Tuesday, June 28, 2011

Big corporates and cash-rich companies investing in Equity Mutual Funds

Source: ET

MUMBAI: Corporate treasuries with large cash reserves have started allocating money to equity funds as they expect stocks to perform well over the next two years, fund industry sources said. The past two months have seen several cash-rich companies increasing their exposure to stocks through investments in equity mutual funds.

Corporates such as ITC, Hindustan Zinc, Sesa Goa, Asian Paints, ACC, Reliance Industries , Larsen & Toubro , Emami , and several mid-cap IT firms have started making small investments in equity funds managed by leading asset management companies. Market correction in March and April, which resulted in Sensex declining over 16%, provided a good entry point for corporate treasuries to invest in equity mutual funds.

"Treasury managers are testing waters with small investments - say about 30-50 crore per fund. They invested a few thousand crore in February, March and May, when the market corrected by a few percentage points," said the CEO of a mid-sized fund house. "These companies have taken a valuation call. They have invested in funds as they feel markets will not fall any further and there is significant upside over the next 16-18 months," the CEO said.

Fund marketers are attributing the 1,546-crore worth of equity fund inflows in May to investments made by corporate treasuries. As on May 31, corporates have investments worth 21,088 crore (through 2.27 lakh unique investor folios) in equity mutual funds. This forms about 11% of overall equity fund asset base. About 40% of this money is invested for a period exceeding 24 months, as per data from Association of Mutual Fund in India.

Historically, corporates, as part of treasury and cash-flow management, invest 90% of their surpluses in short-term debt funds. It is only companies with large surpluses, a few mid-caps and some small and medium establishments that are taking opportunistic investment calls in equities market. "It's mostly SMEs and some listed companies (with specific investment mandates) that are investing in equity mutual funds currently," said Sundeep Sikka, chief executive officer, Reliance Mutual Fund.

"Companies with investment mandates prefer to invest in markets through equity mutual funds. Corporate treasuries, most of the time, have only two-three officials managing cash levels and investments. Corporate treasuries entrust their money with mutual funds as they do not have the expertise or research to manage equity investments," Mr Sikka said.

Companies like Hindustan Zinc (mutual fund investments worth 9,332 crore), Sesa Goa (mutual fund investments worth 8,799 crore), ACC (fund investments of 1,320 crore), Asian Paints (fund investments of 869 crore) and ITC (fund investment worth 3,282 crore) have invested in equity mutual funds at different points of time and market levels. An email sent to Hindustan Zinc, Sesa Goa, ACC, Asian Paints and ITC to understand their investment philosophy failed to elicit response.

"Most corporate treasuries have larger chunks of their investments in liquid debt funds. Only companies with large surpluses will take some risk and invest in equities. These investments are long-term in nature and they expect just about 14-15% return on their equity fund investments," said Tarun Bhatia, director (capital markets) Crisil Research. According to industry sources, corporate investments in equity funds will counter-balance redemption outflows from retail investor portfolios. Institutional investments in equity funds will also help fund houses to earn more asset management fees.
Big corporates and cash-rich companies investing in Equity Mutual Funds

28 comments:

SWATI said...

It was a very nice idea! Just wanna say thank you for the information you have shared. Just continue writing this kind of post. I will be your loyal reader. Thanks again. and welcome to my Blog: Intraday Tips

BullionMCX.Com said...

Dear Blog owner Thanks so much for this.! Your blog as usual was educational, I have had to bookmark your Blog and subscribe to your feed in i feed. Your content is awesome and theme looks lovely. It my pleasure that you visit my site MCX Tips Gold Tips Silver Tips

Thanks and Best Regards

BullionMCX.Com

Commodity Tips said...

Nice blog good information about market I really appreciate your post and you explain each and every point very well.Thanks for sharing this information. And I will love to read your next post too and most welcome MCX Gold Today MCX Silver Today

Thank and Regards

MCX Crude Oil Today

Free Intraday Stock Tips said...

