Regulations
The Lone NRI

SEBI and RBI have ensured that NRIs are put through many hurdles before they can invest in Indian stocks. A first-person account of the pains

 

I have lived about half of my life in the United States and the other, in India where I was born. Growing up in a Socialistic country, it was ingrained into me that your education was your passport to a successful future and nothing else mattered. After completing an undergraduate degree, I was drawn towards the share market. These were the ‘80s where every IPO was oversubscribed (the face value of a stock was always Rs10 or Rs100 or Rs1,000 (rare)). Many years later, I worked for a company incorporated in India and to cash my options, I had to get a PAN (Permanent Account Number) from the Indian Income Tax Office. After several mis-steps, I finally got the card (it felt like an achievement after the application was rejected twice on flimsy grounds) and I started looking at what I could do with my PAN number. 

 

It was August 2013 and I was browsing a newspaper when an article caught my attention. The RBI had just released guidelines for NRIs and other foreign investors to invest in the Indian market. This spurred me to think that it is perhaps time to invest in India's equity markets. I was armed with my PAN card and a million passport size photos and other documentation such as my local address, permanent address, etc. I approached HDFC Bank to open an NRI Demat account. And then the fun began...

 

The new accounts manager in the local HDFC Branch was ill-equipped to open this kind of account but help was on the way. I was connected to the NRI accounts specialist at HDFC who offered to come home to help with the application process. He explained to me that there will be 4 accounts created - a PIS NRE account (Portfolio Investment Scheme Non-Resident Rupee and a non-PIS account. Further more, I had to open a PIS NRO (Non-Resident Ordinary Rupee) and a non-PIS NRO account. If this gets your head spinning, it’s just a start!
 
I took a giant leap of faith and signed all the forms in the right places and also gave him a check from my NRO account to get the proceedings started. True to his word, he had the account opened in 72 hours flat and he also connected me with an online trading company who would (for a nominal fees) allow me to trade online, since I lived half way across the world and can't really call my broker to make the trades. (HDFC Securities would not be able to offer an online trading account.)
 
A trip to the online trading company's sales office and I was confronted with another mountain of forms to fill and sign. I had read the fine print in the RBI notification and was told that I could trade not only in equities but also in Futures and Options. But there was a catch... To trade in Derivatives, I needed to get a CP Code from a securities company.
 
After an hour of filling applications and giving another set of copies of my ID, PAN card, passport size photos, my first born (just kidding!) I was told that it would take up to six weeks for the CP code to come through and then and only then can I start trading. It was time for me to return to the US and I began following up from the US. After about 8 weeks and much pushing and prodding I was told that my CP code was ready and the same was notified to my online trading company, who promptly set me up with an account. I was impressed that while it took time, things did move and I could actually trade from my home computer stocks half way across the world! So I traded happily ever after? Not so fast!
 
After about a week or so, I started noticing that I was being penalized for not having enough margin (although I thought I did because there was enough money in the PIS NRx account). When I started inquiring about this, I was slapped with a freeze on my trading account with a terse explanation that my CP Code has not still been issued and therefore I cannot trade! This got me squarely in between the eyes and I was on the phone hollering with the securities company as to how I did not have a "CP Code" and still could trade. A further two weeks elapsed before CP code was issued and this time around, the margins were established by the securities company and I could resume trading. I had started the process in July and it was December before everything was in place.
 
Trading went well for a few days till I hit another snag. Dealing with futures is a high risk, high reward proposition. I had bought a futures block and tried selling it within a few minutes because the stock was dropping. The online trading system registered the Buy but not the Sell for a full 24-hour window during which the price dropped alarmingly. My phone calls were not returned and before I knew it all my profits were wiped out because of a computer glitch at their end. The company issued a general apology to the trading public but the damage was done.
 
There is another wrinkle in this whole thing. Apparently NRIs and Foreign investors cannot trade on any stock! They can only do so from a list that is updated daily by the RBI. So the process is for the trader to look up this list, determine which stocks he/ she can buy and then proceed to do so. This reeks of socialism where a privileged few somehow managed to get on this list. This is a blatantly protectionist view on part of the government and should be done away with or the real companies in need of cash will not get them.
 
So why the title, you ask? Well in the course of my discussions with the online trading company, I found out that they had only five NRI accounts and only 1 was active (that would be me). So I was the guinea pig on which all these companies learnt to follow the RBI directives. Should I be happy about this? I don't know but I will continue to be active in Indian equities because I am at heart an optimist.
 

 

User

COMMENTS

Navin

2 years ago

An eye-opener for anyone who believe that India has become great investment destination. Prime Minsiter Narendra Modi's thrust on ensuring "ease of business" will remain a dream till such hurdles are placed in the path of investors.Navin Upadhyay

Navin

2 years ago

An eye-opener for all of us who are swayed by the noises made by authorities that all efforts are being made to help NRIs trade in the indian equities. The Government must order an inquiry and ensure that such things are not repeated in future.Navin Upadhyay.

