably impact the MF Industry, here's hoping that we close the calendar year with a great positive mood.

Gurpreet SinghPrincipal Consultant - FIAI

Financial Intermediaries Association of India (FIAI) was formed as a financial distributors’ body to strengthen the cause, development, education and progress of the industry. FIAI's endeavour is to bring all the national & regional players like National Distributors, Banks and IFA Associations on one platform to pursue the industry development and education agenda.

Some of the key objectives of FIAI are to promote and develop the Indian financial intermediary industry on professional, healthy and ethical lines and to enhance and maintain standards in all areas of operations and to work towards protecting and promoting the interests of financial intermediary and their members

THE KEY OBJECTIVES OF FIAI ARE:

INDUSTRY DEVELOPMENT:

Promotion & development of the Financial Distribution Industry on professional, healthy and ethical lines.

INDUSTRY STANDARDS:

To ensure, promote and maintain a high professional and ethical standards in all areas of operation of financial intermediaries and their members and to enhance and maintain standards with a view to protecting and promoting their interests.

SUGGESTIONS:

Engaging with and proposing suggestions & initiatives to the industry players, associations and regulators for the growth of the industry.

TRAINING & EDUCATION:

Sharing of knowledge and giving a forum for enlightenment & exchange of ideas within the industry.

ENGAGING OTHER STAKEHOLDERS:

Actively engaging with certification bodies including NISM and FPSB for distribution to agree professional standards and accreditations for financial advisors in India and to drive its implementation across the intermediary fraternity.

DIARY 1

DIARY 2

RECAP OF THE MF INDUSTRY FOR OCTOBER 2016

DIARY 3

READING CORNERALTERNATE INVESTING - INDIA AIF SCENARIO

By Mr. Tanuj KhoslaAssistant Portfolio Manager at Sentosa Capital,a Singapore based long/short Asian Credit hedge fund. 

Despite India having one of the broadest equity markets on the planet (in terms of number of listed names) and one of the most liquid local currency government bond market (as liquid as US Treasuries in my view), the country has frustratingly lagged behind in development of alternative Investment products up until recently. It was a classic chicken and an egg problem where onerous (and to a great extent unclear) regulations that completely excluded foreign investments (barring non-resident Indians), led to lack of tangible demand for India focused alternative investment products, which in turn didn’t incentivize the regulators to make any improvements in the framework.

All that changed to a great degree in 2015 when while presenting the Union budget for financial year 2016, the finance minister announced that foreign investments would be allowed in alternative investment funds (AIFs).

AIF is an investment vehicle established to pool in funds for investing in real estate, private equity and hedge funds. It is in the form of a  trust or a company or a limited liability partnership (“LLP”) or a body corporate.

Up until this announcement, in India pooling of capital was allowed only for (a) Indian investors and (b) a select approval route was used by overseas investors and non-resident Indians (NRIs).

Key points to note about AIF are:

Minimum investment from an individual is INR. 1 crore.

The overall corpus of the AIF should be at least INR 20 crores (INR 10 crores for angel funds)

There should not be more than 1,000 investors at any point in time.

The fund manager or promoter should have contributed at least 2.5% or INR 5 crores, whichever is less, to the initial capital.

AIF Regulations make it mandatory to obtain certificate of registration from SEBI and are segregated into three categories based on the type of funds and the impact the same shall have on the economy. The ones having a positive impact are expected to get concessions from the government although the exact nature of the same isn’t completely clear at the moment.

Category-I: Venture funds, social venture funds and infrastructure funds (expected to get incentives from the government)

Category-II: Private equity funds and debt funds (prohibited from raising debt, except for meeting their day-to-day operational requirements)

Category-III: Trading with a view to making short-term returns and includes Hedge Funds among others

As per an article in a leading Indian business magazine, Investments made by AIFs have crossed the  INR 24,800-crore mark at the end of the second quarter of 2016-17, a jump of 20 per cent from the preceding three months.

Year-on-year, AIF investments have more than doubled from  INR 11,254.71 crores at the end of September last year.

Cashing on the positive sentiment created among foreign investors due to (a) Narendra Modi’s historic election win in 2014 and (b) AIF framework, many well homegrown banks, NBFCs (Non-Banking Financial Corporations) and fund houses have launched new India-focused funds, both domestic and offshore, in partnership with multi-billion dollar pension funds from around the globe. Even marquee investors like Blackstone, GIC, KKR and others are pouring billions of dollars into Indian real estate  through various vehicles to take advantage of the rising demand for offices and retail spaces, and corresponding jump in rents.

As of 30 June 2016, market regulator SEBI has allowed as many as 235 entities to set AIFs. The Reserve Bank of India (RBI) on 20 October 2016 notified the amended norms for foreign investment in startups as another step in this direction.

