The Hindu Business Line : AMFI moots new classification for sectors

SECTOR nomenclature will soon be re-defined for mutual funds, an exercise that has been mooted at the first meeting of a panel appointed by the Association of Mutual Funds in India (AMFI), the industry body.

The committee has sought to bring about a new set of industry classifications for streamlining the terminology that is currently used by fund houses. The idea is to stay in tune with the latest business developments — the ones that have led to changes in operational models of various corporates.

A similar exercise was initiated a few years ago and the time has come to do it again, said the CEO of HSBC MF, Mr Sanjay Prakash, who is part of the committee.

He, however, did not elaborate on the extent to which the new system will be different from the existing one.

What has triggered the move by AMFI is the realisation that far-reaching changes have taken place in the world of business in recent times, and that a reclassification may be necessary at this juncture.

The latter, in fact, is expected to be brought about in association with India Index Services & Products Ltd, the joint venture between the NSE and Credit Rating Information Services of India Ltd (Crisil).

India Index Servicesprovides a number of indices for the country's premier exchange in partnership with the rating agency, Standard & Poor's (with which it has a consulting and licensing agreement).

"The change that we foresee will cover a number of sectors and a wide range of companies that operate in them," Mr Prakash told Business Line, adding that there have been more than a few cases where companies have adopted new models.

On another front, the names involved have only lately come up for inclusion. NDTV and Zensar may be cited as examples.

As things stand, investors in MFs have to grapple with a variety of industry classifications. A typical growth fund may allocate assets to a number of areas, some of which may bear sweeping names. Included in this group are tags such as industrial conglomerates and machinery.

Grindwell Norton, for example, is being listed under machinery, while Indian Rayon is clubbed with other industrial conglomerates.

Besides obvious names such as pharmaceuticals, banking or information technology consulting, mutual funds commonly use terms like metals and mining, electrical equipment and construction material to categorise companies they invest in.