Mutual Funds
Daiwa to launch equity fund

The timing is right, as the market is not that expensive

Daiwa Mutual Fund has filed an offer document with the Securities and Exchange Board of India (SEBI) seeking approval to launch Daiwa Equity Fund, an open-ended equity scheme. The investment objective of the scheme is to generate long-term capital growth by investing in a diversified portfolio of predominantly equity and equity-related securities.

The scheme proposes to invest 65% to 100% of the assets in equities and equity-related securities and up to 35% of assets would be invested in equity and equity-related instruments with a high-risk profile and up to 35% of assets in debt and money market instruments with a low- to medium-risk profile.

Under normal market conditions, the scheme would invest predominantly in a diversified portfolio constituting equity and equity-related instruments of companies which the fund manager believes have sustainable business models, and the potential for income and capital appreciation. The scheme may also invest in debt and money market instruments in a manner consistent with the investment objective. The benchmark for the scheme is BSE-200 index.

David Pezarkar is the fund manager of the scheme. His previous assignment was with Bajaj Allianz Life Insurance as head of equity. He has also been associated with SBI Funds Management and UTI Mutual Fund. The total recurring expense would be 2.50% per annum on the average net daily assets. This is a good time to launch a fund as the market is not expensive.

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MCX-SX may claim up to Rs500 crore in costs, damages from NSE

The claims from MCX-SX could be estimated at about Rs450-Rs500 crore, including about Rs150 crore of losses suffered by the exchange in currency derivatives business due to NSE’s predatory pricing

New Delhi: Armed with a favourable anti-competition ruling against the National Stock Exchange (NSE), MCX Stock Exchange (MCX-SX) is planning to claim an estimated Rs400-Rs500 crore for costs and damages suffered by it due to its larger rival's ‘predatory’ practices, reports PTI.

The Competition Commission of India (CCI) has imposed a penalty of Rs55.5 crore on NSE after finding the bourse guilty of abusing its dominant market position.The order followed a month-long CCI probe into the matter, which had begun after a complaint from MCX-SX.

Reacting on the CCI order, Neralla Neralla, Co-Founder, Financial Technologies India Ltd (FTIL), said, "This (the CCI) order vindicates our claim that there have been anti-competitive practices by this private monopoly. We are happy that CCI has directed NSE to allow its members free choice to select our software or any other software for use in the Currency Segment of NSE. With this, we hope that over 500,000 API clients and 100,000 license holders of FTIL's ODIN trading software will be able to trade in NSE's currency segment. We would now be consulting our legal counsel for our next course of action."

MCX-SX’s CEO and MD Joseph Massey said that the exchange would claim compensation, but did not quantify its losses or damages.

However, the sources said that the claims from MCX-SX could be estimated at about Rs450-Rs500 crore, including about Rs150 crore of losses suffered by the exchange in currency derivatives business due to NSE’s predatory pricing.

Besides the business loss of about Rs150 crore, MCX-SX would claim damages and losses for opportunity costs, legal costs and other matters from NSE, sources said.

These claims would be independent of the Rs55.5 crore penalty imposed by CCI, for which a demand notice has already been issued by the commission along with the penalty order.

“Our next course will be to claim compensation for the losses and damages that we have incurred till now due to predatory pricing,” Mr Massey said.

The CCI order, passed last evening and uploaded by its website this afternoon, said that NSE was found to have abused its dominant market position through unfair pricing of services.

Welcoming the order, Mr Massey said that the order would “safeguard new entrants and ensure innovators are not decimated by existing entities which have deep pockets and are more powerful.”

“CCI penalising NSE and holding it guilty of anti-competitive and predatory practices vindicate our long-standing belief that monopolistic practices, especially those monopolies controlled by foreign and private entities, restrict fair competition and constrict innovation in any industry.

“This only leads to non-inclusive development of the market and is detrimental to the interests of common investors and consumers,” he added.

