Daily Market View: Caution at current levels

There is not much of upside from the current levels without a decline first

The market ended higher on a six-week high on Monday, buoyed by positive sentiments that spurred global equity markets. The Sensex closed the session at 17,338, up 273 points (1.6%) and the Nifty settled at 5,197, up 78 points (1.5%). The indices started the day with a surge, taking cues from the Asian markets. Trading was range-bound till early afternoon, after which the bourses witnessed a strong uptrend, ending in the green for the fourth day in a row.

Asian markets were up for the third consecutive day on Monday as investor sentiment was upbeat in the US on speculation that demand for products and resources will increase in the world's biggest economy. Key benchmark indices in Japan, South Korea, Indonesia, Hong Kong, Taiwan and Singapore were up by 0.7% to 1.8%. China's markets are closed from Monday to Wednesday for the Dragon Boat Festival.

The US markets were up on Friday, on a report stating that consumer confidence is improving. The Dow Jones industrial average was up 38 points (0.4%) to 10,211. The Standard & Poor's 500 index was up 4.7 points (0.4%), to 1,091 and the Nasdaq Composite was up 24.9 points (1.1%), to 2,243.  

The Irish Central Bank governor said that the crisis in the Eurozone has worried investors, dragging down the euro and global markets. However, European leaders will now attempt to convince the financial markets that the crisis can be contained by taking tightening measures.

Back home, India may be able to reduce the fiscal deficit to 4.5% of its gross domestic product (GDP) by March 2011 on revenue earnings from third-generation (3G) spectrum. The sale of 3G mobile phone licences and broadband access will bring in $23 billion, which will help the government reduce its Rs4.57 trillion borrowing for the fiscal year. India had projected a budget deficit of 5.5% for the fiscal year that ends in March 2011, down from a 16-year high of 6.9% of GDP in the last fiscal year.

The wholesale price index (WPI) rose an annual 10.16% in May, driven by higher food and fuel prices, government data showed on Monday. This has increased the possibility of the Reserve Bank of India (RBI) raising interest rates at its meeting in July.

Foreign institutional investors (FIIs) were net buyers on Friday, purchasing stocks worth Rs820 crore. Domestic institutional investors (DIIs) were net sellers, offloading stocks worth Rs213 crore.  

Compucom Software (up 5.3%) has been awarded the prestigious School Computer Education Project worth Rs77.77 crore by the government of Rajasthan. This order is to provide computer education on BOOT basis in 1,550 government schools in the state.Prajay Engineers Syndicate (up 3.2%) announced that one of its subsidiaries has received foreign investment of Rs70 crore for its ongoing construction and development project at Hyderabad, which envisages development of a residential town ship of approximately 45,00,000 square feet.  

The board of Uniply Industries (down 1.6%) discussed the proposal to set off accumulated losses against its share premium account. The board observed that the accumulated losses were mainly on account of non-core/extra-ordinary activities. Consequent to their hiving off last year and with the anticipated improved operating results in the coming period, the accumulated losses could be set off against the profits that accrue in future. Keeping this in view, the board decided to drop the proposal of setting off accumulated losses against the share premium account.

Mundra Port and Special Economic Zone (up 1.3%) has laid the foundation stone for doubling the existing Mundra-Adipur 57 km private railway line to meet the growing demand of the port. This additional line will run parallel to the existing one. The new line will have four crossing stations and 99 bridges. It can handle 25-tonne axle-load wagons at 100kmph. The line will be commissioned in two phases. The first phase of 30km will be commissioned by June 2011 and the rest by the end of 2011-12.


SEBI’s move to boost mutual fund volumes on stock exchanges draws brickbats

Mutual fund distributors say that online trading of mutual funds will leave investors at the mercy of stockbrokers and expose them to further mis-selling

Market regulator Securities and Exchange Board of India's (SEBI) latest effort to shore up mutual fund trading volumes on the stock exchanges has not gone down well with the distributors' community. Industry experts believe that having mutual fund investments in demat form does not serve investors' interests and will expose them to further mis-selling.

Reacting to an article published a few days back, KN Vaidyanathan, executive director of SEBI, told Moneylife that no investor is being forced to open a demat account for investing in mutual funds. The article said that the regulator has invited suggestions from the Association of Mutual Funds in India (AMFI) by 15 June 2010, on making it mandatory for all mutual fund investors to open demat accounts.