Vivek Mahajan

2 years ago

In a country where the regulators take pride in saying that they have never traded or would never trade in stocks/commodities, how do you expect them understand the pain of investors and lay down investor friendly regulations & procedures? Can a virgin ever understand the labor pain of delivering a child? The law makers continue to be guided by a handful of jokers from various Govt. agencies who hardly understand the serious business of trading/investments.

Dr Anantha K Ramdas

2 years ago

Dear Mr Iyer: I am truly sorry to hear about your experience. I have mine too, but I learnt the hard way, and have also returned from Alexandria, Virginia.

I dont know your location, but you can get in touch with me on email via the Moneylife office, and I am located in Bengaluru. I will be happy to share my experience with you, free of cost.

How the ‘Corridors of Power’ work in Delhi-Part 3

The liaison agent's role withdrew into the background. At the same time, the new media got busy with the business at hand - of mind-bending (PR), of influencing policy (policy groups), of influencing decisions (lobbying) and finally, of pre-empting future movements at and before the decision making stage in governance (espionage) 

 

Liaison work in Delhi of the "get foreign exchange released for business travel" while keeping in sync with the licence raj. The way it was, well distributed to just a few protected families in India were how things worked until around the late 1980s. This was extended to a sort of low-level public relations (PR) of the sort, where multiple global brands arriving in India needed not just visibility but also the ability to reach deep into the markets and was added on to the repertoire by the mid -1990s.
 
Obviously, this was not enough. There was the whole "Bombay Club" issue of "protecting" the Indian manufacturers for one, and the worry that India was really moving ahead of the rest of the world in brain capabilities for another. The lure of a "market" as different from a "country" pretty much sealed the fate of how things were going to move ahead for the global corporates moving in relentlessly, with the dye cast. Now all it needed was the tools.
 
It was at around this time in my life, after selling off my small shipping cargo clearance business, when I saw the writing on the wall. The big guys were going to swallow the small local punters up, that I got interested in "the media", and how it happened was in retrospect quite comical. I used to take part in amateur car rallies in those days, mainly a whole lot of us driving up and down back roads without much worry about rules and regulations, and in due course, I became part of the organisers, putting in solid efforts for route maps and safety as well as operational aspects. All this hard work, purely voluntary, was fine - but then, at the end, along would come some wet-behind-the-ears kind of "media-person" and totally destroy everything in her or his reportage-often because the food or the booze or the gift or the hospitality was not perfect.
 
The media had arrived in India, and it was clear as day to anybody who could keep their eyes open, that this was where the power rests. In a country starved of information for decades, what anybody said in front of a camera, was considered to be the absolute truth. You just had to say it with a straight face, preferably in perfect English, and get it repeated often enough.
 
Therefore, I joined the electronic media. Through a series of coincidences, I found myself as the motoring anchor, the first on TV in India actually, for Doordarshan, Star and NDTV - simultaneously.
 
To start with, there was no PR control, instructions were very clear - the viewer was the constituency, and the viewer wanted the truth. It took just about three years for this to change, which was about how long I lasted, as I simply could not go on TV and be a PR mouthpiece. Meanwhile, I also realised how the power factor of the new media, rapidly emerging into private news and entertainment channels on television were morphing together so quickly that often it was difficult to tell the difference. What anybody said on any screen was considered to be the truth by those choosing to watch that channel.
 
There was even a technology doing the rounds of the multiple new television channels emerging then, which actually quantified how credible a face and voice were or television. This incidentally was linked to early days of subliminal mind management using the then emerging internet also in addition to television. It did not take very long for the denizens of the corridors of power in Delhi (and elsewhere too) to realise this, and thus was truly matured the deep relationship between these two elements therein.
 
I grabbed this technology with both hands, left TV, and moved off into working on esoteric technologies of facial biometrics and subliminal mind management over the internet and elsewhere. With the world becoming an increasingly more dangerous place every day, these technologies, so closely related to electronic media, entered the realm of preventive defence for the larger Nations, of which an important subset was psychological warfare by espionage.
 
All well said and done until it was governments and militaries, which were playing these mind games. But the world was also increasingly populated by multi-national corporations (MNCs), which were way bigger than many countries put together. And they, too, needed espionage to stay alive as well as ahead.
 
Where were they to get their spies from?
 
The liaison agent's role, meanwhile, withdrew into the background of wheeling and dealing and evolved into serious business of the sort carried out in the old colonial clubs and private chambers of 5-star hotels. At the same time, the new media got busy with the business at hand - of mind-bending (PR), of influencing policy ("policy groups"), of influencing decisions (lobbying) and then finally, of pre-empting future movements at and before the decision making stage in governance (espionage). That is where the corporate spies emerged.
 
But they had to be technologically sound.
 
The new age corporate spies, often known as "commercial intelligence", were needed for this last activity. This was the most important, and it was seen that it was fulfilled by these practitioners of the new age media the most, because once aware of which way decision making was going, it was important to raise public opinion to sway the said decision making back in the directions of whoever was paying the said media persons.
 
And thus, was expanded the role of the paid main-stream media, as my friend Mediacrooks puts it, the Category 5 Morons. Nicely controlled by the tech-savvy commercial and corporate spies.
 
