- Narendra Modi Creator & Destroyer Of Indian Business
- Narendra Modi Brings Beurocrasy & Red Tape
- Get Well Soon Narendra Modi
This blog is
not a political statement.
A blog /
post on appreciations has was written in past
Purposes of
blog is not criticizing Modi, but wish to have ease of doing business in India.
Modi has done various creditable jobs. But Modi went miserably wrong in brining
reform in security market business in India. Rather regulation had brought red
tape, bureaucracy & enabling business only to rich institutions.
Let’s see
how changes made by Modi Sarkar has affected securities business
Posts
winning of election Modi Sarkar come out with new regulation called Research
Analyst regulation. (RA Regulation)
1) Only big institutions should do business (No place for small
advisors)
What’s new
regulation says
“Independent
research analysts, individuals employed as research analyst byresearch
entity or their associates shall not
deal or trade in securities that the research analyst recommends or follows
within thirty days before and five days
after the publication of a research report.”
What old Investment
Advisor Regulation (IA regulation) says
“An
investment adviser shall disclose to the client its holding or position, if
any, in the financial products or securities which are subject matter of
advice. “
a) How it affects SME / entrepreneurs
New
regulation had put restriction on investment by investment advisor in stock he
recommends to clients
When an advisor
gives recommendation to clients he should not invest in it. And if advisor
invest in stock, he should not recommend it to clients
There will
always be few gems (top quality recommendations). Either advisor should invest
(and did not recommend to client) or recommend to client (then did not invest
himself)
Simply what
it means a person who cook delicious food, should not eat it ;)
You may also
find smart advisor will shy to come in media/ CNBC to discuss their investment
idea…thanks for Modi
b) How it helps big institutions
Big
institutions will have separate subsidiary for each business, so it does not
affect them.
c) How does it affect small investor community?
When there
is a talk about large wealth creation, big names come in mind like Rakesh
Jhunjunwala (In India) or Warren Buffet (In world). How frequently you heard a
name of Institution as super wealth creator.
When institution
sells ULIP in 2008, are they more concern about their profit or investor’s
profit?
In 2015,
market was down & institutions promoted SIP.
Now putting
a restriction on advisor likely affect common investor as smart analyst will
not help investor community
d) Will small investor understand it
Investor
will never understood though his interest get sacrificed
Why??
What has
happen now, Modi created a big wave in economy as well as in stock market. All
sins of institutions are washed and will get washed in good karma of Modi
2) Complexity in doing business – red tape & bureaucracy
IA
regulation put compulsion for doing risk profiling. Regulation clearly mentions
that “income details” and “existing investments/ assets” should be taken from
client
Investor can
open demat & trading account without doing risk profiling
Investor can
buy or sell stock as per his wish without doing risk profiling
Investor can
take input new paper or CNBC or other media & buy or sell stock without
doing risk profiling
But if
Advisor wants to give recommendation, he should do risk profiling
My personal
experience, I have seen investor says “I want to invest few thousand / lakhs in
stock market, why should I (investor) share my income or asset details?”
It is more
likely that small investors will do SIP & big investor will do PMS which
will help institutions & will kill SME / entrepreneurs /small players
3) Unfair advantage to big institutions
I have seen Portfolio
/ fund managers talking positively about their investment (stock) in public
media like CNBC tv.
Portfolio
manager did not get any consideration for talking positive, but it is likely
that that stock may go up & Portfolio manager get indirectly benefited. And
after few weeks /months, Portfolio manager can exit stock & at the time of
existing stock he may not inform on CNBC.
IA is put
under IA regulation & RA regulation restriction I am not sure but I guess IA
regulation & RA regulation is not applicable portfolio managers & AMC
Law should
be same for all intermediaries as well as print-tv-online media in securities
business.
4) No value for talent courtesy NiSM
Indian
people are known for their talents. Lot’s of Indian people are working abroad
at senior posts. Institutes like IIM, IIT, IISc, XLRI. NIFT ICAI, ICWAI, CFA, ICSI, medical collage conducts
various education programs
All above
institute / university certificate is valid for lifetime Vs NiSM certificate is
valid only for 3 years.
