PowerMF Blog – Empower Yourself

Over the last year or so, if there was one Industry which saw a continuous wave (and some may choose to call it a Tsunami) of changes hitting, then it should surely be the Mutual Fund Industry.

While there were many reasons and reactions for the changes that took place, specifically from the Regulatory stand point, I believe that the crescendo was reached when the Regulator and the Industry shared the dais on the occasion of the CII Mutual Fund Summit recently.

A good account of the message that came out of the meet has been clearly spelt out by our Mr.Dhirendra Kumar, Value Research, one of the torch bearers of the Industry for decades now (See Link: http://new.valueresearchonline.com/story/h2_storyView.asp?str=14745).

As per his reading on the clash of the titans in the dais (and around), the message seems to have come out loud and clear for the Mutual Fund Industry – You need to Re-Discover yourselves.

This message is strong enough and needs to be taken seriously by the players in the industry.

Yesterday, SEBI came out with an order against one of the leading AMCs and few of its employees for Share Trading Fraud.

The fraud committed is that of ‘Front Running’ wherein the person knows the institution’s order for a stock and before the order gets executed in the market, benefits by taking personal positions on the stock and benefiting by the institutions order.

While such activities are heard to be practice by many traders, pinning the errant has always been a very difficult task.

The case under reference is one of the occassions where Regulator has been able to clearly identify the wrong done and the wrong doer.

This in my view is going to be an importnat  moment, more so by the way the wrong done is planned to be handled – by asking the wrong doer to pay the amount to the investors who have lost the money.

Hope this landmark order will be able to make the markets more efficient and investor friendly.

Draft Direct Tax Code has come out and there are a lot of areas where an Individual Tax Payer has reasons to be happy including the proposed slabs and exemption limits.

However, when it comes to Mutual Funds,  keeping up with the continuous spate of changes and concerns faced by the industry, DTC adds one more: removal of ELSS from the approved investment options for tax saving.

Currently, ELSS schemes have around Rs. 23,700 cr. under management in May 2010, up from around Rs. 11,800 cr. in May 2007. This represents around 60 lacs to 120 lacs investors using the ELSS as a tax saving route which is expected to be foregone by the industry.

Sure, this is probably not the most important issue in the minds of most Industry players only owing to the spate of other immediate issues to grapple with. But one sigh of relief the industry will probably have is that ULIPs may also be treated the same way as ELSS.