According to UK Sinha, the promoter holding in Indian companies is very high as compared to other Asian markets and SEBI took up the matter with the government as it feels that he PSUs should also follow the rules
Mumbai: The government has assured the Securities and Exchange Board of India (SEBI) that listed public sector undertakings will meet the August 2013 deadline to meet the capital markets regulator’s mandatory public shareholding norms, reports PTI quoting Sebi chief UK Sinha.
“I am happy to inform that we have received confirmation from government that it will abide by public shareholding guidelines within the timeframe,” Mr Sinha said at a conference organised by industry body Assocham.
According to Mr Sinha, the promoter holding in Indian companies is very high as compared to other Asian markets and SEBI took up the matter with the government as it feels that he PSUs should also follow the rules, Mr Sinha said.
Under the norms, privately promoted companies are expected to have a public shareholding at 25% by June 2013, while the same for the state-run listed companies has been relaxed to 10%, which has to be met by August 2013, Mr Sinha said.
According to analysts, 11 PSUs, including Rashtriya Chemicals & Fertilizers and State Bank of Mysore, have government holding beyond the 90% mark and the government will have to bring it down.
Mr Sinha also said that SEBI is continuously taking measures to improve retail investors’ confidence in the equity market and stressed that the market is not a ‘casino’ where one can do anything and get away with it.
Underlining that the Indian market is well-regulated, he said investors should not worry as SEBI has the necessary mechanisms to take care of any manipulation.
It has put up a sophisticated surveillance mechanism which is putting out up to 100 alerts a day on potentially fraudulent transactions, he said.
“I assure you, if there is any attempt to manipulate the market or to bypass the rules, we will take action and with this surveillance mechanism, we are in a much better position to do that today,” he said.
Direct plans to invest in mutual funds are a cheaper option. But without proper advice, investing in a wrong mutual fund scheme and/or poor knowledge of the investment process could prove costly
With investors having the option of investing in direct plans from 1st January, it would be interesting to see by how much the fund houses would reduce the costs for direct investors. Fund houses would now have two plans under each scheme. One is the regular plan and the other would be the direct plan with a separate Net Asset Value (NAV). The direct plan would have lower costs. Therefore over the long-term, direct investors would benefit. But how much this difference would be depends more on how much fund houses would be willing to reduce the costs.
Moneylife did an analysis on the Net Asset Value (NAV) of schemes as on 8 January 2013. Of the 187 equity diversified schemes where the NAV was available, in around 48 schemes there was no difference at all in the NAV of the direct plan and the regular plan. As for most of the remaining schemes, the difference the varied from 0.10 basis points (bps) to 1.50 bps. Though this may not seem that huge, but for a short period of a few days it is a considerable difference. Over time the gap would widen. The difference in expense ratio would be around 30 bps to 75 bps for most schemes. Fund houses would also have to keep in mind their distributors; hence, it would be rare to see a higher reduction in expense ratio for direct plans. Existing investors can switch to direct plans, as well. However, many schemes have raised their exit loads which would in turn deter investors from switching to the direct plans within a short time frame.
To take advantage of a lower NAV, direct investors would have to invest on their own, without the help of a distributor or advisor. Direct plans will benefit those investors who believe in doing things on their own. But investing in mutual funds is complex.
What kind of scheme should one choose? How much should they invest? Whether one should opt for a systematic investment? One needs to look at the performance of the schemes over various periods. What would be the cost of choosing a wrong equity scheme? Take for example the 1 year period ending 31 December 2012. The top 10 equity diversified schemes delivered an average return of 50.50% and the bottom 10 schemes delivered an average return of just 20.82%. There is almost a 30 percentage point difference in returns. Take the last three year period, had one invested in the bottom 10 schemes they could have faced a loss in capital, as the average returns of the schemes was -1.07% annualised. Any one of the top 10 schemes would have earned them over 12.50% annualised in the same period.
But choosing a scheme is just one part of the story. One would also have to find time to do the documentation process. Direct investors may find it difficult to keep up with the various changes in regulations and documentation process without an advisor. There are various servicing activities like change of address, change of bank mandate, consolidation of folios, transmission of funds, inclusion of nominee, handholding on minor investments, arranging for periodical statement of accounts, correction of mistakes in the account, change in KYC, change in contact information, etc. If an investor has in-depth knowledge of all this it would be easy to invest.
A strategy note by Morgan Stanley shows what Moneylife had written eight months ago: that the...