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| September 29, 2017 |
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Impact 
The message Securities And Exchange Board of India (SEBI) is communicating to fraudsters these days is: “Clean up your act or else bear the brunt of disciplinary actions.”
The instances of abusing/violating laws to evade taxes, and using stock markets as a medium for it aren’t new. Income-Tax Department (I-T Department) and SEBI have unearthed atleast 32,000 cases in which they suspect such violations have taken place.
And to make this happen, SEBI has undertaken a significant overhaul of its regulatory framework. Compared to the yesteryears, its regulations are stricter, smarter, and undoubtedly direct to curb and prevent double-dealings in the capital markets. Going a step further, SEBI is now working on creating a preventive surveillance system that aims to nab promoters, operators, and other market participants perpetrating frauds and money laundering activities. At present, the proposed regulatory reforms are in the discussion phase, and the capital market regulator is expecting inputs from stock exchanges and depositories on the subject.
SEBI’s presently in-placed surveillance systems are producing over a 100 alerts per day for the further investigation of probable cases of market manipulation. To break the back of fraudsters and market manipulators, SEBI is now expected to join hands with enforcement agencies. If this association achieves, the set objectives will go a long way in preventing and curbing the inflows of black money in the capital markets.
This is what SEBI official had to say about this development— “The regulator is undertaking a comprehensive review of its surveillance systems. It is working on several measures that would fill the gaps in existing regulations and would be preventive rather than reactionary.”
And further added that, “The exchanges and depositories require the adoption of an advance technology that would support scrutiny of promoters and stakeholders of such companies. This could be done with the help of an advance database, which could be created in coordination with brokerages.” To give an idea of the role stock exchanges are playing as of now, an official said on the condition of anonymity, “The exchanges are analysing the past instances and the modus operandi adopted by the manipulators to plug the loopholes.”
But SEBI wants intermediaries and stock exchanges to play an even bigger role.
The capital market regulator now wants them to:
What will change in coming days?
By and large, it’s the price manipulations in the penny stocks that has caught the attention of SEBI so far. But now, it’s going to catch sharks in the deep sea—even large-caps and mid-caps and their promoters won’t be spared if caught red-handed. SEBI has already come down heavily on sham companies. Looks like the witch hunt for Babas in Lord Ram’s clothing has begun.
Kaccha sauda nahi hoga, ab accha sauda. No foul play anymore, only fair play in the capital markets.
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Impact
The interest rate on Public Provident Fund (PPF) may fall to a 37-year low soon.
And those on all other Small Savings Schemes (SSS) may also decline in next few days.
If…
The Government decides to reduce interest rates on SSS by 10 Basis Points (bps). One basis point is one-hundredth of a percentage.
Interest rates on SSS at present…
| Small Savings Scheme |
Interest rate |
| 5-year National Savings Certificate (NSC) |
7.8% |
| Senior Citizen Savings Scheme (5-year maturity) |
8.3% |
| PPF |
7.8% |
| Sukanya Samriddhi Yojana |
8.3% |
| Kisan Vikas Patra |
7.5% |
(Source: India Post)
Historically, interest rates on SSS were shuffled only once a year. However, the Government changed this practice in the recent years when banks complained about deposits turning unattractive due to administered rates on SSS. So, the Government tried to ameliorate SSS rates with more market drive.
The strategy is likely to backfire on the Government if it decides to lower the interest rates even in Q3, FY 2017-18.
To read more about this story and Personal FN’s views over it, please click here.
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Impact
Why do some balanced mutual fund schemes outperform a majority of pure equity diversified schemes?
Well, the answer lies in their asset allocation. Some balanced schemes take their equity exposure to as high as 70%-75%, hence outperform many pure equity schemes.
Balanced schemes are expected to invest around 65% in equity, while equity-diversified funds maintain an equity allocation in excess of 80%. Yet, many balanced funds intentionally raise their equity exposure to take advantage of a market rally. If you noticed, these schemes are able to do well by being quite unbalanced. With this allocation strategy, several balanced schemes are able to outperform their benchmark- the CRISIL Balanced Fund Index-by a wide margin.
To read more about this story and Personal FN’s views over it, please click here.
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Impact
India’s GDP growth for Q1FY18 fell to a dismal 5.7% (a 3-year low) as against 6.1% in the previous quarter. The Gross Value Added (GVA)––—a refined parameter which excludes taxes and subsidies–– too dwindled to 5.6% from 6.6% in the last quarter, significantly lower than 7.6% a year ago. And now to revitalise economic growth, the Government is batting for a policy rate cut.
But will the Reserve Bank of India (RBI) budge; is there real scope for monetary easing?
Well, let’s take stock of the macroeconomic situation to get the answer…
- Retail inflation (as measured by the Consumer Price Index (CPI)) has inched-up for the second consecutive month in August 2017 to 3.36% from 2.36% a month ago, as the Consumer Food Price Index (CFPI) reported a positive reading (of 1.52%) after three months of contraction.
To read more about this story and Personal FN’s views over it, please click here.
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If you had filed Income-Tax (I-T) returns online, you will have to update your personal details and create your complete profile at the e-filing portal of the I-T Department. The department has already issued an advisory saying, “New registration process to facilitate effective communication between the taxpayer and the department is enabled. The existing e-filing users are required to update their profile by logging into e-filing account. Users who have registered already and not activated has to register again."
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Market Surveillance: The prevention and investigation of abusive, manipulative or illegal trading practices in the securities markets. Market surveillance helps to ensure orderly markets, where buyers and sellers are willing to participate because they feel confident in the fairness and accuracy of transactions. Without market surveillance, a market could become disorderly, which would discourage investment and inhibit economic growth. Market surveillance can be provided by the private sector and/or the public sector.
(Source: Investopedia)
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Quote:"The most important quality for an investor is temperament, not intellect." - Warren Buffett
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