Recently, the regulator sought banks' help to promote the stock market route for mutual funds. However banks' managements were not keen on SEBI's suggestions. The meeting was attended by NSE's deputy MD Chitra Ramakrishna and BSE's deputy CEO Ashish Chauhan. From the banking side, senior officials from Union Bank of India, State Bank of India, HSBC and Canara Bank were present at this meeting.

Ajit Dayal, director of Quantum Mutual Fund, says "The independent financial advisor (IFA) who wishes to make a living from advice will never lose out. His clients may have a demat account but they don't have to trade and transact based on their broker's advice. Brokers provide little value-add as advisors.

We have seen in the US how regulators have time and again proven the conflicts that exist in broking houses and investment banks. Their research analysts are told to give short-term views. There have been instances of documented evidence of internal emails saying that a particular stock was 'junk', but then the research analysts gave buy recommendations on the same stock to clients. Yes, I do see a potential problem here. I do see brokers making their clients flip in and out of mutual funds-just as they make them flip in and out of stocks. It is up to the investors to realise that having a demat account with a broker may subject him to a new kind of mis-selling"

In December last year, SEBI allowed trading in mutual fund units on the Bombay Stock Exchange's (BSE) StAR MF platform and the National Stock Exchange's (NSE) NEAT Mutual Fund Service System (MFSS). But so far, the volumes on both the platforms have not been encouraging. Moneylife had first reported about the low volumes a few months back.( Read here: http://www.moneylife.in/article/8/3193.html )
Between 4 December 2009 and 31 May 2010, the BSE StAR platform recorded 3,944 transactions worth Rs29.30 crore of net inflows. The NSE NEAT (MFSS) platform witnessed Rs9.62 crore of net inflows from 30 November 2009 till 31 May 2010.

"I have an investor who is a maid servant and she is investing Rs100 a month in a  systematic investment plan (SIP). If I ask her to open a demat account by paying Rs500 and force her to renew the account by paying Rs500 every year, will she continue her SIP? Her annual investment is Rs1,200 per annum and she will have to spend Rs500 for a demat account every year, which is 41.67% of her annual investment. Is this investor friendly?" asks Ramesh Bhatt, a Chennai-based IFA.

"There is a huge possibility of wrong and opportunistic advice because the main source of income for a brokerage house is trading volumes. What is required is to amalgamate all registrar & transfer agents (RTAs) into a single platform to enable each investor to have a single statement of account for all his holdings," said T Kalyanaraman, a Chennai-based IFA.

"The role of an IFA is that of a financial planner, guide and friend to the client. By investing in mutual funds through the demat route; the personalised role of an IFA is diminished. The IFA has to become a sub-broker with a national distributor and work according to the policies and objectives of the national distributor whose objective may not always be in the best interests of the mutual fund customer. The reason for this is that the platform they work on is speculative in nature. The broker (who normally trades for his clients on shares) will have no time to give quality advice to the clients," said Sunil Bhagat, a Pondicherry-based IFA.

"I cannot imagine life with compulsory demat. How will an investor get his solutions? In India people don't have a Permanent Account Number (PAN) card as yet and SEBI is asking them to open a demat account," said a Mumbai-based financial advisor.

"Demat totally defeats the very purpose of abolition of loads to bring down the cost of investing in mutual funds. I fail to understand the logic of the suggestion of the regulators," said an IFA.




6 years ago

dematerialisation of mutual funds provides an excellent open .1 from the point of investor he can subscribe to any fund from even remote parts of the country 2.from the point of amc,the product penetration will be very high and 3.the volumes will grow up multifold from the present stage 4. the distributor will definitely get a fee for value added service he gives.5.its high time that distributors get enrolled with national brokers as franchisees or associates and provide multiple financial products to investors.


6 years ago


girish prasad

6 years ago

one thing is clear that mf ind is diaing.
i started a new sip of 1000 and clint has signed the form i have to fill up and submit to amc .i may get four rs for this .logic of sebi is not clear .
mf is to be sold not brought by customer .this is main diff bet shares and mf


6 years ago

sub:- Regarding removal of entry load and direct.and making demat a/c compulsory

The sole object of MUTUAL Fund is to give benefit of stock market to the small investor
who is not in position to invest directly in the Stock Market due to lack of proper knowledge and money.Hence the
welfare govt of India enacted UNIT TRUST OF INDIA ACT.

