Mutual Funds
Morgan Stanley to launch mid-cap equity fund

The objective of this mid-cap fund is to invest mainly in mid-cap and small-cap stocks for generate long-term capital growth. However, mid-cap funds have been known to stray from their objective

Morgan Stanley Mutual Fund has filed an offer document with the Securities and Exchange Board of India (SEBI) seeking approval to launch Morgan Stanley Mid-Cap Equity Fund, an open-ended equity fund. The investment objective of the scheme is to generate long-term capital growth from an actively managed portfolio of medium and small capitalisation equity and equity-related securities, including equity derivatives.

The scheme proposes to invest 65% to 100% of the assets in equities and equity-related instruments of small- and mid-cap companies with a medium- to high-risk profile. Up to 35% of assets would be invested in equity and equity-related instruments of any other company with medium- to high-risk profile and up to 35% of assets in debt and money market instruments with a low- to medium-risk profile.

Medium and small companies are defined as having a capitalisation that is lower than the 100th stock in the BSE 200 or a Rs10,000 crore market capitalisation, whichever is higher. The benchmark index of the scheme shall be the CNX Mid-Cap Index.

The mid-cap stocks and small-cap stocks rise the fastest when the economy is in a growth mode. They are the blue chips of tomorrow. But they are also more volatile. Wrong timing can decimate returns over the short term as Morgan Stanley knows better than others. Its first fund launched in 1994, was stuffed with small- and mid-cap stocks, but suffered severe value erosion of 35% over seven years.

This mid-cap fund will invest a major portion of its assets in mid-cap stocks and the rest may be in larger companies. There are many examples of mid-cap funds that end up investing in large-cap stocks. For example, Axis Midcap Fund has invested in Infosys and TCS, Birla Sun Life MidCap Fund has invested in stocks like Glaxo Smithkline Consumer, Cadila Healthcare and Cummins India and BNP Paribas Mid Cap Fund has Titan Industries, Lupin and Ultratech Cement in its portfolio. Clearly, funds are quick to stray away from the investment objective when its suits them.

The total recurring expense would be 2.50% per annum on the average net daily assets.

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2G case: Court reserves order on ex-telecom secretary’s bail plea

The CBI said that Mr Behura should not have followed the orders of the then telecom minister A Raja, who is the key accused in the case, if they were not in accordance with the law

New Delhi: A Delhi court on Friday reserved its order on the bail plea of former telecom secretary Siddhartha Behura, an accused in the second generation (2G) spectrum allocation case, reports PTI.

“Put up for order on 3rd June,” special Central Bureau of Investigation (CBI) judge OP Saini said after the arguments on Mr Behura’s bail plea were concluded.

During the arguments, the CBI said that Mr Behura should not have followed the orders of the then telecom minister A Raja, who is the key accused in the case, if they were not in accordance with the law.

“He (Mr Behura) was not obliged to follow the orders of the minister (Mr Raja), if they were not in accordance with the law,” CBI prosecutor AK Singh said.

Senior advocate Aman Lekhi, appearing for Mr Behura, countered the CBI’s submissions saying his client was only performing his duties, being the secretary of the Department of Telecommunication (DoT).

The agency had earlier said Mr Behura did not put any check and balance on Mr Raja’s “misdeeds” during grant of licences despite having highest executive powers in the DoT.

The CBI had also opposed Mr Behura’s plea that the prime minister was informed by Mr Raja through letters about the process of grant of licences, saying mere informing him did not mean that he got the consent on the issue.

The agency had pointed out that Mr Behura had played an active role in giving licences to Swan Telecom, promoted by Shahid Usman Balwa, despite its ineligibility.

Mr Behura is lodged in Tihar Jail along with 12 other accused persons including Mr Raja, DMK MP Kanimozhi and Shahid Usman Balwa.

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CCI to issue ‘cease and desist’ order against NSE soon

Under the ‘cease and desist’ order, NSE will have to stop subsidising its currency derivative operations. The CCI on Wednesday pronounced NSE guilty of abusing its dominant market position and adopting unfair trade practices in currency derivatives trading

New Delhi: The Competition Commission of India (CCI) is likely to issue a ‘cease and desist’ order shortly against the National Stock Exchange (NSE) to stop the country’s premier bourse from subsidising its currency derivative (CD) operations.

“The Competition Commission will serve the final order to NSE by 2nd or 3rd June under Section 27 of the Competition Act 2002,” sources close to the development told PTI.

The CCI on Wednesday pronounced NSE guilty of abusing its dominant market position and adopting unfair trade practices in currency derivatives trading.

Sources said that under Section 27, the CCI can issue ‘cease and desist’ order to refrain the company from pursuing any anti-competitive practices.

“Under the order, NSE will have to stop subsidising its currency derivative operations.” they added.

The CCI’s final order will be issued after NSE files a reply to the show-cause notice. Based on the response, the CCI will decide on the quantum of fine to be imposed on NSE.

MCX-SX, promoted by commodity exchange MCX and Financial Technologies, had alleged before the CCI that NSE substantially reduced admission and trade related fees to eliminate competition and discourage other entities from entering the market.

The CCI’s Wednesday order said, “It can be said that the two relevant markets (currency and non-currency derivatives segments) have associational links. Therefore, it is concluded that NSE has used its position of strength in the non CD segment to protect its position in the CD segment.”

An investigation report of the CCI director general had found NSE used its dominant position and original monopoly in equity, F&O (Future and Options) and WDM (Wholesale Debt Market) markets to protect its position in the CD market.

MCX-SX had argued that all market segments such as equity and currency derivatives are related while NSE had argued that these different segments are actually different markets.

CCI is believed to have gone by NSE’s view on this issue by concurring that segments like equity and currency derivatives may be related but are different markets.

In the recent past, MCX-SX has been leading over NSE in currency derivative segment although NSE has a dominant position in the overall market.

While there was no official confirmation, sources said that CCI’s order against NSE was based on a majority view of its members and not by consensus.

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