The market has turned stormy again;we have entered an uncertain stretch
In our previous issue,...
NK Prasad, executive director and chief operating officer of Computer Age Management Services (CAMS) in an exclusive interview with Moneylife speaks on various services offered by his company for investors, distributors and AMCs. This is the first part of a two-part series
Moneylife (ML): What percentage of mutual fund investors avail of CAMS' online services currently?
NK Prasad (NK): At this point of time we are serving about 4 crore investor accounts. Out of these, 2.7 crore investor accounts would have positive balance and the remaining are zero-balance accounts. It is difficult to identify the number of unique investors. We will have to talk about it in some metrics. Since PAN is unique for each investor we can identify each of them. In respect of the account holder, our experience tells us that each investor typically has two accounts.
Because in MFs your account remains as it is. In terms of usage of online services, we have one lakh hits on our website. Many of them look for CAMS services and information related to mutual funds. Investors who visit the site for transactions log in lesser than thousand transactions in a month. Most of them use it for other services. In addition to these hits, we also have people who are seeking mail-back services which run into 50,000 statements every month which are served to various investors.
ML: Is there fear among investors over security of online transactions?
NK: I would not call it fear. People traditionally invested with an instrument along with an application, and many people are comfortable doing that. The younger generation on the other hand is equally comfortable transacting online. Many of them take multiple channels so the population gets divided. We have ICICIdirect, fund house websites and the CAMS website. So it depends where investors want to go. But this entire population put together is a very small percentage of the total transactions even now.
ML: You launched FinNet in 2005 which is very economical as compared to other software available in the market. How has been the response to FinNet so far?
NK: It was called Fundsnet when it was launched but it morphed into FinNet. Initially it was called a distributor-centric platform to provide transactions, execution and customer service along with settlement capabilities. Online distributors said that they need the interface to hook it (up). Many Independent Financial Advisors (IFAs) said that they wanted to transact from home. So we provided all the functionalities and over a period of time we have 2,000 members.
Many of them use it extensively for customer service and for mutual-fund transactions. We get around 3,000 transactions every month. It's a powerful platform with rich features which eliminates a distributor's work. They don't have to take a fresh application form. They can pull the data from the existing database and decide which scheme they wish to invest in and create a new folio. Then they just have to print it out and take a signature of the client. Secondly, they (IFAs) don't have to go anywhere. The bank representative comes and collects the cheque from the distributor's office. So the cost of distribution and servicing the investor is very less. They can also give a holding statement, a portfolio statement to investors.
ML: Are banks and national distributors part of this?
NK: Many of the banks have built their own platform. These are mostly an extension of their wealth-management platforms. A mutual fund is a third-party product. So they have evolved their own platform over a period of time. They (banks) wanted to make use of their own system for internal use. But they need somebody to hook into to submit their transaction database. So we have provided these interfaces traditionally from the last 12 years. Banks which have recently entered the mutual fund business have two choices. They either have to use their own platform or existing software. The existing platform exists for only CAMS funds. So the bank gets to sell only those funds which are serviced by CAMS.
However, banks would like to typically sell all mutual funds. Since now FinNet is jointly provided by CAMS and KARVY there is some interest among banks. Nobody wants to use two systems.
ML: Are you planning to expand your operations?
NK: Yes, we are planning to target not only IFAs but also national distributors and particularly PSU banks because PSU banks are new to third-party distribution business.
ML: Wouldn't it be logical to say that FinNet should expand into providing a bouquet of products other than mutual funds?
NK: Yes, eventually we would like to do that. We have realised that the features of this software could potentially serve other products. There are some components which are not available currently. For example, investment advisory functions where one can relatively evaluate various mutual fund schemes, competitive products, risk assess the customer and give a valuation based on that.
All this is not available at this point of time. Currently (the) customer database is available which reduces the time and effort. If a customer walks into a distributor's office at 2.55PM he can still invest on the same day. In the past, the customer used to give the transaction slip to the IFA at 1PM or 1.30PM and the distributor in turn has to reach AMCs or the CAMS/KARVY branch which took lot of time. Now they can transact on a real-time basis.
The index is now headed for a short-term high, probably around 18,300
The market continued its upmove today following the Chinese move on the yuan, after taking a breather on Friday. The Sensex ended at 17,876, up 305 points (1.7%). The Nifty settled at 5,353, up 90 points (1.7%). The indices started the day with sharp gains, taking cues from the Asian markets. The government's announcement on Unit-linked Insurance Plans (ULIPs) also provided a boost to the market, which was at a two-month high in intraday trade today.
Asian stock markets were up Monday, after the People's Bank of China signalled over the weekend that it would end the yuan's de-facto peg to the US dollar. The Shanghai Composite index was up nearly 3% while Hong Kong's Hang Seng surged more than 3%. Key benchmark indices in Japan, South Korea, Indonesia, Taiwan and Singapore were up by 0.3% to 2.4%.
The People's Bank of China hinted that it will allow the yuan to take the market way. The yuan soared on Monday to close at its highest level against the dollar since its July 2005 revaluation. It closed at 6.7 against the dollar on Monday, up 0.42% from Friday's close of 6.8.
Back home, the monsoon is likely to be weak in the soybean areas in the next three days. However, soybean growing would not be hit due to good soil moisture after recent pre-monsoon showers in the region. The annual July-September rains were passing through the central city of Indore, western Rajkot and Ahmedabad, among other places. Annual monsoon rains were 8% below normal in the week to 16 June, the India Meteorological Department (IMD) said.
The government has ended the row over ULIPs by promulgating an ordinance, stating that unit-linked insurance plans with investment component are insurance products, which will come under the regulatory jurisdiction of the Insurance Regulatory and Development Authority (IRDA) and not the Securities and Exchange Board of India (SEBI).
The European Central Bank (ECB) has pressed governments in the region to follow stricter budget rules. The ECB has called for a new system of incentives and sanctions to shore up fiscal rules for the 16-nation eurozone.
Foreign institutional investors were net buyers on Friday, purchasing stocks worth Rs779 crore. Domestic institutional investors were net sellers of Rs499 crore.
The board of Shree Ganesh Forgings (down 4.9%) has decided to increase its share capital by Rs14 crore by creation of 140,00,000 preference shares of Rs10 each; to issue (optionally) convertible cumulative redeemable preference shares up to the amount of Rs15.65 crore to the consortium lenders at par on a preferential basis and issue equity shares to the promoters up to a sum of Rs6 crore, in terms of the reworked Corporate Debt Restructuring (CDR) package. The directors also decided to make a reference to the Board for Industrial and Financial Reconstruction (BIFR) in view of the erosion of the net worth of the company.
Dewan Housing Finance Corporation (up 0.3%) and its subsidiary DHFL Vysya Housing Finance Ltd have promoted a housing finance company called 'Aadhar Housing Finance Pvt Ltd'. The promoters have entered into a transaction agreement with International Finance Corporation (IFC), whereby the latter has agreed to subscribe up to 2,00,00,000 equity shares of Rs10 each aggregating to Rs20 crore of Aadhar on a fully-diluted basis i.e., 20% of the paid-up capital. Aadhar initially plans to focus on retail housing loans in the low-income segment in certain States.
Ashoka Buildcon has filed a Draft Red Herring Prospectus (DRHP) for an Initial Public Offering (IPO) of equity shares of Rs10 each for cash at a price to be decided through a 100% book-building process. The issue comprises a net issue of Rs 225 crore to the public and a reservation of Rs4.50 crore for its employees.