The mutual fund industry has welcomed the Securities and Exchange Board of India (Sebi) move directing fund houses to declare dividends in rupee terms instead of percentage terms. Sebi has also asked mutual funds to benchmark returns to the Nifty and Sensex. The industry says the measure would simplify disclosures and make investments in mutual funds more transparent.

At present, fund houses benchmark their equity schemes to different indices.

Naval Bir Kumar, managing director, IDFC Mutual Fund, told Financial Chronicle the new steps would lead to better quality disclosures, check misselling and give investors a better picture of the performance of equity schemes. “Sebi has taken a lot of steps towards improving transparency in mutual fund investments and we welcome all moves that are in the interest of investors,” he added.

Akshay Gupta, chief executive officer, Peerless Mutual Fund, said although the initiatives may not have an earth-shaking impact on the mutual fund industry, they will make the sector more transparent. “Although many investors are already aware of the fact that a 20 per cent dividend would mean Rs 2 a unit dividend, the new move would leave no scope for any mis-representation,” he added.

On benchmarking, Gupta said a majority of equity-diversified funds are large-cap oriented and hence comparing their returns to the Nifty and Sensex, instead of any other indices, made sense. “In case of mid and small-cap funds, however, there are chances of distortion in terms of comparison,” he added.

Arindam Ghosh, chief executive officer, Mirae Assets, said, “These are better standards of disclosures and are investor-friendly. They also make tracking of fund performance simpler and transparent.”

Sebi is also planning to draft guidelines for telemarketing agents, distributors and relationship managers of mutual funds. The regulator may ask distributors of mutual funds to record calls made by telemarketers to mutual fund investors to check misselling.

Dhirendra Kumar, CEO, Valueresearch, said although the steps are in the interest of investors, it remains be seen how the regulator ensures implementation of such guidelines.