Is this the end of a 'retail investor friendly' era? - The 5 Minute WrapUp by Equitymaster
Investing in India - 5 Minute WrapUp by Equitymaster
PRINTER FRIENDLY | ARCHIVES

Is this the end of a 'retail investor friendly' era? 

A  A  A
In this issue:
» After telecom scam here comes 'kerosene' racket
» Are you in favour of more foreign banks in India?
» US, UK lying about inflation says Rogers
» The biggest risk to global recovery
» ...and more!!


------------------------------- Crash Proof Your Portfolio -------------------------------
Imagine... The stock markets have crashed by 20%.
Trading on the exchange has been suspended.
Television anchors -- the cheerleaders for the rally thus far -- are looking as though they have seen a ghost.
But here's what matters the most - "How have YOU been impacted by the crash?"
If you want to be one among the very few who are geared up for any adversity, then, you need to see this right away!
Hurry... This opportunity will disappear forever on 31st January 2011!

------------------------------------------------------------------------------

00:00
 
Retail investors in India have not had too many godfathers vouching for their safety. And whenever there are any, stakeholders with vested interests have ensured that the godfathers do not stick around for long. Even the government that asks for an extension of term at the end of 5 year period seems to turn a blind eye to stability of good governance. What else can explain that the existing SEBI chief Mr Bhave will soon be replaced at the end of a mere three year term? Despite there being no reason to refuse him an extension for another two years!

To make our stand clear, there is no offense meant to his successor UTI AMC chief Mr U. K Sinha. However, we believe that Mr Bhave's premature exit could leave a lot of clean-up work in the mutual fund industry incomplete. Mr Bhave has strived to provide more safety mechanisms for small investors against the might of companies and mutual funds. But probably this has brought him in the eye of storm of these biggies. And as our founder Ajit Dayal says, an independent SEBI or RBI is not in their interest. In fact there is starker reality that he highlights in the 'Honest Truth'. "In the 1980's over 10% of our annual savings went to the capital markets. Now it is less than 3%. Investors are scared of scams and scamsters. This was an opportunity to clean up the system." But unfortunately, the policymakers in India themselves seem to have got used to living in murky waters. And until retail investors in India find their next godfather, this may be the end of an era.

Do you think Mr Bhave's exit will mean the end of a 'retail investor friendly' era? Let us know your views or post them on our Facebook page.

01:20  Chart of the day
 
Today's chart of the day shows that India figures among those emerging economies having the highest benchmark interest rates currently. This is hardly surprising. Food prices in India have been high for quite some time now. This is turn has fuelled overall inflation which has refused to ease off considerably. Therefore, to bring inflation under control, the RBI has been raising rates consistently for the past many quarters. And because this has not brought inflation down to levels that the central bank is comfortable with, further rate hiking measures in the future cannot be discounted.

Data source: global-rates.com

01:50
 
Looks like the scandals and scams did not end with 2010. The latest in the scheme of things is the 'kerosene racket'. Unfortunately for this one there is no one person that can be blamed. Probably there is - the system. Kerosene, which is a poor man's fuel, is being mixed with diesel, the truckers' fuel to bring down costs for the latter. Kerosene is currently priced at Rs 12 per liter while diesel is priced at Rs 38 per liter. There is a Rs 20 per liter subsidy on kerosene which is paid by the government. The idea behind keeping kerosene subsidized is to not put pressure on the poor man's wallet. By mixing the subsidized fuel with diesel, the effective cost of diesel for the trucker comes down. Hence the government's subsidy ends up helping the richer trucking companies instead of the poor.

The total quantum of subsidy being 'mis-utilized' in this ingenious manner is a whopping Rs 200 bn. But the bigger shock is that this amount is half of the sum that the government is spending in the NREGA (National Rural Employment Guarantee Act) scheme to generate employment for the poor. So thanks to this racket, the poor are being hit from both sides. The fuel that has been subsidized for them goes to the truckers. And the amount of the government's subsidy that is lost on it could be better spent on generating more jobs for them. So who is to blame? The truckers, the government or just the poor for having bad luck? Probably the system. When there are loopholes there will always be the 'ingenious' corrupt who would take advantage of the same.