I read your post on NCDEX. That was amazing. Your thought processing is wonderful.
The way you tell the thing is awesome. They are inspiring and helpful.

Thank With Regards: MCX Commodity Tips

indianist said...

How to Select a Mutual Fund?

Neeru sharma said...

Nice blog.. Defined perfectly.

Thanks For Shareing

Regards: MCX Gold Tips

Free Intraday Stock Tips said...

It's glad to see good information being convey. Its a very nice written, and I really like this blog. Thank you for sharing this info.

Regards: MCX, MCX Tips

Nishi said...

Awesome blog for traders and investors.I really appreciate your post and you explain each and every point very well.. Looking for more updates from your side.
Regards
share market tips

Anjum Mahmood said...

Read all the related Posts:


Basic of VBScript Language for QTP

Introduction to QTP (QuickTest Professional) Part2

Introduction to QTP (QuickTest Professional) Part3

Introduction to QTP (QuickTest Professional) Part4

Basic of VBScript Language for QTP


Read all the related Posts:

64 Software Manual Testing Interview Questions

Answers To Common Job Interview Questions

Behavioral Questions In Interviews

Questions to Ask at an Interview

Competency based Interview Questions

Kalpana Chauhan said...

Post Free Classified Ads related your business, product and services at http://www.classifieds2india.com

Bull Gains said...

Great post. Thanks for sharing.
Stock Market Tips

daygains.com said...

visit: wwww.daygains.com - Stock Market Tips, Stock Tips

stocktaj seo said...

Nice informative blog. Thank You.
Stock Tips, Best Stock Tips

Share tips said...

This information provided by your blog is very helpful l for New Traders in Stock Market. We too have provided Stock Market Education on our website at
Intraday stock tips |Nse tips|Nifty tips

saranya zinavo said...

Hey, I searched for this blog on Bing and just wanted to say thanks for the excellent read. I would have to agree with it, thank you again!
Web Developers Bangalore

Top Ten Classifieds said...
This comment has been removed by the author.
Top Ten Classifieds said...

Good and informative post.. Thanks..

regards

Bisell.in

jalpa prajapati said...

Thanks for such very great information. This is the best sites for proving such kinds of good information.Examhelpline.in

jalpa prajapati said...
This comment has been removed by the author.
jalpa prajapati said...
This comment has been removed by the author.
jalpa prajapati said...

such a great detail given to us thank you a lot..
LPU NEST Slot Booking 2017
JSSC PGT Admit Card 2017
GATE CS Answer Key 2017
Mobile Payment Apps
careinfo.in
carebaba.com

naveen james said...
This comment has been removed by the author.
naveen james said...
This comment has been removed by the author.
naveen james said...
This comment has been removed by the author.
naveen james said...
This comment has been removed by the author.
naveen james said...

Informative and awesome blog.
Waiting for more like this.


Regards
Visit adaalo

jalpa prajapati said...

A wonderful post and good site.thank you...
UPSC CISF Result 2017
OSSC Preliminary investigator Answer Key 2017
OSSC Vital Statistics Clerk Result 2017
CIL Management Trainee Result 2017
JEE Main 2017 Answer Key
JEE Main 2017 Answer Key

eduction exam said...

really wonderful information given to us..thank a lot
AP EAMCET Admit Card 2017
JEE Main Result 2017
CGBSE 10th result 2017
CBSE 10th class result 2017
Bihar board Matric result 2017
NHTET Result 2017

Life Insurance | Health Insurance | Auto Insurance


Investors Please Listen !

 
More than 100 kinds of Insurance products from more than
20 companies under one roof.



Call: 9818269396 
investorspleaselisten@in.com
www.investorspleaselisten.blogspot.com

 

 

Safe Harbor:

The information contained and provided on this Website provides Investment advice for the education of investors. The posts are an information service only. Recommendations, opinions or suggestions are given with the understanding that readers acting on this information assume all risks involved. We do not assume any responsibility or liability resulting from the use of such information, judgment and opinions for Trading or Investment purposes.
Powered by Olark
Advertising Learn to Invest