In conclusion, the authorities are steadily but cautiously easing the investment path in alternatives in India and billions of dollars are expected to flow in the country for the same. I go for 3-4 fundraising trips for our fund every year and empirically I have seen the interest in the alternatives space in India from institutional investors go up by leaps and bounds. This was not the case two years back.

Consequently a designation like CAIA is quite useful especially for those who are building and launching these India-focused alternatives as it teaches them about best practices, industry standards and the lens through which asset allocators look at the space.

The objective of 2016 AAFM India’s Wealth Management Convention is to unwrap the contemporary questions and thus provide a strategic pathway for both the Industry and the Intermediaries to capitalize on the changes the Wealth Management Industry is going through.

CAIA's India Chapter Executive Committee are holding CAIA India's 1st Anniversary with an education and networking evening on December 5, 2016. The event will cover the latest alternative investments topics and trends. The speakers include Mr. Bill Kelly & Ms. Jo Murphy from CAIA Association, Mr. Jainendra Shandilya from SEBI, Sameer Somal from Blue Ocean Global Wealth

DIARY 4

EVENTS - NEXT MONTH

ACTION AT FIAI

WEALTH MANAGEMENT CONVENTION 2016 -DEC 9TH 2016

• Meeting with AMFI

FIAI and United Forum team met up with AMFI to discuss the ramifications and suggestions pertaining to the RIA paper to be submitted to SEBI

• Members meeting

FIAI members met up on discussing & finalising the RIA paper

• Paper submission to SEBI

United Forum presented a comprehensive paper on the proposed RIA amendments along with facts and figures supporting the cause of Distribution Industry

CAIA INDIA'S 1ST ANNIVERSARY EDUCATION AND NETWORKING EVENT - MUMBAI

FEEDBACK ON THE CONSULTATION PAPER ON AMENDMENTS/CLARIFICATIONS TO THE SEBI (INVESTMENT ADVISERS) REGULATIONS,2013

DIARY 5

Source: bloomberg.com

1 US$1 Euro100 Yen1 Pound

66.7972.9163.4481.30

31-Oct-16

66.6274.7566.0586.42

30-Sept-16

67.0274.2764.6988.30

30-July-16

65.2771.6753.9299.93

31-Oct-15

0.34%1.87%1.97%8.61%

% Change(Quarter)

-2.28%-1.70%

-15.01%22.92%

% Change(Year)

-0.25%2.52%4.11%6.30%

% Change(Month)

FOREX Source: bloomberg.com(Currency movements against INR)

DOMESTIC MARKETS - INDICES % Returns as on 31th October - 2016

Source: BSE & NSE.

Key Indices

S&P BSE Sensex

NIFTY 50

S&P BSE 100

S&P BSE 200

NIFTY 500

NIFTY FREE FLOAT MIDCAP 100

S&P BSE SmallCap

S&P BSE Midcap

NIFTY NEXT 50

10 Years

7.98

8.72

8.83

9.18

9.18

12.60

7.73

9.53

13.17

5 Years

9.55

10.15

10.84

11.74

12.19

16.87

14.04

16.31

18.54

3 Years

9.70

11.10

12.49

14.66

15.97

28.11

31.65

26.67

24.42

1 Years

4.82

7.09

8.93

10.29

11.01

19.66

18.90

22.18

19.17

30-Oct-16

27941.51

8638.00

8925.39

3754.45

7494.10

15841.35

13454.03

13408.27

23516.85

INDUSTRY UPDATESKEY ECONOMIC INDICES DATA FOR MONTH: OCTOBER 2016

364 Day Tbill

91 Day Tbill

10-year Benchmark (7.59% 2026)

3 Months Certificate Of Deposit (CD)

3 Months Commercial Paper (CP)

AAA Corp Yields - 1 Yr

AAA Corp Yields - 3 Yrs

Bank Rate

RBI LAF-Repo rate

RBI LAF-Reverse Repo rate

Foreign Exchange Reserve($ bn)

Brent Crude Oil ($/bbl)

Gold ($/oz)

US Fed Funds Rate

US 10-yr Gilt

CRR

6.45%

6.38%

6.91%

6.60%

7.05%

7.60%

7.78%

6.75%

6.25%

5.75%

367.16

50.50

1272.00

0.50%

1.82%

4.00%

6.58%

6.52%

6.97%

6.50%

6.60%

7.70%

7.77%

7.00%

6.50%

6.00%

371.99

48.93

1322.50

0.50%

1.59%

4.00%

6.72%

6.56%

7.17%

6.60%

7.15%

7.95%

8.10%

7.00%

6.50%

6.00%

365.75

42.69

1342.00

0.50%

1.49%

4.00%

-0.13%

-0.14%

-0.06%

0.10%

0.45%

-0.10%

0.01%

-0.25%

-0.25%

-0.25%

-4.83

1.57

-50.50

0.00%

0.23%

0.00%

-0.27%

-0.18%

-0.26%

0.00%

-0.10%

-0.35%

-0.32%

-0.25%

-0.25%

-0.25%

1.41

7.81

-70.00

0.00%

0.33%

0.00%

IndicesAs On

31-Oct-16As On

30-Sept-16As On

31-July-16Change(Month)

