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Broker route for mutual funds has been a non-starter

Mutual fund volumes on NSE and BSE are yet to catch up, as only 792 combined orders worth Rs10 crore were recorded between 8 December 2009 and 12 January 2010

Online trading volumes of mutual funds (MFs) continue to remain bleak if the numbers are anything to go by. According to the data available on National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) websites, NSE has received a total of 309 orders worth Rs3.26 crore while BSE StAR MF has received 483 orders worth Rs6.74 crore, a total of 792 combined orders between 8 December 2009 and 12 January 2010.

The subscription orders received by NSE and BSE were 208 (Rs2.64 crore) and 346 (Rs3.72 crore) respectively for the same period. Surprisingly, BSE recorded 137 redemption orders worth Rs3.02 crore while NSE received 98 redemption orders worth Rs0.61 crore. The main reason behind introducing online trading of MFs was to increase retail participation, but the story here is totally different as we are getting to see more redemptions than subscriptions in terms of value.

Currently out of 37 Asset Management Companies (AMCs), only 10 AMCs are registered with NSE so far while 11 are with the BSE StAR MF platform. Although these AMCs are registered in both these exchanges, their entire set of schemes are still not been made eligible to trade.

Just to get a sense of how inconsequential the market share of broking platforms has been, consider this: subscriptions to MFs were Rs7,76,811 crore in December 2009 and redemptions were Rs9,34,015 crore, according to provisional data from the Association of Mutual Funds in India.

Market regulator Securities and Exchange Board of India (SEBI) banned entry load charges on MF units with effect from 1st August in a bid to protect retail investor interests. This immediately led to a slump in MF subscriptions as distributors lost the incentive to sell funds.

In order to increase the reach of MFs, SEBI allowed online platforms in NSE and BSE for stock brokers to buy and sell MFs since these two exchanges already reach 1,500 towns and cities over 200,000 stock exchange terminals.

The NSE started its online trading platform for MFs on 30 November 2009 and the BSE launched its BSE StAR MF platform on 4 December 2009.




7 years ago

A mature and spiritually grown person will adopt a holistic approach to all the aspects of his life or job or business. Such a person will adopt a win win strategy for all. The investor, the distributor-big & small and institutions of the country. When MF schemes were having entry load this was happening. Investments made by investors when entry load was existing are still giving them very good returns even today. And all were benefitted. After the entry load was removed for the benefit of investor a win-lose situation has emerged. In fact lose-lose situation has emerged for all the parties. This happens when un-holistic approach is adopted by anybody in his life or job or business. And since the humans sustain on Ego nobody will backtrack so easily.

Investor adoption low for mobile stock trading, says Gartner

Despite the hype surrounding mobile stock trading, especially in the US, Gartner has said that most on-the-go trading is more likely to take place in semi-mobile situations in notebooks and netbooks, instead of mobile handsets 

International research company Gartner Inc said that despite the hype surrounding mobile stock trading in the US, the economic and longer-term values of investments in this technology are open to serious question.

In a research report, Gartner said chief investment officers (CIOs), strategic planners and business-unit leaders thinking of developing mobile stock trading capabilities for their retail customers should consider if the online channel is a better place to invest in improved self-service for their brokerage clients.

“Although all five of the largest US discount brokers offer mobile trading, actual consumer adoption is pretty low with less than 2% of US consumers and 5% of discount brokerage clients taking it up to date,” said David Schehr, research director at Gartner.

“However, more than three-quarters of discount brokerage traders use the online channel. The issue is not just whether these activities can be done via the mobile channel, but whether enough readers and trades will shift to the mobile channel to justify the investment,” he added.

Explaining the rationale behind low adoption of mobile stock trading, Mr Schehr said the fit between active traders’ needs and the value of mobile trading is limited as the hardware form factor of smartphones makes technical analysis difficult, and other alternatives for rule-based trading diffuse much of the need for mobile access.

Instead, he said that most on-the-go trading is more likely to take place in semi-mobile situations in which notebook and netbook computers, combined with increased connectivity, will remain the predominant tools used for stock trading by retail investors.

With a huge mobile subscriber base, India, however, offers a great potential for the technology. Brokerage houses like Reliance Money and Sharekhan had launched their mobile trading platforms for both equities and commodities. Another brokerage Motilal Oswal Securities Ltd (MOSL) is launching its own mobile trading platform by the end of this month, said Manish Shah, associate director for equities and derivatives, MOSL.