02:30
 
The RBI has recently released a 20 page discussion paper on whether or not to allow foreign banks more leeway on Indian shores. Being its conservative self, the central bank is taking every step to ensure that the foreign entities do not bring unwanted risk exposures. But the foreign entities themselves are eyeing the opportunity with greed. After all, the vast underpenetrated opportunity in Indian financial space can hardly be ignored. And it may be easier to develop complicated products in an uncomplicated market. Ironically Indian banks have been offered very little room to offer banking services in the Western markets. So we do not believe that this one sided liberal policy is meant to serve the interest of Indian financial markets. However, we rest assured that the RBI will keep its hawk eye on all vested motives. But probably, as an account holder dear reader, you too should let your views be known to the RBI

03:03
 
Inflation has already reared its ugly head in the emerging nations including India. Most governments there are struggling to bring it under control and have announced several rate tightening measures. But the US and UK are not too concerned about inflation. Because a meaningful recovery is yet to take place and unemployment still remains high, the governments in the US and UK feel that they do not need to worry about the dreaded 'I'-word. But noted investor Jim Rogers thinks differently. Rogers believes that officials in the US and UK are lying when they say that inflation is not a problem. Inflation may not be such a problem for these 2 developed countries in the near term at least. This is simply because both are struggling to battle recession and bring down the high unemployment levels. The problem is that the governments there are looking to solve the issue by excessive money printing which has already bloated debt levels. So that when these 2 economies do recover, excessive money supply in the system means that inflation will be the next big problem for both these countries.

03:40
 
Protests and street fights in Cairo and other Middle Eastern capitals have intensified. And as inevitable as it is, their desperation for democracy is quite justified. But their political battle has a direct economic repercussion on the rest of the world. And this is no new thing. Chaos in oil-producing countries brings with it instability in oil prices. So if oil prices start acting funny, it could very well spell doom for the ailing western economies.

Add to that inflation created by central bank printing presses. And oil prices would go soaring over rooftops. To add further, the US has enough trouble at home to worry too much about the Middle East. Rising gas taxes imposed by broke US local governments threaten to push up oil prices anyway. All this could very well see the so-called Western economic recovery "resting in peace".

04:15
 
Most of the key global stock markets ended the past week on a negative note. Brazil was the biggest loser of the week down 3.5% while China and Russia were the biggest gainers, up 1.4% each. Most of the European markets were under pressure as a result of the political turmoil in Egypt which threatens to spill over into the Middle East.

India (down 3.2%) was one of the worst performers of the week on concerns of food inflation and a 0.25% hike in key interest rates by the RBI. Among other Asian markets, Hong Kong was down 1.1%. However, the remaining Asian markets closed the week in the green. China and Japan closed the week up 1.4% and 0.8% respectively. US also closed the week in the red, down 0.4%.

Data source: Yahoo Finance, Kitco


04:45  Weekend investing mantra
"An organization's ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage." - Jack Welch
The 5 Minute WrapUp Premium is now Live!
A brand new initiative of Equitymaster, this is the Premium version of our daily e-newsletter The 5 Minute WrapUp.

Join us in this journey to uncover the sensible way of managing money and identifying investment opportunities across various asset classes including Stocks, Gold, Fixed Deposits... that over time can help you realize your life's goals...

Latest EditionGet Access
Recent Articles:
You've Heard of Timeless Books... Ever Heard of Timeless Stocks?
August 19, 2017
Ever heard of Lindy Effect? Find out how you can use it to pick timeless stocks.
Why NOW Is the WORST Time for Index Investing
August 18, 2017
Buying the index now will hardly help make money in stocks even in ten years.
This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)
August 17, 2017
A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.
This Company Beat the Business World's 'Three Killer Cs'
August 16, 2017
And what it has in common with beating the stock market too.

