Investor Issues
Investors can get monetary relief during claim proceedings: SEBI

Investors with claims of less than Rs10 lakh, would get certain amount during their claim proceedings from the investor protection fund

Market regulator Securities & Exchange Board of India’s (SEBI) said it will give monetary relief to investors having claims up to Rs10 lakh, during the course of proceedings from the Investor Protection Fund (IPF) of stock exchanges.

 

According to a release, SEBI said, the Investor Grievance Redressal Committee (IGRC) in the stock exchange would be empowered to look into admissibility of claims in addition to conciliation process. If IGRC concludes that the complaint cannot be resolved through conciliation process, then the stock exchange would block the claim amount admissible to the investor from the deposit of the concerned member. The member would get seven days to pursue next arbitration. If the member does not opt for arbitration, then the stock exchange would release the blocked amount to the investor after the seven day's timeframe.

 

SEBI said, in case, the member opts for arbitration and the claim value admissible to the investor is not more than Rs10 lakh, the monetary relief from IPF would be given to the investor as mentioned below:
 

i. 50% of the admissible claim value or Rs75,000, whichever is less, shall be released to the investor from IPF of the stock exchange.

ii. In case the arbitration award is in favour of the investor and the member opts for appellate arbitration then a positive difference of, 50% of the amount mentioned in the arbitration award or Rs1.5 lakh, whichever is less and the amount already released to the investor at clause (i) above, shall be released to the investor from IPF of the stock exchange.

iii. In case the appellate arbitration award is in favour of the investor and the member opts for making an application under section 34 of the Arbitration and Conciliation Act, 1996 to set aside the appellate arbitration award, then a positive difference of 75% of the amount determined in the appellate arbitration award or Rs2 lakh, whichever is less and the amount already released to the investor at clause (i) and (ii) above, shall be released to the investor from IPF of the stock exchange.

 

Separately, SEBI said, in order to address the complaints regarding 'unauthorised trades', the stock exchanges would ensure that the contract note issued by member for transactions owing to non-compliance of margin calls would bear a remark specifying the same. The member would maintain a verifiable record of having made such margin calls and that the clients have not complied with the same, the market regulator said.

 

SEBI has also asked stock exchanges to set up facilitation desks at all investor service centres to assist investors in obtaining documents or details from stock exchanges wherever so required for making application to IGRC and filing arbitration.

 

The market regulator has also reduced the amount payable by investor for appellate arbitration to Rs10,000 from Rs30,000.

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Ignore India PMI-Purchasing Managers Indices: Credit Suisse
Credit Suisse have made a startling discovery. It has found that a popular leading indicator, PMI, followed by all analysts and policymakers including even the Reserve Bank of India, had no correlation with the actual data, which was released later
 
Credit Suisse has found out that India’s Purchasing Managers Indices (PMI) data has little or no correlation with actual data released by the government. Yet, many experts and analysts, and even Reserve Bank of India follow it as though PMI is a leading indicator of economic activity and a tool to make policy and investment decisions. Robert Prior-Wandersforde, a research analyst, said in his research note, “Unfortunately, we have failed to find a single indicator that consistently leads real growth rates in the Indian economy which then leaves us to focus squarely on fundamentals. Focusing on such indicators as the PMIs could present greater dangers”. 
 
The analyst further says, in his note, “Judging from their commentary, forecasters and policy markers in India clearly pay close attention to the monthly release of the manufacturing and service sector PMIs. However, a close inspection of their historical relationship with industrial production and service sector growth suggests that they should often be taken with a sizeable pinch of salt.”
 
The Purchasing Managers Index, or PMI, is widely used as a leading indicator of performance of manufacturing and service sectors. Companies like Markit provide this service by individually collecting information from companies about their performance or output, every month, and compare it with previous months. The advantage of this is that the data is known ahead of government data. This gives investors, policy makers and analysts, who use it, an “edge” over others to make decisions.
 