Espionage, which at one time was the sport of kings and the domain of countries, had now moved full-time into practice at corporates who were often larger than many Nations put together. And in this constantly boiling pot, jumped in Shantanu Saikia, who even in the early days of the internet, was way ahead of most other media-persons I knew in and around Delhi on his mastery of this brand new medium.
 
The number of "leading journalists" in Delhi who got their websites made and maintained by Shantanu Saikia would when revealed be of great interest as well as a pointer of the direction in which things were moving.
 
And the reality that the percentage of senior leading media-persons in and around Delhi who did not have the faintest clue of what was happening on the internet was something people like Shantanu picked up rapidly too.
 
Who, after all, knows most and best on what is going on in a client's life than his webmaster?
 
Read More
 
 
(Veeresh Malik started and sold a couple of companies, is now back to his first love—writing. He is also involved in helping small and midsize family-run businesses re-invent themselves.)
 

User

COMMENTS

Ravindra Joshi

2 years ago

An excellent 'insight' piece that would help any Grade V moron, such as this retired fauji, make greater sense of what is going on in the nether world, only the tip of which (s)he gets to see.

It confirms what the said moron vaguely suspected but was too dumb to fully understand, even when the murky business has been going on for so long.

So, many thanks to the former 'army brat'and kind regards. To him I'd say: Keep spilling the beans, thick and fast!

Nifty, Sensex, Bank Nifty turn around on Economic Survey – Friday closing report

Nifty’s bullishness will stall if it closes below 8,760

 

We had mentioned in Thursday’s closing report that the move on NSE’s CNX Nifty maybe weak but it may regain strength on a close above 8,750. The 50-share benchmark opened Friday in the positive and made a gradual upmove throughout the session. At the end of the session, it hit its day’s high and closed near to it. The market was waiting for the Economic Survey for 2014-15 to be tabled in the Parliament. The Survey was welcomed by the market.
 
S&P BSE Sensex opened at 28,865 while Nifty opened at 8,730. After hitting a low at 28,837 and 8,717, the benchmarks moved higher to hit a high at 29,254 and 8,857, respectively. Sensex closed at 29,220 (up 473 points or 1.65%) while Nifty closed at 8,845 (up 161 points or 1.85%). Bank Nifty too followed similar pattern of trading. It opened at 18,660 and moved from the low of 18,655 to a high of 19,114 and closed at 19,075 (up 536 points or 2.89%). NSE recorded a higher volume of 126.82 crore shares. India VIX fell 4.91% to close at 19.5700.
 
The stock exchanges will be open on Saturday as the Finance Minister presents the first full-fledged budget of the Narendra Modi government.
 
While tabling the Economic Survey 2014-15, Finance Minister Arun Jaitley stated that the government remains committed to fiscal consolidation and that the deficit target of 4.1% as envisaged in the Budget 2014-15 will be met. As per a medium-term fiscal strategy, there is a need to reduce fiscal deficit to the established target of 3% of GDP.
 
Annual GDP growth was seen at over 8% for 2015-16 and double-digit economic growth trajectory maybe possible in future, hoped the survey.
 
According to the Economic Survey the e-commerce sector in the country is likely to witness a growth of over 50% in the next five years.
 
Coming back to Indian stock markets, Unitech (17.07%) was the top gainer in ‘A’ group on the BSE, despite the fact that a police probe was ordered for Unitech allegedly cheating its buyers. However, the upcoming budget and anticipation of sops for the sector moved the stock higher. Hathway Cable & Datacom (8.49%) was the top loser in ‘A’ group on the BSE.
 
Tata Power (5.43%) was the top gainer in the Sensex 30 pack. Tata Power SED in consortium with L&T is one of the two selected development agencies for prestigious “MAKE” program Battlefield Management System for the Indian Army. L&T (4.67%) was among the top two gainers in the pack.
 
Gail (1.07%) was the top loser in the Sensex 30 stock. The board of directors have approved payment of interim dividend for the FY 2014-15 @ 30% (Rs3 per equity share) on the paid-up equity share capital.
 
On Thursday, US indices had a mixed closing. The consumer-price index fell 0.7% in January 2015 from December 2014, the Labor Department said yesterday. Prices slipped 0.1% from a year earlier, marking the first year-over-year decline since October 2009. Weekly jobless claims rose to 313,000 last week, above the 283,000 in the previous week. Durable goods orders figures for January increased 2.8%, after a 3.4% decline in the prior month.
 
Asian indices had mixed closing. Shanghai Composite (0.36%) was the top gainer while Straits Times (0.68%) was the top loser. Japanese industrial production rose 4% in January 2015 -the second straight on-month increase, following the 0.8% increase in December 2014, data showed today. European indices were showing mixed trading. US Futures were trading marginally in the red.
 
German lawmakers reportedly signalled that they will approve an extension of Greece's bailout with an overwhelming majority in parliament today, although many will do so reluctantly amid fears that Athens will not deliver on its reform promises.
 

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