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NSEL investors unlikely to receive more than 60% of their money
Indications are that the government may soon drop the kid gloves treatment to NSEL and its management and allow the CBI to take over. If that happens, most investors will not get anything back from their investment
 
Even as the government begins to distance itself from the woes of National Spot Exchange Ltd (NSEL) investors, we learn that actual recovery, in the form of physical assets, is unlikely to be more than 60%.  Moreover, this information is already known to the investigation agencies and the government. It may be recalled that Jignesh Shah and his team borrowed a lot of time by saying that it was imperative for all involved to be on the same side so that recovery of assets would give investors their money back. Our information from insiders of the Financial Technologies–MCX (FT-MCX) group indicate that this 60% is probably the most optimistic estimate. 
 
Further, we learn that Mr Shah has been negotiating with top brokers such as Anand Rathi Financial Services Ltd, Motilal Oswal Securities Ltd, India Infoline Ltd and others to accept a 20% haircut on the money recoverable.  Repeated talks with the brokers have failed, since the brokers refused to accept the haircut and wanted to pass it on to investors. Some high-networth individual (HNI) investors, who were consulted, also refused to accept the loss. The FT-MCX group had suggested that brokerage houses must take part of the loss and refund money to their investors. However, brokers want to pass on the loss to their HNI investors. From our interaction, it would seem that those who have invested over Rs1 crore in NSEL are bound to take a significant hit. 
 
Interesting, while NSEL investors have refrained from filing litigation against brokers, on the assumption that they are all working and negotiating on the same side, this is likely to be far from the truth. Indications are that the government may soon drop the kid gloves treatment to NSEL and its management and allow the Central Bureau of Investigation (CBI) to take over. If that happens, most investors will end up kissing their money goodbye. In the history of scam investigations, whenever the CBI has taken over a case, there is no question of investors’ getting back their money. 
 
The present situation raises several questions. Although multiple agencies including the Income Tax (I-T) department, CBI, Enforcement Directorate (ED), Forward Markets Commission (FMC) and the finance ministry have investigated NSEL, there is no authentic information in the public domain about the actual assets available with defaulters, the valuation of these assets and whether enough pressure has been brought to bear on them to transfer these to NSEL.  
 
There are also frequent rumours that several powerful people who had invested in NSEL may have used their clout to get their money back. These persons too may have been fooled by its appearance of a regulated exchange with a genuine trade guarantee, prefixed by the word ‘National’. However, it seems increasingly as though NSEL investors, who live in hope that their informal forum will get them justice, may be in for a shock. This scenario could only change if the FT-MCX group is also forced to add its own assets to the kitty to make good the loss. But there are no indicators that the government wants to bring such pressure on the group. One indicator of this is that Jignesh Shah, founder of FT-MCX blames NSEL's former managing director Anjani Sinha and a few others who have been sacked and have also admitted to their actions, but no action has been initiated against them either.
 
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    COMMENTS

    hasmukh

    6 years ago

    I am reminded of a story in which, a monkey gets away with a big loot & the other participants just watching the disappearance of their money.Poor NSEL investors !!

    Dilipkumar Shah

    6 years ago

    ICAI has not conduscted any inquiry against auditors of NSEL for 2011-12, because no complaint has been lodged. such a scam would not have taken place in one year. ould you please take up the matter furhter.

    Jeetendra Agarwal

    6 years ago

    It is very well evident that the government is in hand and glove with NSEL and let us wait for a much bigger scam in MCX. Strangely enough which is being allowed to go on even after knowing the owner of both the exchange is the same person.
    Height of Corruption......

    D N dalal

    6 years ago

    As can be seen from this article that you have the requisite network to get the information.

    If so, kindly lead the battle to expose (i) the precise fraud committed, (ii) in what manner it was committed, and (iii) who were IN FACT responsible for the same.

    Make sure that the Government is not able to hand out kid gloves treatment to those responsible.

    Harish

    6 years ago

    Monopoly of NSE ?

    REPLY

    sathyacumaran

    In Reply to Harish 6 years ago

    sathyacumaran

    the nse and bse and sebi take the investors for an ride and the law makers are law brakers this loss by stock brokers is not actual loss they cheat the investors if the investors is online client they trade in the client account as offline with haircut margins and vice versa and this profit is taken to brokers account and literally we can say that all the accounts of stock brokers firma are fudged for which ICAI ia also well aware and they are also party to it now days even Chartered accountant certification of balance sheet and other certification dependability is under million dollar question so as whole morale integrity honesty and accountabiltiy is totally lost after the advent of Shri ManMohan sing where they themself cheated the public cash for vote scam everything is hushed up even an learned person like Manmohan sing and Chidamabaram stooping to cheap politics is pitable state of affiars people should teach an fitting lesson and GOD should punish them let us pray for evil doers to get punishement in the current life itself is our sincere prayers would pay rewqard

