S&P BSE Sensex*	Re/US $	Gold Rs/10g	Crude ($/barrel)	FD Rates (1-Yr)
18,835.77 | 100.2 0.53%	54.37 | (0.1) -0.17%	29,540.00 | (140.0) -0.47%	108.01 | (0.4) -0.35%	7.25% - 9.00%

Starting the process of setting up Self-Regulatory Organisation (SRO) for mutual fund distributors, the Securities and Exchange Board of India (SEBI) has begun to invite applications from groups of intermediaries interested in forming such an oversight body.

The move follows notification of norms by SEBI in January 2013 to set up an SRO for regulation of distributors of mutual fund and portfolio management products.

As per the norms, an applicant seeking a SRO status from SEBI will have to be registered under section 25 of the Companies Act, 1956 and will have to comply with the following criteria:
 

• Should have a minimum net worth of Rs 1 crore
• Should have adequate infrastructure to enable it to discharge its functions
   

Besides the directors of the applicant entity would need to have:
 

• Professional competence
• Financial soundness
• General reputation of fairness and integrity
   

Also it is stipulated that, the applicants and their directors must not be involved in in legal proceedings connected with the securities market or have any conviction for an economic offence.

It is noteworthy that according to the norms the certificate of recognition as a SRO would be valid for a period of five years, and will be binding on mutual fund distributors.

We are of the view that, formation of SRO for mutual fund distributors would indeed help infuse proficiency among the mutual fund agents and distributors community, and may even curb incidences of mis-selling. But with aforementioned criteria set in for applicants, how many applications the capital market regulator indeed receives needs to be seen. In our view, with the aforementioned criteria may be perceived demanding by many mutual fund distributors, and thus there may not be many mutual fund distributors who may seek SRO status from SEBI.

To read how to select your mutual fund advisor wisely, please click here.

Can mid and small caps create wealth for you in 2013?

After beginning the year 2013 with an ascending move, the Indian equity markets have languished since global economic headwinds and downbeat domestic macroeconomic data has been in the backdrop. Thus if you were to invest in the New Year 2013 getting carried away by the recovery in equity markets after reforms being put at the forefront by the Government; you may have witnesses disappointment so far in year 2013.
 

Relative Performance: Large caps vs. Mid caps vs. Small caps

Base: Rs 10,000
Data from January 01, 2013 to March 26, 2013
(Source: ACE MF, PersonalFN Research)

As revealed by the chart above, irrespective of the market cap segment which you may have selected, in the three months period January 2013 to March 2013 there’s occurred wealth erosion. And it is small caps which have taken the maximum beating followed by mid caps and large caps. If one were to invest Rs 10,000 at the beginning of the calendar year (i.e. on January 1, 2013) each in S&P BSE-100, S&P BSE Midcap, S&P BSE Smallcap, one would have yielded a sum of Rs 9,334 Rs 8,410 and Rs 7,687 each as on March 26, 2013.

So would be wise to stay invested in mid and small caps?
We are of the view that, the rally in mid and small caps took place in 2012 after the reform measures were taken by the Government and since valuations in the segment appeared attractive. Now that earnings growth in the mid and small segment has fell short of expectations of the market, a descending move has occurred. in the mid and small segment. For the mid and small cap to create wealth at an accelerated pace going forward, it is imperative that reform measures translate in benefiting companies in the mid and small segment, which in turn will have a positive impact on their earnings.

Hence while you may like to play in the market capitalisations prudently in your objective of wealth creation, we recommend that you invest in flexi cap funds which as per their mandate tilt their portfolio sighting opportunities in each market capitalisation segment. However while selecting mutual funds for your portfolio, prefer the one which follow strong investment processes and systems, and invest with a long-term horizon of at least 5 years.

Are you indulging in Collective Investment Schemes of Real Estate companies? Read this!

The rapid real estate development in the country has been rather fascinating and has enticed many to participate in the exuberance, where we have witnessed skyline of cities changing. The growing appetite for risk supported by rise in income levels has also encouraged many to gain from this, as many do indulge in collective investment schemes of real estate companies to share the benefits on a pro-rata basis. But you got to be careful, with whom you are dealing and not get lured by tall claims and fancy propositions.

Recently suspecting frauds in projects being launched by numerous real estate developers, capital markets regulator - SEBI has initiated a probe for possible violations of Collective Investment Scheme (CIS) regulations. The capital market regulator has been flooded with complaints of investors being duped by real estate companies promising huge returns in projects. To know more about this news and to read our view over it, please click here.

Has there been a failure to curb gold imports?

A couple of months back – to be precise on January 21, 2013, the Government of India slammed a 6% import duty on gold, raising it from 4% earlier in an attempt to curb widening country’s Current Account Deficit (CAD), assessing the fact that the country remains the largest consumer of gold.

Later in February 2013, the Reserve Bank of India (RBI) working group also recommended setting up of gold banks and introduction of gold-backed financial products, which in their view would help curbing gold imports as financial products providing returns akin to the precious yellow metal may lure investors to such an investment in gold. The panel also suggested Introduction of products like gold accumulation plan, gold linked account, modified gold deposit and gold pension product and introduction of tax incentives on instruments, aiding to impound idle gold. Also, aiming to put idle gold to productive use, it was proposed that a gold bank or a bullion corporation be assigned to act as a backstop facility to provide refinance to institutions lending against gold.

Moreover it is noteworthy that, RBI in its 2nd quarter mid-review of monetary policy 2012-13 (held on October 30, 2012) also advised banks not to lend to dealers or traders in gold for purchase of gold in any form (including primary gold, gold bullion, gold jewellery, gold coins, units of gold Exchange Traded Funds (ETF) and units of gold mutual funds) barring for genuine working capital requirements of jewellers, thereby aiming to trim demand and speculative activities.

But all these measures haven’t been able to reduce India’s insatiable appetite and flair to own the precious yellow metal. To know why demand for gold is still robust, please click here.

 

 

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If you are the one getting swayed by tall claims made by investments schemes, structured as chit funds you got to be careful. Recently, SEBI expressed concern over mushrooming growth of chit funds in the country, especially in the eastern region, and said strong action was needed to curb their activities.

“The type of promises (some of) these companies are giving are such that no legitimate business activity can provide that sort of returns,” SEBI Chairman, Mr. U.K. Sinha said.

SEBI at present has initiated proceedings and investigations are made against, but taking advantage of the loophole in the law, such companies are seeking relief from the court. In the meanwhile, SEBI has requested the Government to come up with a new set of laws providing for a single regulator for these companies.

We are of the view that, one need to be cautious and not get swayed by tall claims (on returns front), made by companies floating chit funds. In the past there have been horrendous cases of investors being duped and such chit fund companies fleeing away with investors’ hard earned money. We believe it is imperative to invest your hard earned money by applying enough prudence, in order to create wealth in a systematic manner in the long rum and to achieve your life goals.

 

 

 

 

Chit Fund Company: Chit fund company means a company managing, conducting or supervising, as foremen, agent or in any other capacity, chits as defined in Section 2 of the Chit Funds Act, 1982.

 

Quote : "In the long run, investing is not about markets at all. Investing is about enjoying the returns earned by businesses."   - John C. Bogle