S&P BSE Sensex*	Re/US $	Gold Rs/10g	Crude ($/barrel)	FD Rates (1-Yr)
35,657.86 |234.38 0.66%	69.10 |-0.29 -0.42%	30,467.00 | -21.00 -0.07%	77.39 |-0.46 -0.59%	5.00% - 7.00%

 

And please don’t be fussy about it. I am a master chef, so I can charge you a premium rate.

And let me assure you, people will make a beeline to my shop.

In fact, some buyers prefer to buy in bulk from me and I have a separate quota for them.

If you are a customer with a lesser budget, don’t worry. I have a quota for you as well, but that’s really small considering the footfall I am expecting, so wait outside my shop before it opens and be in the queue.

Does this sound like a monologue of an arrogant cake shop owner?

No, it’s not!

In fact, this is a story of every overconfident promoter who grossly overestimates his abilities in almost everything. Such promoters try to offload their stake in the company to the public at unrealistic valuations.

When the markets are on song, such promoters get away with their blithe arrogance—as all investors claim their share of the cake. But poor market conditions make an overpriced Initial Public Offer (IPO) look ugly.

[Read: Do Listing Gains On IPOs Make You Excited? Read This… ]

But that’s lesser a problem. After all, you can decide for yourself whether or not you want to buy.

The bigger problem is when institutional investors such as mutual funds and insurance companies join hands with the promoters and work in their interest to make the IPO successful. They don’t think twice before compromising the interest of millions of investors who trust them with their money.

People often talk about Life Insurance Corporation (LIC) bailing out government companies.

But why blame LIC alone?

When it comes to doing a favour to a “related party” the government entities and their private sector counterparts are all alike.

We recently wrote, How HDFC Mutual Fund Is Taking Investors For Granted.

And now it’s ICICI Prudential Mutual Fund…

In March this year, ICICI Bank diluted its stake in ICICI Securities through IPO.

Despite jittery market conditions, the promoters of ICICI Securities had decided to price the IPO at steep valuations.

As a result, the IPO received a tepid response from institutional investors and High Net-worth Individuals (HNIs).

ICICI Prudential Mutual Fund invested Rs 640 crore in the IPO of ICICI Securities in two tranches. The fund house invested Rs 400 crore through five of its schemes on the first day of the issue and Rs 240 crore on the last day.

Schemes from ICICI Mutual Fund that applied for the IPO

• ICICI Prudential Balanced Advantage Fund

• ICICI Prudential Balanced Fund

• ICICI Prudential Banking and Financial Services Fund

• ICICI Prudential Focused Bluechip Equity Fund

• ICICI Prudential Value Fund Series 19

The Securities and Exchange Board of India (SEBI) took cognisance of this, and believes ICICI Prudential Mutual Fund flouted the norms of related party transactions. However, the fund house claims that it hasn’t breached any rule pertaining to the quantum of investments.

The capital market regulator has directed ICICI Prudential Mutual Fund to repay Rs 240 crore (i.e. the amount equivalent to the bids under the QIB portion on the final day of ICICI Securities IPO) together with interest @ 15% p.a.

Moreover, those who redeemed their units, during the period after the allotment of shares happened till the date AMC repays the respective schemes, will also get the proportionate compensation on account of loss in the stock price of ICICI Securities.

The stock of ICICI Securities has tumbled 43% within 4 months of its debut.

With this, SEBI has set a strong precedent that would curb the brazen behaviour of mutual fund houses and other QIBs (Qualified Institutional Buyers) entering related party transactions.

More to the story…

As per the capital market regulator’s rulebook, for any IPO to be successful, QIB quota must be subscribed at least 0.75 times.

In the case of ICICI Securities, the QIB quota of IPO got fully subscribed only on account of ICICI Prudential Mutual Fund’s last day subscription to the offer. In the absence of this “goodwill gesture”, ICICI Securities’ IPO would have failed as the QIB quota would have remained subscribed less than 0.75 times.

Such an unethical practice from the country’s eminent fund house is tantamount to swindling mutual fund investors who have trusted the fund house with their hard earned money.

It’s as good as an event manager you’ve appointed colluding with the overconfident cake shop owner and taking you for a royal ride.

Fortunately, SEBI probed in the matter and took a firm stand which would safeguard the interest of mutual fund investors.

Is SEBI’s action sufficient?

SEBI’s laudable effort still keeps a few questions unanswered. They are as follows:

• What would have been SEBI’s stand had ICICI Securities generated positive 43% returns post-listing?

• How would have SEBI reacted if  ICICI Mutual Fund invested Rs 640 crore in one go, on first or the last day of the issue? Subscribing on the last day isn’t the problem, right?

• If the fund house had invested on the last day, how difficult/easy it would have been to prove that the investments weren’t guided by the sound investment principles and were solely made to bail out ICICI Securities IPO?

• Even deadlier, what if a company colludes with unrelated QIB, and the unrelated QIB struck a “secret deal” to squander investors’ money for IPO?

These questions need to be answered…

Surprisingly, institutional investors including other mutual fund houses, who may have bought into the IPO of ICICI Securities have not commented on the recent developments.

In another development, SEBI has also reprimanded HDFC Mutual Fund—which has been planning an IPO—to do away with its “pre-IPO special offer for its distributors”.

The SEBI poured cold water on HDFC Mutual Fund’s plans of making a preferential allotment to its distributors at a deep discount.

Do you have any mutual fund scheme in your portfolio that might be compromising on your interest?