Change(Quarter)

Source: Various (BSE, NSE, SEBI)

DIARY 6

Source: bloomberg.com

GLOBAL MARKETS INDICES % Returns as on 31th October - 2016

Dow Jones Ind Avg (USA)

FTSE 100 (UK)

Hang Seng (Hong Kong)

Nasdaq (USA)

Nikkei 225 (Japan)

Bovespa (Brazil)

Shanghai Composite (China)

Global Indices 31-Oct-16

18142.42

6954.22

22934.54

5189.14

17425.02

64924.52

3100.49

1 Year

2.71

9.32

1.30

2.68

-8.69

41.54

-8.34

3 Years

5.28

1.09

-0.39

9.80

6.74

6.17

13.13

5 Years

8.70

4.64

2.92

14.09

14.16

2.16

4.67

4.15

1.27

2.27

8.17

0.61

5.16

5.37

10 Years

Source: SEBI.

INSTITUTIONAL ACTIVITY Net Investment (Rs. Crores).

FIIsMutual Funds

-4,306.269,128.50

-10,306.2233,765.70

-3,558.503,01,423.10

46,986.9022,892.30

43,428.403,24,315.40

EquityDebt

-5,999.9624,637.20

Total Debt Equity Total

OCTOBER-2016 01-Jan-16 To 31-Oct-16

B

i

ii

Growth/ Equity

Oriented Schemes

ELSS

Others

474

60

414

3,75,56,235

75,38,500

3,00,17,735

4,68,022

50,737

4,17,285

69,879

2,239

67,640

22,232

2,403

19,829

92,111

4,642

87,469

C Balanced Schemes 28 28,59,026 56,816 6,183 11,82718,010

Fund of Funds Investing OverseasE

Total (A+B+C+D+E)

Source: SEBI

29

D

i

ii

Exchange Traded Fund

GOLD ETF

Other ETFs

64

1351

6,80,600

3,99,178

2,81,422

29,034

6,295

22,740

7,715

572

7,143

11,835

3311,801

4,120

5384,658

5,05,59,4952,346 15,80,076 82,27,120 84,61,684 2,34,564

1,14,541 1,898 378 161 217

MUTUAL FUND MONTHLY DATA Amount in Rs. Crore (Source: SEBI)

A

i

ii

iii

iv

v

No. ofSchemes

Type No. ofFolios

Fundsmobilized

Repurch-ase/

Redemp-tion

Income / Debt

Oriented Schemes

Liquid/ Money Market

Gilt

Debt (other than assured return)

Debt (assured return)

Infrastructure Development

1,751

52

41

1651

0

7

93,49,093

6,09,240

72,539

86,67,266

0

48

10,24,305

3,08,688

15,390

6,98,417

0

1,809

81,42,966

78,55,564

6,448

2,80,954

0

0

1,96,601

98,725

2,303

1,00,179

0

0

83,39,567

79,54,289

4,145

3,81,133

0

0

Net Inflow(+ve)/

Outflow(-ve)

Net Assetsas on June

30, 2016

DIARY 7

CONTACT FIAI

Communicaton Address: AWFIS Business Centre, 1st Floor, Poddar Chambers, Mathruradas Mill Compound, Lower Parel, Mumbai - 400 013.

Registered office: Navjivan Society, Office No. 1209,Building No. 3, Lamington Road, Mumbai - 400 008.Website: www.fiai-india.org

Suggestions & feedback: Email: info@fiai-india.org

BECOME A FIAI MEMBERFIAI invites all National Distributors, Banks and IFA Associations to become its members to be able to successfully pursue the objectives of the body in interest of the entire industry & distributors at national level.

Membership Benefits

FIAI provides an excellent opportunity to participate in the process of building a think tank that puts forth well-researched and independent points of view on topic relevant to the financial products distribution / advisory practice.

Members will be able to suggest and participate in building of the research subjects and the underlying reports.

Members will get access to the updates of regulatory and business changes.

The FIAI members will be privy to our reports immediately prior to submission with regulatory bodies.

Members will have the opportunity to engage with eminent people and organisations through a range of events.

Members will be able to reach remote areas by the use of the planned FIAI regional/ zonal offices.

FIAI will undertake services for promotion of financial business of its members and the development of the securities market.

FIAI will undertake studies /surveys on important matters and access to such report will be helpful for the business practices of its members.

Registration Process

To become a member, kindly contact us...

Communicaton Address: AWFIS Business Centre, 1st Floor, Poddar Chambers, Mathruradas Mill Compound, Lower Parel, Mumbai - 400 013.

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