Liquid Mutual Funds Not To Borrow Money

SEBI has changed the rules for liquid and debt mutual funds. In a circular, they have mentioned the new rules:

  • Liquid funds must get money in their bank accounts before 2 pm if they want to give the previous day’s NAV. That is, if you put in money on Tuesday before 2 pm, you get Monday’s NAV.
  • Money received after 2pm will get the NAV of the same day – that is, if you transfer money on Tuesday at 3pm, you’ll get Tuesday’s NAV.
  • If money is “realized” later, you will get the preceding day’s NAV. For example, if I give a cheque on Tuesday at 1pm, they might get the money only at 4pm on Wednesday. In which case I will get Wednesday’s NAV.
  • Funds can’t invest by borrowing money based on such inflows. I.E. If I give them a cheque, they shouldn’t take on a short term borrowing (say intraday or for one day) to invest.

The reasons, in my opinion, are best mentioned in an example. (Note: This is a broader example – it doesn’t really apply – but I’m illustrating)

The Bribery Scam: Negative for Real Estate

The CBI yesterday busted a scam where executives in banks and fin-organizations took bribes (surprise!) to give real estate developers large loans. Among the arrested were a director of Central Bank, and senior executives of LIC Housing Finance, Punjab National Bank, Bank of India and an intermediary called Money Matters Financial Services (MMFS).

At Yahoo: The Illusion of Low Risk

Read: The Illusion of Low Risk "A person often meets his destiny on the road he took to avoid it." - Jean de La Fontaine

Capital Protection Funds: Worth it?

There are a number of New Fund Offers out there, for Capital Protection Funds, which means you invest some money today and they kinda-sorta guarantee that you will get at least the amount you invest. Typical fund structure, let’s look at the Sundaram Capital Protection Oriented Fund, Series 2:

Readings: Japan, Expert Advise, Sec Theater

Japan, after the bubble. An old piece but amazingly informative about how real estate screwed that country. In the same context, WSJ on the London Real Estate Bubble.

October Monthly Inflation down to 8.58%

The previous article was intended to be a reintroduction to HMVC for the web application era. HMVC is not a new concept: it was originally referenced in a Java World article over ten years ago and based on an idea that dates back forty years.

Short Takes: STT and Option Prices

Learn why option prices seem to be very low on expiry day - the reality is that a regulatory cost, the Securities Transaction Tax (STT), eats up too much that it leaves options quoting at less than intrinsic value.

Click to watch the Short Takes Video.

Short Takes: Mutual Funds Are Not Just For Equity Investing

There's a popular misconception in India that Mutual funds are too risky because they invest in stocks. Learn about where Mutual funds can invest - and how you can get a low risk exposure to what is otherwise unavailable to you. 

Watch the Short Takes Video

Short Takes: No more third party cheques for Mutual Funds

Read about AMFI's latest regulation - that one person's cheque will no longer be usable as investment into another investor's account. Under Short Takes, a new five minute video explains the regulation, and why it came about.

See: No More Third Party Cheques for Mutual Funds