This was done for dual purpose on the one hand the small investor will get benefit from stock market
through experts,on the other hand govt will save themselves from paying interest subsidy on small saving
like NSC,PPF and so on and earn income & service tax.

Tradition in politics is that the MPs,or MLAs or other rule making authority weep so loudly for the welfare
for the weaker,poor and backwards & they form law and system to uplift them but strong people take charge of the
schemes and drink entire benefit of it, because they are so powerful, no body can reach them.(As say Sri RAJIV GANDHI said
that Rs one of govt reach to the beneficiary in the shape of one pairs.)
Same thing is repeated by SEBI CHAIRMAN saying that i will prefer to investor to others.Now see what does mean for investor
by action of sebi,is Small or big investor.

From the Data available of MUTUAL fund approx 76% of MF corpus cames from Corporate,HNI (High net worth investors).
This is very powerful lobby. AMCs are also stand in the same footing because they plays in multi billionaires.
These strong people conspired and first able to manage SEBI to To make provision for DIRECT investment.Because the Big investor are able to manage expert, CAs and have full means to reach AMC.Hence they are getting full benefit of not only
Upfront brokerage but also able to cause loss of Distributors and Govt by taking the payment service tax and income tax in his poket which would have been paid by the distributos to the GOVT.On the other hands the AMCs is getting of similar benefit of absorving Trail commission (service, incometax which would have been payble by the distributors). Therefore both are beneficiary but lossers are distributors, small investors and Govt.Hence they able to manage SEBI to take this step and not opposed.It is most important to note that small farmer and labour,middle class man who are not well versed with this type typical investment avenue, can not invest Rs. 500/-directly if he dare to do so he has to incurred Rs.500/- in getting form, advise and to submit it in office of AMC, nor any AMC will be interested to go rural area to do this.
Therefore making provision direct is not for small investors, for Which MUTUAL FUND concept was adopted

Now this strong lobby was able to manage the SEBI for making rule of abolishing entry load. Before it if small investor invest
Rs.500/-the distributor can take maximum Rs.10/ as Commission (2.25%=12.5 minus service tax =Rs. 10/-)Now if this investor invest direct he has to incurred more than Rs. 10/ or has to pay for it to any one (Not necessary Amfi certified distributor) much more than rs.10/-.
Therefore this provision is also against the interest the small investor.It proves that SEBI is not meant for small investors.

Another aspect of this is also very much important. Small investor is not so equipped with knowledge to redeem the fund
when condition of market goes wrong but HNI is able to redeem in proper time hence they are able to eat the investment of small investor, which several time seen, currently in FMPs.

From all corner this is proved that SEBI has taken this type decision to help HNI to eradicate the small investors and to infructuate the object

If the SEBI is really meant for welfare of small investors to fulfil the object of MUTUAL FUND ACT.He must not take these two decisions which are made to eradicate the small investors,new way of making whole in Govt Revenue as well as Small distributors and to enrich the HNI.While it should resolve that no investor will be able to invest in Mutual fund more than 20 Lac.And those who invest more, has to pay higher entry load because they are able to play in the market directly and the difference of higher entry load will go to the NAV which will be to encourage more investment in mutual fund by small investor and will stable the market and also save the subsidy of the Govt in National savings. But this is not possible because the HNI have full power to strongly protest.

By doing this it further taken steps to throwout distributors from this area by making trading of MUTUAL Fund in STOCK Exchanges.But practices has proved that policy makers are not real experience persons.Members of SEBI, who lives,travels and work in AC cannot understand the actual position of poor real investors.They have no experience of mutual fund distribution,unless they have they cannot make suitable provisions.

Now SEBI's action resulted in reducing 20 million folios from mutual FUNDS. Because the small investor is not able manaege his investment nor able to pay fee for every action. NOT receiving Statements,Div,redemption.nominee claims etc are the common problems which the investor regularly faces,but sebi could not dare to make rule that if the AMC do not provide correct SOA, regular uninterrupted payments AMC should pay at least Rs 2000/ for each fault.Hence NOW mutual fund are the game of AMC and only HNI.There is no place of small investor who want to invest Rs. 500/

But SEBI is still not stop their process now it is proposing to make demat a/c compulsory for mutual fund investors, what will happen,A small investor who is willing to invest Rs500./-has to spent Rs500/- more for opening demate a/c and has to pay every year more then it.Minimum investment is Rs.500/- in mutual fund, What it means.