The CCI said that its probe found “a clear intention on the part of NSE to eliminate competitors in the relevant market (currency derivatives—CD).”

It also said that NSE intended to acquire a dominant position in the CD segment by cross subsidising this segment of business from the other segments where it enjoyed virtual monopoly.

“It also camouflaged its intentions by not maintaining separate accounts for the CD segments. NSE created a facade of the nascency of market for not charging any fees on account of transactions in the CD segment.

“The competitors with small pockets would be thrown out of the market as they follow the zero transaction cost method adopted by NSE and therefore in the long run they will incur huge losses.

“The past conduct of NSE and the conduct in the CD segment shows a longing for dominance in any segments in which the NSE operated by dominating its competitors,” CCI said in its 170-page order.

The exchange was asked by the CCI to immediately cease and desist from unfair pricing, exclusionary conduct and unfairly using its dominant position in other markets to protect the relevant CD market.

Besides, NSE was also asked to maintain separate accounts for each segment from next financial year and modify its zero price policy in the CD market and levy appropriate transaction costs within 60 days.

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COMMENTS

Shibaji Dash

5 years ago

So, going by the media reports NSE the Regulator of sorts fudged its accounts to conceal cross subsidization of currency derivatives market to perpetrate unfair trade practices ! The protestations of Moneylife ( Sucheta Dalal) stands vindicated. Rs. 50/- crores is the price of arrogance for the time being. Mr. Narayanan may kindly read Barbara Touchman's peerless work on arrogance of power - The March of Folly.

Norms for infra debt fund cleared; it may be trust or company

A trust-based IDF (Mutual Fund) would be regulated by SEBI while an IDF set up as a company (NBFC) would be regulated by the RBI, according to the finance ministry

New Delhi: In order to raise long-term resources for funding the infrastructure sector, the government today said the Infrastructure Debt Fund (IDF) could be set up either as a company or trust, reports PTI.

The IDF, which was proposed by finance minister Pranab Mukherjee in Budget 2011-12, is aimed at accelerating and enhancing flow of long-term debt for funding the ambitious programme of infrastructure development in the country. The requirement of infrastructure in the 12th Plan has been pegged at $one trillion.

“An IDF may be set up either as a trust or company...

A trust-based IDF (Mutual Fund) would be regulated by the Securities and Exchange Board of India (SEBI); an IDF set up as a company (NBFC) would be regulated by the Reserve Bank of India (RBI),” the finance ministry said in a statement.

Pointing out that the IDF is a novel attempt to address the issue of sourcing of long-term debt, it said the structure of the fund would be reviewed for efficacy and refinement.

The fund would try to garner resources from domestic and off-shore institutional investors, especially insurance and pension funds.

Banks and financial institutions would be allowed to sponsor IDFs.

Elaborating on the structure of IDF as a company, the release said it could be set up by NBFCs or banks, with a minimum capital of Rs150 crore. Such a fund would be allowed to raise resources through rupee or dollar denominated bonds of minimum five year maturity. These bonds could be traded among the domestic and foreign investors.

Company based IDFs would be allowed to fund projects in public-private partnership (PPP) which have completed one year of commercial operations.

Potential investors in this category, include offshore and domestic institutional investors, high networth individuals and non-resident Indians.

As regards the trust-based IDFs, the ministry said the fund could be sponsored by a regulated financial sector domestic entity. It would have to invest 90% of its assets in the debt securities of infrastructure companies or special purpose vehicles (SPVs) across all infrastructure sectors.

Minimum investment by trust-based IDF would be Rs1 crore with Rs10 lakh as minimum size of the unit.

The credit risks associated with underlying projects will be borne by the investors and not by IDF, but in case of company-based IDF, the fund would bear the risk.

The finance ministry said that IDF being a pass-through vehicle is easily workable if set up as a trust.

However, since a trust cannot issue bonds or undertake credit enhancement and cannot get withholding tax benefits, an IDF would also have to be allowed as a company.

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