NiSM does
not give value to Indian talent
Think
opposite what will happen if in future IIM, IIT, IISc, XLRI. NIFT ICAI, ICWAI, CFA, ICSI, medical collage etc
institutes decides that their certificate will be valid for 3 years and every 3
years all students should reappear exams?
New
technology / medicines / operation methods are developed; a MBBS does not give
exam every 3 years
New budget
comes every year. Now GST is coming. CA or law practicing people does not give
exam every three years
Few years
ago service tax (a new law comes in India), but that does not mean a CA or law
practicing people gives exam once again
People do
business in new way: Flipkart largest retailer in India does not own any inventory?
Does that mean IIM – MBA qualified people should give exam every year?
NiSM is education
institute or money printing press?
NiSM is a
printing press of money: Rs 10,000/- per square feet per month?
NiSM charges
Rs 1500 for two hours for a small 4sq foot by 4sq feet area
Roughly say
Rs 50 per hour per sq feet or say Rs 500 per day (10 hours) or say Rs 10,000
per square feet per month (Rs 500*20 days)
Everyone for
every 3 years, IA needs to pay money for two exam IA level -1 & IA level-2
exams.
Nism
certificate should have lifetime validity
5)
I believe most of regulations
as well as consultation papers will help big institutions to expand business
while curbing small players. May be blog is becoming lengthily, let me add just
one point from
Oct-16 consultation paper on IA regulation.
What is
proposed “No person shall organize or offer any scheme/competition/game/”
What I
believe “Schemes/competitions/ games is best thing happened to India.
Schemes/competitions/ games should be promoted /encouraged”
Why I
believe so
i) Talented
people can express their skills through this platform, so these platforms
should be encouraged.
ii) Before
1990 very few singer were controlling music industry. We have lots of new singers
come in limelight after they got chance to participate / win competition in TV
program started in 1990+ like Sa Re Ga Ma (recent say Indian idol, etc)
iii) Indian
people (investment advisor) are not so rich that they can afford advt in
prominent newspaper or TV channel.
iv) It will
also in line with “make in India” initiative of government. We should see some
big Indian people name / institutions coming out in securities market, in next 10 to 15 years with help of Schemes/competitions/
games
v) Competitions/
games promotes entrepreneurship spirit, so it should be respected
Regulator
should ask Schemes/ competitions/ games should register with IA / RA regulation
or other regulation
With this
kind of restrictions, only institutions will do business in India. It will deny
large population to take advantage of Indian talent
Role of SEBI
Over the
last 25 years SEBI has indirectly institutionalized India’s securities market.
But there is big question mark whether small investor has created wealth in
Indian stock market? Indirectly SEBI has killed the spirit of India’s securities
market entrepreneurs as well as affected returns of small investors.
BSE website
shows around 3.41 crore investor base. Investor base / penetration can be
compared with mobile penetration / bank account penetration in India for better
comparison. Simple regulation will help to build large Indian investor base
investing in stock market.
How an IPO
has link to IA regulations?
In earlier
1990 we used to have lot’s of IPO. Even company like Infosys has got itself
listed. Post listed to year 2000 (software rally) it appreciated by 245 time
i.e. 245*100= 24500 % return
It has
created enormous wealth
Now IPO is
regulated but very few IPO. Sometimes IPO prices are also high
Mostly large
company comes out with IPO. Now companies go to PE investment or other option
if they want money
Think over
if company at early stage (small / medium size) comes out with IPO, it can
create wealth for small investor.
How many
small investors invest in PE fund??
Too much
regulation killed the spirit of IPO or way for small investor to access to
create wealth.
Similarly
SEBI is & will deny small advisory business / SME / entrepreneurs / players
to do business
It is more likely
that small investors will do SIP & big investor will do PMS which will help
institutions & will kill SME / entrepreneurs /small players
Will it affect political career / future for Modi ?
Apparently
Indian public can’t afford Rahul Gandhi or Kejriwal as prime minister. There is
no apparent competitor for Modi. We will vote for Modi in 2019 election too
Long live
Modi