My suggestion is that SEBI's members who are dealing with mutual fund regulation must have 10 years mutual fund distribution experience of rural area.otherwise mutual fund investment banned for people of small investor or rural area and minimum limit for investment be raised from 500/- to 500,000/-

From above it is clear cut intention of SEBI to destroy MUTUAL fund and poor and small investors.Gov is made by people for people but SEBI is made for only HNI

Please ponder over it to save the skin of small investors distributors and GOVT.

It will be my reward if it is read by the Finance MINISTER and CHAIRMAN OF SEBI.


girish prasad

In Reply to S C JAIN FIROZABAD 6 years ago

facts are eye opner.
sebi may allow 10 to 60 % entry load (as irda in ulips) but 2.25 was very small and it was very difficult to manage allllll people with 2.25 % so this has happened


In Reply to girish prasad 6 years ago

Dear friend,
it is clear that this all is SCAM of our democratic(but dictator natured)govt's hidden agenda to kill MF industry and to make people invest in NPS(NEW PENSION SCAM)which will give GOVT OF INDIA a huge fund to ''waste'' by corrupt policies on name of developmental schemes-this NPS will be like ''KAMDHENU"which will be continuous source of treasury-with no burden to pay intersest-people will invest money for 30-40 yrs then our sSENSEX will rise to 40000 and just like NIKKE of japan which was 40000 23 yrs back and when people will go for withdrawal of pension money it will be just 10000 level-just like Nikkie is trading today-so what will happen to pension planning of people?god save this country from these BUTCHER govt


6 years ago

I think it can be argued both sides.

While demat provides a lot of convenience to the unitholders, the charge issue can outway the benefits, if regulator and AMFI do not come up with a solution.

Every demat account holder will agree that if holdings in mutual fund are shown in the same demat account statement, it is lot more easier to track the investmernts and unitholders need not preserve so many account statements.

There is no denying of fact that mutual funds incur cost in sending account statements. Saving can be passed on the unitholders by negotiating a charge for exclusively holding mutual funds. Why AMFI and SEBI negotiate with depositories (like in case of pension scheme where there is a fixed chaarge). This charge can be collected from mutual funds depending on the units held by the account holder. That is, if a unitholder holds units of 5 different mutual funds during the financial year, depositories can charge the fees from all these 5 mutual funds. If the unitholder already maintains a demat account, there will be no additional cost, thereby mutual funds need not incur any cost.

SEBI did a good thing by removing the entry load. Adding any additional cost the the unitholders will look counter-productive.


6 years ago

The cost of trading through Demat is comprised of charges as listed below-

1-demat opening charge(min 500 Rs)
2-demat annual maintanance charge(min250 rs
3-demat transfer charges-15 rs per security per transaction (minimum
4-inter depositery benificiary charges( a new way of pick pocketing)
5-demat closing charges-few broking houses use this

6-short delivery charges which can be levied in case of Mf units also if punching is wrong /but it is never levied in present model

7-brokerage on sell and purchase which is normally 50 paisa(.5%) per sell and .5% per buy-with STT and other charges it is .75% or 1.5% in a trade cycle-which is more then AMC charges-
AMC's send printed statements and many other services which are more costly-but AMC's put no extra charge for a 1lac or 1k investor-
Now with all these charges how a retail investor will come forward to invest in MF is a BIG BIG question mark-may be SEBI has some plans to do some CHARITY for MF investors -then it can wipe off all these charges-
but i doubt Brokers and Deposietries will ever do this loss making business

Sandip Basu

6 years ago

Demat for investing in mutual funds is a terrible idea. Please SEBI, don't do it.

Param Iyer

6 years ago

I think this is a great idea. However SEBI must also ensure the following:
a. Brokers must give Trading accounts for free or SEBI must pay the fee on behalf of investor
b. DPs must give Demat accounts for free or SEBI must pay the fee on behalf of investor
c. Brokers must not charge brokerage on MF transactions or SEBI must pay the brokerage on behalf of investor.
These changes would make it pro-investor, without any extra cost to investor...



