Impact ![]()
Brokers and wealth managers once again have come under Securities and Exchange Board of India’s (SEBI) purview for transmitting unverified or unauthenticated information to clients or general investors.
In an effort to prevent stock manipulation on the stock exchanges, SEBI has asked broking firms to ensure that their staff does not circulate rumours, or unverified information, obtained from client, industry or any other sources. Unauthenticated news pertaining to a particular stock when transmitted through chats, blogs, mobile phones, etc. has an adverse impact on the trading price of such a stock.
According to SEBI, due to lack of proper internal controls and poor training, employees of such intermediaries are sometimes not aware of the damage which can be caused by circulation of unauthenticated news or rumours.
Broking houses will also have to ensure (as per SEBI’s circular) that any market-related news received by their employees, either in their official or personal mail, should be forwarded to clients only after the same has been approved by its compliance officer. If an employee fails to do so he or she would be liable for actions.
In our opinion, the initiative taken by SEBI would help in reducing dissemination of unauthenticated information, but not completely eliminate such happening. We think that instead of just asking the brokers or wealth managers to keep a check on the information outflow, SEBI should ask brokers to provide recommendations to investors, which are backed only through thorough research.
Remember as a responsible investor one should always go with the piece of advice which is backed by thorough research in order to prevent a financial loss. One should not get lured by tips offered by unknown entities through different modes of communication, like SMS, emails, blogs, chat rooms, etc. while doing your investments.
| Multibagger Stock Ideas
Claim this Free & Exclusive Guide Today. Act Now!
CLICK HERE to know more... | |  Impact ![]()
The Government is mulling ways to amend the Banking Regulation Act, 1949 through which RBI would be empowered to seek information from an entity running bank and other businesses like insurance and asset management as well.
Empowering RBI is essential for obtaining information about other businesses of the corporate houses seeking banking licences, in order to protect depositors’ interests.
We believe that granting appropriate powers to the RBI before issuing new banking licences would strengthen the financial system further. This in our opinion is much needed in the world financial exuberance, where industrial houses too are seeking banking licenses.
As per the current practice, India follows subsidiary model where non-banking business of a bank like insurance and asset management are subsidiaries. But since there’s risk involved in these non-banking businesses, the extra teeth which is proposed to be given to may reduce such a risk. | |
Impact ![]()
The rise in lending rates by several banks and housing finance companies, have finally led to prospective home loan borrowers re-think of availing a home loan.
The rises in home loan rates have been a result of Reserve Bank of India’s (RBI) monetary policy stance in order to tame inflation. So far RBI has increased policy rates 8 times since March 2010.
| | Increase / (Decrease) since March 2010 | At present | | Repo Rate | 200 bps | 6.75% | | Reverse Repo Rate | 250 bps | 5.75% | | Cash Reserve Ratio | 100 bps | 6.00% | | Statutory Liquidity Ratio | (100 bps) | 24.00% | | Bank Rate | unchanged | 6.00% | (Source :RBI website, PersonalFN Research)
But the rise in policy rates has started displaying an adverse impact on Mumbai’s real estate market.
Property sale registration in India’s financial capital has fallen for the second consecutive month. The downtrend in sales volumes for the month of February 2011 is similar to that seen in January 2011. Sales registrations at 4,716 are down 22% year-on-year and 7% month-on-month, according to a study by Prabhudas Lilladher.
The absurd rise in property prices especially in Mumbai suburbs too is one of the dominant factor which is keeping buyers away. Sales in Mumbai Suburbs are down by 26% year-on-year in February 2011. While the sales in the city have expanded 13% year-on-year, albeit on the lower base of last year.
 (Base = Rs 10,000)
(Source :ACE MF, PersonalFN Research)
This downtrend in the property sales is also supported by the weak fundamentals of the real estate companies which are reflected in the realty index (see graph above). The real estate companies’ profits have been hit hard as their interest costs too are going up along with home loan buyers feeling the pinch (of high borrowing rates).
In our opinion, property sales are likely to drop further more as the central bank appears to be quite vigilant on controlling spiralling inflation. The sales in the city however would not be impacted much with this, despite the fact that the island city continues to command a premium.
Property buyers who are looking at real estate as an investment would delay their purchase. But, those are looking to buy one to live in their dream home would continue to buy.
| | | Weekly Facts |
| Close | Change | %Change | | BSE Sensex* | 18,815.64 | 936.83  | 5.24% | | Re/US$ | 44.76 | 0.4 | 0.95% | Gold /10g | 20,995.00 | 385.0 | 1.87% | | Crude ($/barrel) | 115.00 | 4.8 | 4.39% | | FD Rates (1-Yr) | 7.00% - 9.00% | Weekly change as on March 24, 2011
*BSE Sensex as on March 25, 2011
| |
In this issue
| |
This Week's Poll !!!
************
What do you rely on for making investments?
- Own Research
- Other research
- Tips from friends and family
To Vote Now! | |
In an interview with the Financial Express, Mr. Aditya Puri - Managing Director, HDFC Bank shared his views on deregulation of savings rate and new banking licences.
Mr. Puri believes that in a tight liquidity situation where the interest rates are high, one should wait for the market conditions to normalize in order to deregulate savings rate. He explains further by saying that, "It’s just like if you do an oil price deregulation when the price is at $50 to $60 a barrel you would not have a problem. However, at $110 per barrel you will have a problem."
He also cites that once savings rate are deregulated, the charges associated with it would also have to be deregulated. And, such a price discovery, he believes, will hurt financial inclusion.
On issuing new banking licences, Mr. Puri said that India needs more banks as there is a demand and supply mismatch. Explaining further he said, "If anybody thinks these new participants will alter the landscape in a hurry, it will not happen. As for industrial houses being permitted, both models exist in the world - professionally managed as also those owned by large industrial groups."
| |
Peerless MF Child Plan : Peerless MF Child Plan (PCP) is a debt-oriented hybrid fund which combines equity and gold ETFs with along with debt funds. PCP aims to generate a stable portfolio having major exposure to debt segment, followed by investments in large cap companies for its equity segment. Gold will enable PCP to hedge against the risk of inflation and would safeguard the fund’s equity portfolio during turbulent time of the equity market.
To read more please Click here.
| |
Securitization: The process through which an issuer creates a financial instrument by combining other financial assets and then marketing different tiers of the repackaged instruments to investors. The process can encompass any type of financial asset and promotes liquidity in the marketplace.
(Source: Investopedia) | |
QUOTE OF THE WEEK
"The world does not pay for what a person knows, but it pays for what a person does with what he knows."
- Laurence Lee | |