Intention
of this blog is not to blame but let India and Indian people rise & shine
Who
is Holding Back India, lets define
A
person / institution “extract money” by misselling product or services to
people rather “taking money” for product or services provided
Example
can be given as
: Hospital
asking for surgery / treatment in ICU with intention to make money for them
rather than improving health for patient
: Cartelization
by cement companies by selling / maintaining higher prices of cement even when
demand was lower. Making handsome profit even at lower capacity utilization.
:
Cartelization by builders by maintaining higher prices of property even when
demand was lower
:
Cartelization by telecom companies by charging Rs 100 to Rs 250 for 1GB of data
prior to Jio’s entry
: Companies
used to sell vanaspati tel (which is 60% cheaper than milk) as ice cream to
make more profit
:
Few decade ago toothpaste company used to opposing salt & coal (to kill
competition), now selling its product with salt and coal
Sebi
got statutory powers post Harshad Mehta scam. Thanks to SEBI, now a day we
don’t have big scam like Harshad Mehta/ Ketan parekh. But while bringing
regulation over decades, SEBI has been instrumental to institutionalized
securities market business in India.
I)
Primary market
PE
investment in, IPO system out
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.
II)
Secondary market
Intermediaries
a)
Mutual fund: Due to nature of product, business is run by institutions
Number
of AMC is 42 (as of Nov-2017)
b)
PMS
For
registering as PMS: Net worth requirement is 2 crore and fees are 1 lac for
application & 10 lac for registration (valid for 3 years), renewal fees 5
lac.
Payment
of fees allows / make eligible to business but can not help / guarantee of income
/ revenue. Registration fees is like license fees to do business.
Higher
/ lofty entry barrier
Number
of PMS is 259 (as of Nov-2017)
c)
IA / RA
Net
worth and registration fees are lower as compared with MF & PMS
Advisor
/ analyst can do financial planning
Total
number is 772 +443 (as of Nov-2017)
Lets
start with
i)
Who create wealth in stock market?
We
talk about Rakesh Jhunjunwala (In India) or Warren Buffet (In world) as
investment guru in stock market. People with highest talent (like IIM, IIT pass
out) may not necessarily make highest profit / money in stock market. It’s more
about judgment / vision / reading between lines / mindset / predicting ahead of
time.
What
do this means is people with highest talent / most sophisticated IT system /
highest capital may not necessary biggest wealth creator
ii)
Due to entry barrier in MF/PMS business is run by institution
Except
few fund / scheme you may find some of top holding in can be same / similar /
well known companies in various mutual fund holdings.
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.
For
MPS, minimum investment requirement by investor is 25 lac or 50 lac (not for
small investor)
Is
institution more interested in their profit or have genuine intention for
create wealth for investor?
iii)
Restriction of doing business on IA / RA
Investor
can get input from print-tv-online media
“There
is no free lunch”
: Say
a broker is giving research report. He is interested in broking income.
:
Information / discussion on TV. Media is interested in income via
advertisements
: Fund
manager talking about his investment (and stating cleverly that it is not
recommendation), is interested in taking his stock price up or increasing
investment return
Investor
can get input from print-tv-online media without risk profiling and KYC.
But
as per SEBI regulation, for IA to give advice to investor, risk profiling and
KYC is compulsory. Investor should give / share details of his income per anum,
various assets and investment done to IA and also reply to questionnaires of
risk profiling.
People
are hesitant to give their personal details like income and assets.
In
addition SEBI has put complex restriction on trading “Independent research
analysts, individuals employed as research analyst by research 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”
So
IA can’t invest in stocks which are recommended to clients
iv)
Grey
area
It
is possible
:
One arm of institution buys a stock and afterword other arm of same institution
recommend same stock to public
:
One arm of institution recommends a stock to public and other arm of same
institution sells stock /books profit.
v)
So
all these regulations since 1992 leads to
:
Small investor should do SIP / MF investment
:
HNI can do PMS
i.e.
only institutions should do business in India.
Investors
will be at mercy of institutions for their return on investment
III)
Word of wisdom
“Transparency”
is the only way to rise for India
i)
Single law should be applicable to all Intermediaries and print-tv-online media
ii)
Anyone talking about a stock should disclose
present
holding,
purchases
/ sale in past one year &
purchases
/ sale in next one year
directly
or through group company / subsidiary / related party
iii)
Small token of amount should be taken as registration fees
