HC admits plea of former NSE employee alleging harassment
Bombay High Court has admitted a petition filed by A Sebastin, former assistant vice president of National Stock Exchange (NSE), alleging harassment by the management.

Sebastin, who claims to have voluntarily retired from NSE in last October, has challenged NSE's action of terminating his service in April this year. Division bench led by Justices Bilal Nazki admitted the petition, which will come up for hearing in due course.

According to a PTI report, Sebastin claims that he was harassed at the behest of managing director of NSE Ravi Narain and deputy managing director Chitra Ramkrishna for suggesting 'measures for improvement in risk management framework' while he was working at National Securities Clearing Corp Ltd, on deputation.

"The High Court took a strong view on the termination notice issued by NSE in April, when it had already accepted the resignation of Sebastin and relived him from duties in November 2008," said Sanjay Dhulapkar, counsel for Sebastin. Sebastin has also filed a defamation case against NSE and its managing director Ravi Narain in the Mumbai Metropolitan Court over alleged character assassination. The Court has issued summons to NSE officials asking them to be present on 16th July, during the next hearing of the case, Dhulapkar said.

The case
On 6th April, the NSE issued a ’public notice‘ in all leading business newspapers with the employee’s photograph announcing that anyone dealing with the “said Mr. A Sebastin” would do so at their own risk.

Normally, such notices are published only if an employee is guilty of financial fraud or a serious betrayal of trust. However, there is no such mention. Instead, the NSE issued a clarification responding to media queries saying that Sebastin’s “services were terminated” because he ”had not met the company’s requirements.” It also indicated, without being specific, that the employee had failed to complete “severance” formalities.

Sebastin, however, has evidence of a formal handover of charge, an exit interview and an email assurance that he would be relieved. He says that the public notice was issued after he sent a legal notice to the NSE on 4th April demanding severance benefits like Provident Fund (PF) and gratuity.

Holding back PF is not legal, so the NSE reportedly credited his PF account immediately after he served the legal notice but simultaneously issued him a termination letter followed by the public notice, almost six months after he had quit the Exchange.

When we published the case under the title of "Vindicative Action?" on our website www.suchetadalal.com, it received, so far, 26 comments from readers. One reader Golak said: "NSE should try to find out why NSE ex-employees are willing to join MCX-SX and sort out the problems rather than take this kind of vindictive action. As an organization, it has failed to come out of whims of few people who run the exchange at their own sweet terms."

Another reader Satish Swaminathan commented,"If there is attrition, then the HR should be pulled up for explanations and probably try to get to the root cause and address it. I am also failing to understand, how NSE is proposing to beat its competition by stopping people and being vindictive when they join a competing firm." -Yogesh Sapkale [email protected]

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Unimpressive
Fidelity has filed a draft prospectus for Fidelity Forward India Fund, which is a plain vanilla equity diversified fund. It will invest in the same set of instruments as any other equity fund – equities, warrants, convertible instruments, government and corporate debt and money market instruments. The Fund would also be investing in exchange traded funds, derivatives and foreign securities. If permitted by the Securities and Exchange Board of India (SEBI), the Fund may also engage in stock-lending. In short, it is a run-of-the-mill fund. Fidelity will select stocks by “a combination of value and contrarian strategies to identify stocks which are trading at less than their assessed values.” Again, this is exactly what other fund managers preach, though it is funny to see a fund company using the term ‘assessed value’ instead of ‘market value’ as if we are talking of insurance claims.

The Fund would be benchmarked against the BSE 200 index. There are 42 equity diversified funds which are benchmarked against the BSE 200. In fact, all the three Fidelity Funds (Fidelity Equity Fund, Fidelity India Special Situations Fund and Fidelity India Growth Fund) also use BSE 200 as the benchmark.

All three have the same investment strategy, which includes diversification, bottom-up stock picking and no-cap bias whereas this new Fund would be a combination of value and contrarian strategy. In other words, there can hardly be much difference between Forward India Fund and Fidelity’s three existing ones.

All this would have been fine if Fidelity were one of the top-performing fund houses. It isn’t. Fidelity Equity Fund (FEF) was launched on 16 May 2005, joining 93 equity diversified funds. Since inception till date, the Fund has gained 23% marginally outperforming its benchmark, the BSE 200, which was up 20%. But 70 of the 93 funds had outperformed their benchmarks and FEF was not among the top 10. Fidelity India Special Situations Fund (launched on 22 May 2006) has gained 11% since inception and has underperformed its benchmark, the BSE 200, which was up 12%. Fidelity India Growth Fund (launched on 23 October 2007) has outperformed its benchmark, the BSE 200, marginally since inception. The Fund was down 12% whereas the index was down 13%. Clearly, there is nothing special about the new Fund or the fund house. There can’t be any reason to invest in another Fidelity fund, merely bearing a different name. For Fidelity, though, another new fund means more money to manage and more fee income.

High Risk Appetite
A Micro-cap fund from Reliance shows extreme bullishness

The fund managers at Reliance Mutual Fund obviously believe that we are at the edge of a monster bull market. They have filed a plethora of schemes with the regulator, one of which is a micro-cap scheme, which shows extreme risk appetite. There is only one other micro-cap in existence – Micro-Cap Fund of Blackrock, which was launched at the height of the last bull market.

Reliance defines micro-cap stocks as those whose market capitalisation is between the highest and lowest market capitalisation of companies on the BSE Small-Cap Index. The scheme would be measured against the BSE Small-Cap Index. As an investor, one would invest in micro cap stocks only when the broader market is clearly on a major bullish trend because micro-caps move faster than other stocks in a full-blown bull market. Conversely, when the trend changes, the decline in these stocks is the sharpest. Reliance is probably well aware of this pitfall. Interestingly, the prospectus says that the scheme will reduce its exposure to equity at a time when good investment opportunities aren’t available and will move the money into debt and money market instruments.

If Reliance does bring this scheme, it will be worth investing a small amount. Reliance is a smart fund company. Since 1994, the fund company has delivered a great performance. If anyone can play the micro-cap game of chasing momentum and then moving to cash when the market is on a low trajectory and micro-caps are about to crash, it is Reliance. If you like the idea, put a little bit of money. If it works, the returns are going to be large.

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