HC asks MCX-SX, SEBI to resolve issues amicably by 30th September

The court suggested to SEBI to give MCX-SX “a fresh chance with an open mind”, saying that for “small reasons, institutions should not be closed down as markets needs competition”

Mumbai: The Bombay High Court today asked market regulator Securities and Exchange Board of India (SEBI) and MCX Stock Exchange (MCX-SX) to resolve differences over the equity trading issue and come up with an amicable solution by 30th September, reports PTI.

MCX-SX had moved the court last September against a SEBI order that rejected its application to launch equity trading.

The court also suggested to SEBI to give MCX-SX “a fresh chance with an open mind”, saying that for “small reasons, institutions should not be closed down as markets needs competition”.

Justice DY Chandrachud advised the warring parties to come back to the court on 30th September with a workable solution through undertakings and assurances.

The Judge also advised SEBI to consider withdrawing the show-cause notice it had slapped on MCX-SX as most of the issues in the order have been resolved.

Last year, SEBI denied permission to MCX-SX to begin equity trading as it was apprehensive of the shareholding pattern in the private exchange promoted by Jignesh Shah-led Financial Technologies.

MCX spokesperson declined to comment on the court’s direction, saying the issue is still part of the court proceedings.

Financial Technologies-promoted MCX-SX is currently the number one exchange in the currency derivatives market.

The other two players are the National Stock Exchange (NSE) and United Stock Exchange (USE).

MCX-SX started operations in the currency derivatives in 2008 and SEBI on Wednesday gave a conditional one year extension to the privately-held exchange for trading in currency futures segment.


Don’t go for fixed rate loans or extend loan tenors: Indiabulls

Indiabulls Housing Finance head explains that increasing the EMI is better than extending the loan tenor

The corporate sector had hoped otherwise, but the Reserve Bank of India (RBI) today hiked key interest rates by a further 25 basis points. This will likely make home and automobile loans still more expensive and realtors believe that property prices will go up further. In this situation, Sachin Chaudhary, business head of Indiabulls Housing Finance, has advised borrowers not to go for fixed-rate loans or to extend loan tenors.

"In a high rate scenario, try and increase your EMI if your pocket allows. Do not go for fixed rate loans, because the rates are expected to soften," Mr Chaudhary said. He also argued that it was preferable to keep the tenor constant than to pay a fixed amount of EMI. In the latter case, the interest increases significantly by the time the loan is repaid. "Don't increase the loan tenor," he said.

The Indiabulls Housing Finance head also explained that in the case of a fixed tenor the effective rate is much lower, because deductions on home loans result in tax benefits. He demonstrated this through an example: When the tenor is fixed for 180 months, and if rates are hiked by 0.25% with each successive EMI payment, even though the EMI amount on every Rs1 lakh increases, the overall increase in rate of interest after six successive hikes is 9%. However, when the EMI is fixed and the tenor keeps on increasing by even one month, after six extensions, the interest rate is increased by 22%.

Mr Chaudhary advised that in the present situation, it was better to renegotiate the rate of interest rather than switch to another financial institution. He also said that prepayment was the best option, and a part prepayment could reduce the loan tenor up to 50%.

Most banks offer loans that have tenets of 'teaser loans', that is a fixed rate for the first few years and then at par with floating rate loans. Experts think that the interest rate hikes are nearing their peak, and a lock in for 3-5 years is not advisable. "In most cases, the fixed-floating hybrid loans favour the lender and not the buyer," said an analyst.

The RBI today announced a hike in interest rates, the 12th time it has increased rates since March 2010. Repo rate now stands at 8.25% and the reverse repo rate at 7.25%.

Indian Overseas Bank chairman and managing director M Narendra said, "I believe banks will wait till the month-end before taking a call on an interest rate hike." Bankers are of the opinion that the rate increase will be passed on to customers sooner than later.


ASCI easy platform to target rivals by submitting complaints

Informed sources have revealed that close to half of the complaints upheld by ASCI (Advertising Standards Council of India)—and subsequently withdrawn or modified—originate from competitors within the industry

The corporate warfare between big brands is just intensifying as more and more companies are fighting it out for a bigger size of the pie-and trying to grab that elusive consumer. Now it appears that the war has reached a different level-instead of expensive and lengthy legal battles, Moneylife has found that companies are find it easier to have the advertisements of their rivals pulled out by approaching the Advertising Standards Council of India (ASCI).

In the period of one year (from April 2010-March 2011), 42 out of 82 complaints against advertisements—that were either modified or withdrawn by ASCI's Consumer Complaints Council (CCC)—were from rival companies.  

For instance, a rival company of Hindustan Unilever (HUL) complained about the multinational giant's television commercial of New Rin, which claims to be the only powder in India "removing yellowness and bringing whiteness" to clothes. According to the complaint, the visual showing the comparison between New Rin and another detergent (not named in the ad) is false and misleading. CCC upheld the argument, found the claim misleading, resulting in discontinuation of the commercial.

Similarly there was a complaint against Dish TV claiming that "half the country loves Dish TV" from a player within the industry. The ad was discontinued, after CCC found it to be misleading.

Moneylife has in its possession the details of the complainants whose complaints have been upheld. However, the documents do not reveal the name of the complainant, but only specify if the complaint has emerged from a rival player within the industry.

According to a few industry experts, none of these companies wants to approach court when ASCI provide them with an "easy complaint platform".

From 1st September, ASCI had decided to proceed with a 'fast-track redressal' of complaints originating within the industry. Accordingly, such complaints will now be resolved by the Fast Track Complaints Council (FTCC) of ASCI within seven working days, from the earlier time of around five weeks taken to resolve complaints.

Avinash Mantri, founder, Purple Grape Production and advertising professor, told Moneylife, "Companies often come out with an ad claiming that their product's results are better, or just use satire to lampoon a competitor's ad. There is a lot of competition between brands. (After all), an ad is all about giving out a quick message to the consumer. Even if ASCI has decided to fast track complaints, by the time the decision is out, the consumer already gets the message."

In fact, there are a number of complaints within the industry against HUL's advertisement. When asked if companies are using ASCI to target competitors, the HUL's spokesperson told Moneylife, "ASCI has been a very effective industry platform to deal with advertising-related complaints in a time-bound manner. It is recognised by the government and the legal system as well. The proposed fast track system for dealing with intra-industry complaints will strengthen the platform further as it will reduce the time taken to resolve the complaints."

Many of these intra-industry complaints, at times have no basis. In the above mentioned period, ASCI did not act against 29 out of 80 intra-industry complaints. For instance, on the Eureka Forbes television commercial claiming that that its brand Aquaguard is a "paani ka doctor", there was a complaint against it from a player from the industry. The complaint stated that the ad was trying to mislead consumers on a health issue and was also trying to "equate itself with professional doctors", without giving any proof. However, ASCI did not uphold the complaint saying that "paani ka doctor", is a creative expression stating that Aquaguard is capable of recommending the appropriate technology for water treatment."

ASCI insists that it upholds complaints only if they are scientifically proved. Alan Collaco, general secretary, ASCI, told Moneylife, "In this competitive environment, companies are alert to the competitors' claims in ads. However, the Consumer Complaints Council as well as our robust complaints handling procedure ensures that no complaints are upheld unless they are scientifically proved."


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