Templeton's latest mutual fund offering, the Flexi Cap fund, has garnered Rs 1,950 crore in its IPO, which closed on February 9, 2005. This is the largest mutual fund IPO in the last ten years. | |
| In the October to December 2004 quarter, there were six new equity schemes launched, which together mopped up Rs 1,881 crore. Earlier in January, Kotak's Mid-Cap fund had managed to raise Rs 570 crore. |
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| The increasing popularity of mutual fund IPOs is good news for the mutual fund industry, which have witnessed net redemptions for its existing equity schemes in the recent past. |
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| In the nine months between April and December 2004, net inflows into equity oriented schemes stood at Rs 1,896 crore. But that was possible only because of a mop up of Rs 3,636 crore done through new scheme launches. |
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| Excluding sales done by the new schemes, there would have been a net outflow for existing schemes. |
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| However, this may not be good news for the markets. It's well known that the best time for mutual funds to raise money isn't the best time to invest in the markets. |
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| This relationship was evident around early 2000, the last time the mutual fund industry was in an IPO frenzy. |
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| While IPOs did extremely well those days, they almost coincided with the peak in the markets. It was common for mutual fund IPO investors to end up with units that were well below their face value. |
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| Things may not get as bad this time around, simply because valuations are not as stretched, but there's no denying that historically there has been a link between market peaks and a frenzy in the mutual fund IPO market. |
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| That's not to say that one must expect the markets to crash. In fact, it's likely that when the money raised by mutual funds finds its way into the markets, stock prices may rise further. |
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| But the inverse relationship the markets have with mutual fund IPOs does call for some caution. |
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| Trade data-January |
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| Trade data for January show that exports continue to grow at a sizzling pace, the growth being 33.17 per cent year-on-year. That takes total export growth for the period April 2004 to January 2005 to 25.5 per cent. |
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Exports in January, at $6.7 billion, are only slightly below December's festive season level of $6.8 billion. For once, the government target of 16 per cent growth for FY 05 seems to have been a severe underestimation.
| Charging up
Non-oil imports in $ billion | | | FY2005 | FY2004 | | Jan | $7.80 | $4.80 | | Dec | $7.80 | $5.40 | | Nov | $6.70 | $4.50 | | Oct | $5.70 | $5.10 |
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| An even more bullish signal than the blistering pace of export growth is the huge rise in non-oil imports, which increased by a colossal 63 per cent in January. In December, non-oil imports had risen 45 per cent on a y-o-y basis. |
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| Non-oil imports have been growing steadily in FY 05""""in the last few months they have increased from $5.7 billion in October to $6.7 billion in November to $7.8 billion in December and January. |
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| On the other hand, the oil import bill has fallen from $ 2.5 billion level reached last October to $1.7 billion in January, thanks to lower crude oil prices. |
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| The rising non-oil import costs, however, have led to a steady rise in the trade deficit, which has gone up from $1.7 billion in October 2004 to $2.5 billion in January. |
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| But if service exports have been showing the same buoyancy as our merchandise exports, there should be no reason for concern. |
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| In any case, with the kind of forex reserves we have today, a negative current account deficit for a developing country is a blessing and it's a sign that we're putting the money to good use. |
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| With contributions by Mobis Philipose. |
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