To know about this, avail of PersonalFN's Mutual Fund Portfolio Review service.

PersonalFN's ethical and unbiased investment advisers, who are effectively financial guardians, will comprehensively review your mutual fund portfolio.

You will get Buy/Sell/Hold recommendations on your existing portfolio, keeping in mind the investment processes and systems followed by the fund house, besides holistic performance of the schemes. Your mutual fund portfolio will be revamped considering your needs and risk profile. 

Don't delay; opt in for PersonalFN’s mutual fund portfolio review NOW!

Here's A Robo-Advisor Offering SOLID Mutual Fund Advice

Mutual fund investors often struggle to find a trusted advisor.

You can’t trust intermediaries working for commissions and novice advisors mimicking experts with their limited experience, can you?

And worthy human advisors, in most cases, are interested in offering advice only to High Net-worth Individuals (HNI).

HNIs pay big-fat fees.

On the contrary, retail investors invest smaller sums; and thus, don’t make a ‘good deal’ for topline advisors.

So does that mean, retail mutual fund investors aren’t entitled to good service and ace advice?

They certainly are.

This is where robo advisors step in; an automated and cost effective investment platform is the solution.

To read more, please click here.

Here's Why Mutual Funds Aren't Betting Big on IT Companies…

Indian Rupee (INR) is on a free fall nowadays.

Recently, it touched an all-time low of 69 against the US dollar (US$).

Global factors such as trade-war fears, monetary tightening in the U.S., and rising oil prices have been warfronts for the Indian rupee (INR).

And against this backdrop, some media reports are drawing attention to the record-high exposure of mutual funds to Information and Technology (IT) sector.

Since big IT companies operating from India are mainly export-oriented, depreciation of domestic currency helps them boost their Indian rupee earning—for no change in the US dollar earnings.

In May 2018, mutual funds  collective had investments to the tune of Rs 72,557 crore in the IT sector against Rs 44,018 crore in May 2017—a jump of 65%!.

To read more, please click here.

Which Mutual Funds Can Protect and Grow Your Savings Post-Retirement? Know Here…

Imagine you're 56 and you have only a few years to retire.

Let's say, through regular savings and investments you've created a reasonable retirement corpus. But the biggest risk that can cull out a sizable chunk of your nest egg is waiting.

Unfortunately, you cannot eliminate this risk.

But, you can tackle it though proper investment planning.

This risk is INFLATION—the loss of purchasing power.

Inflation is a known evil, which even top investors cannot ignore.

"The riskiness of an investment is ... measured by the probability — the reasoned probability — of that investment causing its owner a loss of purchasing power over his contemplated holding period," quotes  Warren Buffett.

Over the past couple of years, retail inflation has hovered between 4%-6%, briefly dropping to under 2% in the first half of 2017. What some may forget is that inflation was hovering over 8% between 2012 and 2014.

To read more, please click here.

Why You Seriously Need To Think About Investment Planning

I met one of my cousins few days ago and we landed up talking about finances.

We discussed investments, and he realized he had never given a serious thought to it. All he has are some insurance policies, fixed deposits, and SIPs (Systematic Investment Plans) in mutual funds which a bank recommended.

And I was surprised; but at the same time realized that there may be many naïve investors like him.

So, it decided to write this piece, which I hope proves illuminating.

I believe buying insurance products that commingle investment needs has not made anyone rich. This holds true for bank fixed deposits too.

To read more, please click here.

ICICI Prudential Pharma Healthcare and Diagnostics (P.H.D) Fund- Should You Invest?

ICICI Prudential Pharma Healthcare and Diagnostics Fund (IPPHDF) is an open-ended equity fund following pharma healthcare and allied theme.

Scheme’s primary investment objective is long-term wealth creation. And to achieve this objective it aims to invest upto 100% of its net assets in equities of companies in pharma and allied sector.

As per the scheme mandate healthcare comprises of hospitals, medical devices, clinical trials, outsourcing, telemedicine, medical tourism, health insurance and medical equipment.

Thematic Funds invest in stocks from one particular common theme. They are growth-oriented equity schemes that aim at capital appreciation by investing in a set of say 3-4 sectors that are closely related to one particular theme.

To read the complete note, click here.

Is Aditya Birla Sun Life Equity Fund A Top Multi Cap Fund? Find Out Here…

Aditya Birla Sun Life Equity Fund has a long history that spans nearly two decades. The fund was launched by Alliance Capital Mutual Fund in August 1998 as Alliance Equity Fund. It was the flagship diversified equity fund of the AMC at the time.

The fund gained popularity as it was managed by ace fund manager Mr Samir Arora, then CIO of Alliance Capital MF. He generated supernormal returns for the fund and other schemes of the fund house during the tech rally in 1999-2000.

However, the overaggressive nature, also led to huge losses for investors when the tech bubble popped. Mr Arora had to quit the fund house in 2003, as the regulator had charged him of professional misconduct, fraudulent and unfair trade practices and insider trading.

To read the complete note, click here.

Are These The Best Aggressive Hybrid Funds (Earlier Balanced Funds) For 2018?

 5 Basic Steps To Pick The Best Mutual Funds To Invest For The Long Term

Purchasing Power: Purchasing power is the value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing power is important because, all else being equal, inflation decreases the amount of goods or services you would be able to purchase.

Quote: "You get recessions, you have stock market declines. If you don't understand that's going to happen, then you're not ready, you won't do well in the markets”‒Peter Lynch