RBI likely to hike policy rates in Sept review: D&B

New Delhi: Market regulator Securities and Exchange Board of India (SEBI) today proposed to double the investment limit for retail investors to Rs2 lakh in public issues, a move that will enable individuals to aggressively participate in primary issues of companies, reports PTI.

"It is proposed to ... enhance the limit prescribed for defining a retail individual investor in a public issue from the existing Rs1 lakh to Rs2 lakh," SEBI said in a draft regulation on which it invited comments from stakeholders by 3rd September.

The current limit of Rs1 lakh for retail investors was fixed over five years ago in March, 2005.

Giving justification for its proposal, SEBI said the limit for retail investors needed to be enhanced in view of the increase in inflation rate from 4% in 2005 to around 12% currently and rise in the BSE Sensex from 8,000 points to about 18,000 points during the same period.

"This means that the retail individual investors now buy a lesser number of securities with Rs1 lakh than they would buy with the same amount in 2005," it added.

"It is a very timely and logical step. The lukewarm public response to some recent offers may also have made SEBI put the proposal," SMC Capitals equity head Jagannadham Thunuguntla said.

"The proposal will also increase competition among retail investors as we will see pressure on small retailers who put in Rs10,000 or Rs20,000 and more participation of those in the Rs 1.10 lakh-Rs 2 lakh category," Mr Thunuguntla added.

Currently most of the applications from retail individual investors have come in the size of Rs75,000 to Rs1 lakh, SEBI said, pointing out that the segment seemingly has the capacity to contribute more.

As about 35,000 to 70,000 retail investors participate in an issue, it becomes difficult for companies coming out with large issues to seek adequate subscription for quota meant for individual investors.

Under Issue of Capital and Disclosure Requirements (ICDR) Regulations, 35% of the public issue has to be allocated to retail individual investors.

SEBI said that for an issue size of Rs4,000 crore to Rs6,000 crore, the limit of Rs1 lakh would mean that it must receive a minimum of 1.5 lakh to 2 lakh applications from retail individual investors to fill in the 35% allocation.

This could be a "daunting task" even in case of well oversubscribed issues, SEBI said, while making a case for doubling the investment limit to Rs2 lakh.

The limit for retail investors was Rs50,000 before it was raised to Rs1 lakh in 2005.

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Infrastructure funds throw up mixed returns

Asset management companies (AMCs) have optimistically launched infrastructure funds aiming to gain from India's ambitious infrastructure plans. However, the returns have not been very encouraging. Currently there are 17 infrastructure funds in the market. We analysed the performance of these 17 open-ended funds since inception. Out of these 17 funds, 10 have outperformed their respective benchmarks while seven have failed to beat their benchmarks. 

Tata Infrastructure Fund, launched in January 2005, has been the top performer. It posted a net asset value (NAV) return of 26% since its inception while its benchmark BSE 100 yielded 21.20% during the same period. Birla Sun Life Infrastructure Fund has been the runner-up. The fund launched in June 2009, had NAV return of 25% while its benchmark S&P Nifty rose 15.98% during the same period. ICICI Prudential Infrastructure Fund, Franklin Build India Fund, and UTI Infrastructure Fund are among the top five funds which gave NAV return between 22%-24%, racing ahead of their benchmarks.

Among the poor performers, AIG Infrastructure and Economic Reform Fund was the worst; its NAV plunged by 2% while its benchmark BSE 100 inched up 1.17%. The fund was launched in February 2008. The NAV of Baroda Pioneer Infrastructure Fund has remained flat from its launch on July 2010 to 16 August 2010 at a time when its benchmark CNX 100 gained 17.58%.

SBI Infrastructure Fund Series I - Growth plan, which was launched in July 2007, has yielded a paltry 2% NAV return since the fund's inception when its benchmark BSE 100 climbed 7.31% over the same period.

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SEBI proposes to double retail investment limit to Rs2 lakh

New Delhi: Market regulator Securities and Exchange Board of India (SEBI) today proposed to double the investment limit for retail investors to Rs2 lakh in public issues, a move that will enable individuals to aggressively participate in primary issues of companies, reports PTI.

"It is proposed to ... enhance the limit prescribed for defining a retail individual investor in a public issue from the existing Rs1 lakh to Rs2 lakh," SEBI said in a draft regulation on which it invited comments from stakeholders by 3rd September.

The current limit of Rs1 lakh for retail investors was fixed over five years ago in March, 2005.

Giving justification for its proposal, SEBI said the limit for retail investors needed to be enhanced in view of the increase in inflation rate from 4% in 2005 to around 12% currently and rise in the BSE Sensex from 8,000 points to about 18,000 points during the same period.

"This means that the retail individual investors now buy a lesser number of securities with Rs1 lakh than they would buy with the same amount in 2005," it added.

"It is a very timely and logical step. The lukewarm public response to some recent offers may also have made SEBI put the proposal," SMC Capitals equity head Jagannadham Thunuguntla said.

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