Equitymaster requests your view! Post a comment on "Is this the end of a 'retail investor friendly' era?". Click here!

51 Responses to "Is this the end of a 'retail investor friendly' era?"

Soumitra Mukhopadhyay

Feb 9, 2011

Mr Bhave has been the most investor friendly administrator. In case a super regulator is put in place as suggested by the finance minister, he must find a place in that board.

Like 

kewalkrishan

Feb 8, 2011

Bhave"s contribution to the Securities market has been immense.His first priority was the of the retail investors.He deserved an extension.Despite reforms in the securities market ,the intermediaries are running amuck.Grievance redressal is in a pitiable state.Complaints against the DPS do not get redressed for years together.
Our complaints against ANAND RATHI ,who lost our shares of Aeiges Logistics(200Equity)&Venlon Polyester(360 equity)given in june,2006(BOID 1201060000421099)have still not been resolved despite writing to SEBI(reference no.MIRSD -1V/ag-DP/cdsl/199509/10 dt. 17-2-10 &CDSL no.IG/SBK/2010/2779 DT.19-5-10,despite dozens of letters &EMAILS to DP/CDSL AND SEBI during the last four years on purely frivolous grounds.And now there is a proposal to form a SUPER REGULATOR FOR THE FINANCIAL SECTOR?

Like 

Manoj Kumar

Feb 8, 2011

No! I don't think so. Remember what happened after T N Sheshan, the election commission didn't lose its sheen and we continue to get the free and fair elections in all the states, similarly we expect from other independent authorities. Change is the way of life and we should accept it.

Like 

Piyush U Singh

Feb 3, 2011

One can cite a phase difference in the economic status of developed & developing economies (esp. BRIC). The sentiments of consolidation (prevalent in developed economies) can be very ephemeral - as the issues of inflation & credit-payback may surface in the near term. It would be very interesting to witness the changing recipe of world economy in next 10-20 months - as there are no clear winners. Thanks to the indigenous issues fostered everywhere.

Like 

Rajesh Maydeo

Feb 1, 2011


Yes. Today i.e on 1 Feb 2011, the GoI has officially announced the appointment of Shri Sinha as the next SEBI chief. When the mutual fund industry came to know about his appointment some days back, they immediately started voicing their views about the differntial entry load and one should not be surprised if the entry load regime may be introduced in some form or the other by SEBI AND as you rightly said there is no one to protect the retail investor.
Let us hope that the wise counsel will prevail and the new SEBI chief will continue the good doings introduced by Shri Bhave.

Like 

kaycee

Feb 1, 2011

Bravo BHave!

Well, from the days of close knit brokers strangulating what was then a single market BSE, in late seventies thru to early eighties, Stock Exchange to the retail investor was literally a black box. One had to accept whatever these brokers (predominantly from one community!) wrote in the slip as the best price they could buy or sell in executing your orders. NSE creation, as a fully automated and price transparent mechanism is virtually a one man show - none other than Bhave. Then came the revolution to take its access to every corner of the country. Now I can be in Dalal Street (well, for sentiment sake, though bulk of the action takes place at Kurla's NSE's non-stop Stratus computers, virtually killing the mafia controlled BSE), sitting anywhere in the country (and abroad, oops sadly letting in PNs - not Bhave's making, though), without steppting your feet on every dirty Dalal Street!! I am not kidding when I said BSE is killed - look at the contract numbers you got off BSE on two consecutive days vs same from NSE. Yet, we need the show piece called BSE, besides sentimental reasons, to give some continuing competition to NSE, so that NSE does not become monopoly controlled by a few from the same or other community. Retail investors have to really thank Mr Bhave, for what he had done to give access to all and make the whole process transparent. Consequently, the able few and large ones have since migrated to the board rooms to continue with their fraudulent activities. IN our country, I am sure it is a matter of surprise that a man like Bhave continued on for this long & that in itself is a credit to him, considering the scores of enemies he had created as went along, just to be truly fair & friendly to retail investors. Not at all surprising that MF lobby managed get somebody to press an eject button! The systems put thus far is so difficult for any future nominee of the shady-lobbyists, to undo! Yes, I too wish he continued for a few more years - besides all else, he still has age and energy to his advantage; but, you win some and you lose some. Bravo Bhave!!