Credit Suisse has found out that PMI data had no correlation with actual data! In other words, whatever the PMI data showed turned out to be misleading. 
 
“There have been periods when correlation between India’s manufacturing PMI and output growth has been non-existent or indeed even negative. This has been true of the past couple of years for example, as we have highlighted in chart. From mid-2011 to mid-2013, the correlation between the two series has been just 0.09,” said the note. The chart below shows how different PMI is from the actual data. 
 
 
This is startling because a correlation of 0.09 means there is absolutely no correlation between PMI and actual data, or in fact “decoupled”. Ideally, if PMI were to be a good indicator, the number ought to be close to one.
 
It is even worse for service sector PMI. Credit Suisse found out that between October 2011 and January 2013, the PMI was trending higher, but in reality services sector actually slowed down. The graph below illustrates this phenomenon. 
 
 
Robert says, “PMIs are by no means the only indicators that are wrongly thought to have powerful leading properties to real economic developments in India”. 
 
If this Credit Suisse study is any indicator, then it is time to take PMI with a heavy dose of scepticism and, instead, either wait for the data or do you own homework. 

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Portfolio Management Schemes: Our online survey results

Moneylife online survey on PMS shows large-scale underperformance and gross mismanagement by PMS companies. While many investors may not have invested due to lack of data for making an informed decision, a majority of those who have invested, say they lost money

There are 253 portfolio management schemes (PMS) offered by various portfolio managers, brokers and asset management companies, registered with the Securities and Exchange Board of India (SEBI). Moneylife has been campaigning to bring some transparency in how PMS performance data is reported. However, we also wanted to capture the experience of the investors of PMS in our cover story, Portfolio Management Schemes: Will Your Portfolio Blow Up?, through an online Survey. Our Survey received responses from 360 participants out of which nearly one-third have invested in PMS schemes. Here is a summary of the responses.

 


According to the Survey, lack of disclosure and poor performance are the main cause of concern for the investors which puts them off. As many as 35% said that they were not convinced if their PMS would deliver good returns. A disturbing 45% of the respondents who have invested in PMS say that they were unable to make an informed decision because of lack of data. Just 15% respondents of our survey said that they compared various schemes before investing.

 



More than half of those who invested in PMS schemes said they have lost their money. When we asked to name the PMS company in which they have lost money, there was no clear poor performing fund house; the names varied from HSBC Wealth Management to JM Financial and Kotak Mahindra PMS to HDFC PMS. Similarly when we asked which was the best PMS company, there was no clear winner either. As many as 65% of the respondents, who have invested, claim that returns were below the benchmark. A mere 5% say that they got returns better than the benchmark. Nearly half the respondents, who have invested, mentioned that their portfolio was churned excessively. This gross mismanagement certainly does not go down well with investors. Nearly 60% of the participants who have invested in PMS have stopped investing altogether. An equivalent proportion of respondents say that they will never recommend PMS to others.

 



While one-fourth of PMS investors have invested in multiple schemes, an equivalent number of investors were not sure of what kind of service (discretionary, non-discretionary, advisory) they have opted for. Were they greedy or foolish or both? Bankers have a major role to play in selection of PMS. Many abuse the trust of the clients and take them for a ride. In our survey, one-third of the respondents who have invested got to know of PMS through their bank relationship manager or wealth manager. Nearly one-fifth came to know of a PMS through a friend or a colleague and an equivalent number got to know of PMS through advertisements.

 



In terms of transparency, nearly 30% say that all portfolio details, charges and returns were not disclosed adequately. As many as 60% of the respondents who have invested in PMS mention that portfolio managers did not make smart investment decisions. But still, nearly 45% of the respondents feel that their PMS will deliver a return over 15% in the next five years. Nearly 75% of the respondents, who have invested in PMS, have done so over the last five years. Despite the complaints of gross mismanagement by PMS companies, just 2% have filed a complaint with the regulator.

