Narendra Modi Creator & Destroyer Of Indian Business

•     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

Fragile Europe Grexit, Brexit & so on….

What happens if you build a 100 story building and, afterwards you come to know that its pillars are weak / structural defect…..

1)     Structural defect

In 1947 One rupee was equal to one dollar

Now its 67 rupee equal to one dollar

Just for imagination, think if in 1947 India & America had come together to form a joint single currency. Would it have been progressive or regressive?

Single currency may not work well as nations have divergence / dissimilarity 

Due to financial imbalance it was Grexist, now labour / immigration imbalance it’s Brexit

2)     Marriages are celebrated & divorces are flip-flop 

If a country wants to leave EURO, can there be step by step, say 15 or 25 years planned separation process / peaceful exit / soft landing 

Any hasty separation is likely cause more damage.

Wish for win-win outcome for all countries!!

This is not a stock market update so no disclaimer / disclosure

Happy Investing

Advisory Performance Review

Cheers !! Celebrating 1st Anniversary of Stock Market Advisory Service Via WhatsApp

 Invest Relax & Keep Smiling

Thank you !!

‪#‎BSE‬ ‪#‎NSE‬ ‪#‎Sensex‬ ‪#‎Nifty‬

Is Investor is a loser with SEBI’s “Research Analysts” regulation 2014

I guess this is the first time I am writing a blog on regulation matter

To protect Investor’s interest SEBI has come out with “Research Analysts” regulation. Research Analyst will get regulated. From interpretation for words / writing of “Research Analysts” regulation I feel Investor is a loser

SEBI has come out with below regulations

Year 2013: “SEBI (INVESTMENT ADVISERS) REGULATIONS”

Year 2014: “SEBI (RESEARCH ANALYSTS) REGULATIONS”

Concerns about “Research Analysts” regulation have been written to SEBI on 12 Dec 2014. By the time of writing this blog, I am still awaiting reply from SEBI

Introducing myself

I am passionate about stock market since 1993/ 1994. It’s 20+years now

I started investment advisory service in 2011, so it’s 3+ year old

I applied for Investment Advisor registration to SEBI in 2013 (got certificate in 2014)

About interpretation of regulation

I)          Investment Advisor may need to comply “Research Analysts” Regulation in addition to existing compliance under “Investment Advisors” Regulation

“Research Analyst” regulation says  “Provided further that an investment adviser, credit rating agency, asset management company or fund manager, who issues research report or circulates/distributes research report to public or its director or employee who makes public appearance, shall not be required to seek registration under regulation 3, subject to compliance of Chapter III of these regulations. ““

“(w) “research report” means any written or electronic communication that

includes research analysis or research recommendation or an opinion

concerning securities or public offer…..”

II)       Let’s discuss further about “Research Analysts”  Regulation with real time example

“Research Analysts” regulation says

“(2) 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.”

“Investment Advisors” regulation says

 (4) 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. 

Let’s take example of Shreyas shipping which declared impressive result on 11-Nov-2014. I guess within 10 minutes of declaration of result, it got upper circuit.

Let us assume

Situation a) if I (Investment Advisor) had bought on 11-Nov at Rs 95, I can recommend it to my client on 11-dec at Rs 179. i.e. client is buying / paying 88% higher price.

Situation b)

i) Technically: if I recommend Shreyas to my client on 11-Nov at Rs 95, I can buy Shreyas on  17-Nov @ 115. (I am assuming 5 days as calendar days and not stock market trading days).

ii)  Practically, it is likely that I may be getting new clients registered with me every week. May be two /three weeks I may continue to recommend Shreyas. In that case I will buy Shreyas at very high price

Compliance under “Investment Advisors” regulation is a win-win situation. I along with clients /reader of blog can buy the same stock in same period.

I felt ultimately Investor (May be myself) or Investor (may be Clients / viewer / reader of blogs) may be a loser with SEBI’s “Research Analysts” regulation

This blog is only an expression of views about regulation. This is not stock recommendation.  Example of Shreyas has been taken to explain implication of regulation by an example. This is not stock recommendation

You can share your views by way of reply or write me email at CommunicateAtul@Gmail.com

Thanks you

Investment Update: Escorts Ltd

Escorts ltd was recommended in Aug-2013 at Rs 89/-  ( Link http://atulgandhicom.blogspot.in/2013/08/escorts-ltd.html )

Last closing price is Rs 166.75

Jun-14 quarter Escort's financial numbers were weak. Subsequent in Sep-14 quarter results, we see operating margin is under pressure.

Advice to exit the stock

Disclaimer:

Any purchase/sale of a stock involves a high degree of investment risk. Caution all investors that they may lose some or all of their investment if they decide to purchase any stock listed here.