In Reply to Param Iyer 6 years ago

we are ready to take everything for free but everything comes for cost. if that be your logic,the petrol price should'nt be increased at all

Ranjan D Gupta

6 years ago

This is the another blunder SEBI is going to make if it make it compulsory to have demat account for investment in Mutual Funds.Now I have serious doubt whether SEBI is really in a mind to develope the MF Industry and do something good for the investors or not. It seems SEBi is concerned only for the HNI investors and large corporate investors not at all concerned for the small retail investors who wants to create wealth by investing small amount by investing in Mutual Fund. I request honourable Finance Minister to look into these matters urgently for the betterment of Mutual Fund Industry.


6 years ago

what is sebi doing? taking high moral ground of protecting investor,it is helping big players by systematically and vindictively eliminating ifas who really care for the investor and in turn earn a little commission. all ifas don't mis-sell.is it a crime to get paid for service rendered?


6 years ago

i think whatever r happning in mutual fund ind.is going to be v.v.tough to make high vol. business because an ifa r giving service to HNI but they can invest direct, then what will hapen. my advice is that if any investor want to invest there will be any ifa or arn is must sothat an investor can understant the value of ifa.


6 years ago

hi accepted but we all question only SEBI who is behind this AMC is also indirectly helping them, it is actually AMC who is the sufferer. AMC also has some irregularites and dont question SEBI cause SEBI may do an audit with AMC and fine them .... how ever SEBI Rules........

sanjay pandey

6 years ago

i think,SEBI is show,he,svery carefull about investors, infact SEBI DONE well in past. but now he is extra carefull 2 investors,
EXTRA CARE MEANS NO CARE. SEBI is open a lab in his office & do daily a new experiement.
one day we will look 2repeatness of

nishikant rotkar

6 years ago

this is the fact for which SEBI is working in name of REFORMS from lasy one year. first they introduce No Entry Load which does not give any brokerage to IFA community. then they started Online platform for through stock broker( who is very professional, unbiased, ethical, do not missell, dont churn, perfect advisor, sees only interest of clients, dont even think of his own brokerage as per Sebi ). now they making it compulsory to have Dmat account to buy mutual funds that is only through stock broker ( he knows more than CFP as per SEBI). so, fact is SEBI wants only stock brokers to flourish & have a tremendous growth as Dmat made complsory. next step is to have online Railway reservation, air ticket, banking service, pan card, life insurance, general insurance only throgh stock broker bcoz it reduces cost to people. what a joke......all the decesions by SEBI are only to favour stock broker @ to eliminate IFA. why not SEBI starts online platform exclusively for for IFA. which help them to reduce paper work, cost,& time. but SEBI is not here to help IFA as it has taken "SUPARI" to kill IFA. the avalanche of reforms from last one year by sebi is only to eliminate IFA. they taken not single decesion to help IFA to survive in these flood of reforms.

Rohit c shah

6 years ago

The intention of the regulator to minimise cost to investor is not fulfill by compulsory dmate a/c

Supply shortages hit auto industry’s output by 5%-7%

The Indian auto industry has been consistently witnessing a high growth for some months now and reached its peak last month, when car sales were up 30% over last year, prompted by new product launches and increased consumer spending

Indian auto industry's output is getting affected by between 5% and 7% because of supply shortages in components, a top industry official said, reports PTI.

"Tyres, casting and fuel injection are the three problem areas...as I see it, nothing can be done about it and the shortage will remain the same as I do not see the supply going up," Mahindra and Mahindra's (M&M) Auto and Farm Equipment's president, Pawan Goenka, told reporters on the sidelines of an event at Chakan in Maharashtra.

Mr Goenka further said that importing the components is not possible. "This is not a commodity, which is in short supply and you go outside and pick up the required quantity. Each of the components (in short supply) needs a certain turnaround time to produce."

Mr Goenka also pointed out that the rapid growth which the Indian automobile sector has seen in the last few months has further added to the woes. Had the sector grown at around 10%-12%, the manufacturers would have been in a better position, he said.
"Everybody is constrained," he said, without giving any numbers pertaining to Mahindra.

The Indian auto industry has been consistently witnessing a high growth for some months now and reached its peak last month, when car sales were up 30% over last year, prompted by new product launches and increased consumer spending.


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