Like 

RAJEEV SANGRULKAR

Feb 1, 2011

YES, SHRI BHAVE'S EXIT IS VERY UNFORTUNATE. HE IS ONLY ONE, TO WHO, RETAIL CONMAN INVESTOR HAS FAITH, THAT HE WILL JUSTIFY THEIR ORIGINAL INSIDE VIEWS ABOUT INVESTMENTS, SINCE HE WAS AWARE OF BOTTOM TO TOP MECHANISM & HOLES IN SYSTEM.

WISH HIM BEST FUTURE

Like 

M T CHIDDARWAR

Feb 1, 2011

An out and out corrupt govt, worst class politicians, corporates and top govt officials cannot stand an honest, upright SEBI Chairman, who is wedded to the declared purpose of SEBI and doing pioneering work for small investors and in long term for furthering healthy growth of capital markets. PM Manmohan Sing has been the most disappointing and letting down creature ever produced in this country.

Like 

MANISH SHAH

Jan 31, 2011

IT IS HUMBLY REQUEST TO GIVE VERY SHORT/ VERY BRIEF TO INCREASE OUR INTEREST TO READ U.WHAT ARE GOOD STOCKS TO WATCH ETC. THE HISTORY AND LENGTHY PARA ARE NOR READABLE IN NORMAL WORKING ON DAILY BASIS.

Like 

R R Menon

Jan 31, 2011

Mr. Bhave has done a great deal of good for the ordinary retail investor. His tenure should be extended for another 2 years to enable him to finish the tasks he has already taken up on hand.

Like 
Equitymaster requests your view! Post a comment on "Is this the end of a 'retail investor friendly' era?". Click here!

MOST POPULAR | ARCHIVES | TELL YOUR FRIENDS ABOUT THE 5 MINUTE WRAPUP | WRITE TO US

Copyright © Equitymaster Agora Research Private Limited. All rights reserved.

Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement

Disclosure & Disclaimer: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. The Author does not hold any shares in the company/ies discussed in this document. Equitymaster may hold shares in the company/ies discussed in this document under any of its other services.

This document is confidential and is supplied to you for information purposes only. It should not (directly or indirectly) be reproduced, further distributed to any person or published, in whole or in part, for any purpose whatsoever, without the consent of Equitymaster.

This document is not directed to, or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity, who is a citizen or resident or located in any locality, state, country or other jurisdiction, where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject Equitymaster or its affiliates to any registration or licensing requirement within such jurisdiction. If this document is sent or has reached any individual in such country, especially, USA, the same may be ignored.

This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Our research recommendations are general in nature and available electronically to all kind of subscribers irrespective of subscribers' investment objectives and financial situation/risk profile. Before acting on any recommendation in this document, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the securities referred to in this material and the income from them may go down as well as up, and subscribers may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. Information herein is believed to be reliable but Equitymaster and its affiliates do not warrant its completeness or accuracy. The views/opinions expressed are our current opinions as of the date appearing in the material and may be subject to change from time to time without notice. This document should not be construed as an offer to sell or solicitation of an offer to buy any security or asset in any jurisdiction. Equitymaster and its affiliates, its directors, analyst and employees will not be responsible for any loss or liability incurred to any person as a consequence of his or any other person on his behalf taking any decisions based on this document.

As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407