Finally, SEBI has some genuine good news for mutual fund investors. The regulator has capped the maximum total expense ratio (TER) for equity funds at 2.25% and for non-equity funds at 2%. For closed ended funds, the respective costs will be capped at 1.25% and 1%. Globally, there is a move towards reducing the cost of mutual funds so that investors can earn returns even in tough market conditions. However, there are other charges like the small town incentive and the GST on management fees that are imposed on top of this TER. Hopefully; this should be an all inclusive cap to be really meaningful.
World markets have lost nearly $14.89 trillion dollars in market cap since peaking at $87.29 trillion on January 28th this year. A large part of this loss of market cap has been driven by the weakness in emerging market currencies and also fears of a slowdown. Markets are sceptical that the trade war between the US and China could actually result in a full-fledged recession in the global economy. At least, the inversion of the US yield curve is indicating an impending slowdown in growth. In terms of hedge funds returns, year 2018 has been the worst year since 2011.
After touching a high of $17.27 billion in FY 17-18, pharmaceutical exports are poised to cross $20 billion in the current fiscal. In the first 7 months of the fiscal, pharma exports have already crossed the $11 billion mark. While the US with 33% market share is India’s largest pharma export market, Europe at 15% and Africa at 17% have also emerged as substantial export markets for pharma. The good news has been that US exports have seen a growth of 14% in the first 7 months and that is likely to add heft to the final pharma export figure. Most of the FDA violations issues have also since been sorted out.
Options traders have bet nearly $16 million (Rs.112 crore) that the TCS stock will fall further in the New Year. There has been a huge put option purchase on TCS 1840 strike at a time when the stock price is at Rs.1990. At the same time traders have also aggressively sold 2200 call option, which is again a signal that upsides are expected to be capped. The premium cost was nearly 2% of the notional value, which is a huge cost to bear unless there is a strong probability of the stock correcting sharply. Traders are expecting weak Q3 results from TCS. The stock has already fallen 11% since October.
The new five-year draft tariff norms came as a boon for the power companies with the CERC retaining the assured return on equity (ROE) at 15.5%. This is contrary to market expectations that the assured ROE may be dropped closer to 14%. Shares of NTPC and Power Grid benefited immensely from this announcement. The draft also allowed additional security expenses for these power plants in their imputed pricing. The calculation of ROE will done after considering the higher security expenses, normal maintenance spending, higher allowance for losses due to quality of coal, special allowance to cover inflation and a lower PLF assumption of 83% instead of the current 85%. These power tariff norms will be applicable for the period 2019 to 2024. Most brokers are expecting power earnings to be boosted.
The Bombay High Court has refused interim relief to Kotak Bank on the RBI deadline to cut promoter stake. Uday Kotak is required to bring down his stake from the current 29.73% to 20% by December 31st in line with the current banking norms. The entire debate arose when Kotak Bank tried to avoid diluting the promoter stake through the issue of Partially Non-Convertible Preference Shares (PNCPS). While this was acceptable in letter, the RBI had argued that his was not acceptable in spirit as it would tantamount to retaining controlling stake in the bank through the back door. RBI has to respond before the date.