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    The uncertainty on extent of Open Marker Operationss and RBI’s approach toward OMOs should keep supply prone zone of the yield curve (>5-year to 14-year bonds) under pressure,forecasts Nomura

    The bond market is still uncertain on the future of OMOs (bond buybacks - open market operations of RBI – Reserve Bank of India), says Nomura Financial Advisory and Securities (India) Private Limited in its First Insights research note. Along with the impact on rupee liquidity from FCNR (foreign currency non-resident) deposits, which questions the extent of the bond buyback requirement, the RBI Governor’s remark on OMOs in a post-policy conference also underlines the uncertainty: “I don’t know whether it should be long bonds or short bonds….we could debate what maturity of bonds we should use and whether we should have a significant effect in the long end and whether we should, those are all issues that are completely open for debate”. The uncertainty on extent of OMOs and RBI’s approach toward OMOs should keep supply prone zone of the yield curve (>5-year to 14-year) under pressure, forecasts Nomura.

     

    Nomura notes that OMOs during the second half of the fiscal year have historically been heavily supportive of India’s bond markets and have kept yield curves flat, despite the issuance pressure in the belly of the curve. However, the current uncertainty on the RBI's approach toward OMOs will keep bonds with a maturity of greater than five years under pressure. As such, Nomura believes that, once market expectations of the terminal repo rate stabilise (the OIS - Overnight Indexed Swaps curve should guide us in this respect), investors can then look to accumulate bonds in shorter tenors (i.e., 3-year to 5-year). However, for bonds with tenors greater than five years, especially 7 years to 14 years (where bond supply is heaviest), the uncertainty (around OMOs) needs to be resolved before the market can stabilise there. As such, only long term investors (who are less prone to mark-to-market moves) should look to accumulate at good absolute levels (e.g., close to 9% on the 10yr benchmark).

     

    Nomura expects that Rs1-1.2 trillion of OMOs in the second half of this fiscal year. However, the uncertainty over the RBI's approach to OMOs will likely dominate price expectations in the near term. Therefore, Nomura suggests that investors stick with the 3-year to 5-year part of the curve, and wait for clarity on the RBI's approach toward OMOs before looking at tenors beyond five years.

     

    Before the bond market can reach a state of equilibrium, there is another source of uncertainty, according to Nomura. The market is still uncertain on the terminal repo rate. Looking at the OIS forward curves, the market is pricing in about an 8% terminal repo rate. However, given the uncertainty and ‘data dependent’ nature of the future outlook, it is likely that the market has not yet reached equilibrium levels in terms of market expectations of the terminal repo rate. In Nomura’s base case, it expects an 8% terminal repo rate before a prolonged pause.

     

    RBI announced its second half borrowing calendar yesterday, with an expected Rs2.35 trillion of issuance. This was consistent with market expectations. There were some concerns among market participants that the second half borrowing calendar would include another Rs500 billion of bond supply to account for 'debt switches' that the RBI is expected to conduct in second half of this fiscal year, concludes the Nomura research note.

  • User

    NSEL fallout: ICAI begins probing Financial Technologies, NSEL issues

    The accounting watchdog has begun looking into the matter where auditors of Jighesh Shah-led Financial Technologies and NSEL have withdrawn their audit reports

    With Deloitte Haskins & Sells, the auditors of Financial Technologies (India) Ltd (FTIL), withdrawing their audit report, the Institute of Chartered Accountants of India (ICAI) has begun probe into the matter. FTIL is the promoter of crisis-hit National Spot Exchange Ltd (NSEL). 

     

    Subodh Kumar Agrawal, president of ICAI, said, “There are certain provisions in the auditing standards that allow an auditor to withdraw report...We are looking into it and will gather information from the persons concerned including various regulators and others concerning Financial Technologies India Ltd (FTIL) and NSEL”.

     

    As per the practice, we would give those 20-21 days to submit the information, he added.

     

    On Tuesday, Deloitte Haskins & Sells withdrew its audit report on FTIL saying the financial statements for 2012-13 financial year cannot be “relied upon” any “longer” in the wake of NSEL payment crisis.

     

    According to sources, the withdrawal came since NSEL’s auditor Mukesh P Shah & Co also withdrew the report.

     

    The audited accounts were to be placed for FTIL’s annual shareholders meeting today but the auditor red-flagged the financial statements and withdrew its report.

     

    NSEL, a company promoted by FTIL, is facing a crisis of settling Rs5,500 crore dues to 148 members-brokers, representing 13,000 investor clients, after its trade was suspended on 31st July by government orders.

  • User

    COMMENTS

    R Balakrishnan

    6 years ago

    Delightful- ICAI still has no clue about what is to be done. Seems to be plugged with morons at all end.

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