 



The survey tried capturing certain key points like, how did the respondents come to know about the scheme, the reasons for not investing, how the investors rate the overall performance of the PMS, whether they lost money on PMS, has losing money on PMS de-motivated them to not to invest further, the names of the scheme where they lost money, whether they think the loss was due to bad selection and/or excessive churning and, most importantly, whether they compared other schemes of PMS before investing in one.
 

           
 



Recently we also analysed the performance of PMS which have disclosed their data (PMS Performance: The Good, the Average and the Ugly) Except for a couple of PMS companies, the performance of the others was patchy.
 

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COMMENTS

x.dsouza

8 months ago

All the posts are pretty old ones. What is the latest trends and performances of various PMS scheme's ??

Satyendra Rao

3 years ago

I had a bad experience with Motiwal Oswal PMS. They charge too much. They want to share profit but not loss. They charge performance fee even when I lose money

REPLY

Ajay Goel

In Reply to Satyendra Rao 4 months ago

Hi Are you still invested with motilal oswal for pms ? Pl share your experiences. Me too looking for pms investment but am confused and afraid of choosing wrong pms as there is not enough data in open to decide which pms is the best.
Pl advice and share your experiences.
Thanks
Ajay Goel
9634096668

KEYUR MEHTA

4 years ago

I have invested in PMS named Value Strategy of Motilal Oswal & its giving fantastic returns. Moreover the stock churning is as low as zreo. PMS investments are long term and should not be churned- Keyur Mehta 9327393274

Dr Anantha K Ramdas

4 years ago

Thank you MGT - I began my work through PMS of a leading bank when it started way back in `1985 and after a couple of years, began to pick and choose my own investment pattern. At this point of time I was an NRI so, we had lots of IPOs coming in with "exclusive" allotments for greenhorns like us. Believe me, we bought everything that was offered and maybe 3 to 5 were good out of a hundred! In the rest we lost our shirts.

On my return back to base in India, in 2007, I spent almost 6 months in reading every journal and commercial newspaper in the country, until I zeroed in on Moneylife. I still follow and maintain regular track of what I want to buy, sell, hold or increase to build a good portfolio. I take the guidance from ML as a rule as to how to avoid pitfalls and so far, I am safe and happy.

Still, I have made the mistakes of not buying on time (hestation
factor) and delays in selling when price is right (greed and stupidity) and hear the pontification by "experts" in TV
channels occasionally, but all the right and wrong decisions are mine own. Period.

To invest and let the wealth grow is an individual's personal and prime responsibility and advice that we get from anyone is to be taken with a pinch of salt!

REPLY

Nilesh KAMERKAR

In Reply to Dr Anantha K Ramdas 4 years ago

Very nicely said sir.

Team Moneylife can protect investors better, only if more people chose to follow your method & approach.

It is far better than seeking recourse after burning a hole due to ignorance, greed & folly.

amol ghule

4 years ago

there should be some kind of ranking which is transparent so that investors can choose right portfolio mamagement companies.

REPLY

Suiketu Shah

In Reply to amol ghule 4 years ago

Amol none of the companies are worth doing PMS with.Best is to educate one self via ml and invest wisely and not depend on "wealth management experts".

Krishnamurthy Kakaraparthy

4 years ago

What is the tax treatment for PMS gains,if any,in Commodity futures ? Capital gains or Business income ?

nagesh kini

4 years ago

The numbers in your Survey have only gone to endorse my belief that PMS is not everyone's cup of tea, not every portfolio managers or financial planners are any Gods.
Every reasonably sane, alert and knowledgeable investor could take initial expert guidance on building up his/her own portfolio and later possibly churn it quarterly taking into account the company and sector performance. He takes his own call and can't blame anyone!

REPLY

Suiketu Shah

In Reply to nagesh kini 4 years ago

Absolutely right Mr Kini.PMS is best to be totally avoided in every which way.

Nilesh KAMERKAR

In Reply to nagesh kini 4 years ago

Do you follow the above stated investment policy yourself or is it just for the sake of making one more comment?

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