However, he said that mobile trading is not as user friendly as one would hope. The biggest problem is with GPRS and its slow connectivity. The real benefit will come when 3G enters the market. {break}

Last month, while speaking at a Moneylife award distribution ceremony, Bombay Stock Exchange (BSE) managing director and chief executive Madhu Kannan had said that the Exchange is planning to launch a trading platform where investors will be able to execute orders over their mobile phones. “People are spending more time on mobile phones these days. India has around 400 million mobile phone users and if we compare that to the (current figure of) 8 million investors, we found that there is a huge potential to leverage this medium,” added Mr Kannan.

Last year, while issuing the framework for mobile stock trading, market regulator Securities and Exchange Board of India (SEBI) said that through these guidelines, it was exploring the possibility of extending the existing framework for Internet trading to enable use of wireless technology for securities trading.

Earlier in 2000, following SEBI guidelines for Internet-based trading, NSE.IT, a subsidiary of the National Stock Exchange had launched a wireless access protocol (WAP) enabled stock trading solution for brokers.

Gartner said it believes that if it is to be profitable, mobile trading will require a high volume of absolute, as well as incremental trading activity— a user who trades via a mobile once or twice a month is unlikely to generate revenue sufficient to cover the costs of developing the technology infrastructure to support the channel.

Based on historical data and discussion with industry participants across the US, Gartner said according to its estimate, even a broad definition of this group would include no more than 500,000 US investors, and is more likely in the range of 2,00,000 to 2,50,000, including occasional traders.

The value of mobile trading is likely to be limited to a small group of active investors who have an interest in maintaining the real-time capability to trade and accept the limitations of a mobile device in return for persistent access and portability. Based on all these factors, the size, and thus the revenue value of this group is likely to be small for the near future, Gartner said.

Advising those thinking of developing mobile trading capabilities, Gartner said they should carefully analyse how much of their client base consists of active traders, and conservatively estimate the incremental revenue that mobile trading will deliver from them.

“Unless there is a strong business case for mobile trading, invest in two other areas—better computer-based online functionality for your more active traders and enhanced research and planning tools for your less active long-term investor segment,” Mr Schehr said.

“If you do decide to proceed with developing mobile capabilities, ensure that they are not stand-alone, but support and link to other self-service channels,” the report said.

Echoing the same views, Mr Shah from MOSL said,” Mobile trading would be more useful for information dissemination which is customised for investors.”




7 years ago

It is very obvious on mobile stock trading apps, where some discount brokerages seem to have spent disproportionate amount of money on developing/promoting applications that they would never recover(wink..wink Etrade!).

However newer technologies also brings newer models and vendors, these are smarter ways to still have a mobile channel for their customers, but not spend money on immature channels before they develop & pickup volumes to justify build your own.

As an example of newer models, MarketSimplified lets discount brokerages go mobile on 6 smart-phone devices(nokia including) for pretty much zero investment on technology infrastructure.

India should set up defence-specific SEZs: Study

The Indian government should establish dedicated defence-specific SEZs, apart from providing a tax-equalisation subsidy, as the fiscal regime plays a critical role in defence market growth, says a study

The Indian government should establish a dedicated defence-specific Special Economic Zone (SEZ), apart from providing a tax-equalisation subsidy, as the fiscal regime plays a critical role in defence market growth, an industry study has said.

"The government is urged to consider the establishment of dedicated defence-specific SEZs, establishment of a tax equalisation subsidy linked to value of goods and services supplied to the defence sector, and exemptions to offset joint ventures from Research and Development (R&D) cess," said a joint study by the Confederation of Indian Industry and audit and advisory firm KPMG.

"The fiscal regime plays a critical role in any defence market in creating an environment that incentivises and supports long-term risk taking, investment and R&D required by the industry," the report said, adding that the general view of the global defence industry was that India currently has a comparatively aggressive and complex tax regime.

It said that with skilled intensive manufacturing capabilities and a world-class IT base, India had the "right ingredients to become a key link in the global defence supply chain.”

The study also sought exemption from R&D cess for joint ventures and implementing the offset obligations under the Defence Procurement Procedure introduced a couple of years ago to energise the defence market.


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