Archive for January 1st, 2008

SEBI waives entry load of mutual funds

January 1, 2008

In what is being called as a new year gift, SEBI waives the entry load for mutual funds in case of direct applications. There has been huge commentary on the issue right since the time SEBI floated the idea. I covered much of it here.

So, what does direct application mean? It means if you download the application from the fund’s website, or submit the application to various distribution centres of the fund, you are not required to pay the entry load. The impact on brokers is going to be small initially, but is expected to be large over a period of time.

SEBI has initiated some quick reforms in the securities market in December 2007. I have covered a few here. It has also made way to allow short-selling in the markets.


1. Thanks to Vikram who commented saying that direct application means

1. Application without broker code
2. Application with “DIRECT” written in the space provided for distributor code

2. Ajay Shah has written an interesting post on the subject


Few developments in Indian economy and financial markets

January 1, 2008

I have missed  out on a number of developments in Indian economy and financial markets. Here is a summary:

1. Balance of Payments data for 2nd quarter 2007-08 has been released. The capital flows continue to surge and despite a current account deficit of USD 5.5 billion, the BoP is at a huge surplus of USD 29.2 billion. Why? Net Capital Inflows have been USD 34 billion. The capital flows surged mainly on account of portfolio flows (also called as FII) and external commercial borrowings.

2. RBI has launched a portal on financial inclusion. Excellent site with lots of papers and case studies.

3. SEBI has floated a discussion paper which will help launching of real estate mutual funds in India. This is an excellent step as atleast there will be some way to know the property prices in India.

4. SEBI introduced mini derivative contracts on Indian exchanges.


5. SEBI has put a note to control short swing profits.

The proposed regulation seeks to compel an ‘insider’ to surrender such profits to the company in any of his/her transaction concerning equity based securities of the company (including it’s parents or subsidiary’s shares) in the event both the buy and sell side of the transaction are entered into within six months of the other.

6. SEBI seems to be on fire right now. It has now proposed easing the process of issuing corporate bonds.

7. RBI has set up a high powered committee (I don’t know what it means) on Estimation of Savings and Investments in the country. And guess who the chairman of the committte is ? Who else but Dr. C. Rangarajan. He is already the chairman of EAC, and is heading a committee on financial inclusion. He is one of the best economists in the country who just doesn’t talk or write economics but looks at applying them as well.

8. Another SEBI initiative. It has introduced index options with longer tenure and much needed volatility index.

9. Another SEBI move. This time it proposes to put a price band of 25% on the issue price on the day of listing of IPOs of issue size upto Rs 250 Cr.

I don’t think it is fair. There is fair bit of volatility in all IPOs as well. IPOs these days are meant only for listing gains and no real benefit.

Assorted Links

January 1, 2008

Wishing all the visitors a very happy and a prosperous new year.

1. WSJ Blog points to a report which says housing prices have already bottomed. However, data says home sales are yet to bottom out.

2. WSJ Blog points to an interesting piece- Why prediction markets work?

3. Mankiw says

Many economists who write about policy rarely, if ever, encounter actual policymakers. Instead, they prefer to sit in the comfort of their ivory tower offices. (I know I do.)

I wonder how different the economics profession would be if economists were expected to do a year of service outside of academia…My conjecture is that the profession would be less creative but more useful.

I think it is a great idea. We would get better more workable policies. It will also provide a balance between “great ideas but non-workable” and “workable ideas but not innovative enough”.

4. EPSA Blog points to 10 important events in 2007 affecting poverty reduction in Asia. It also discusses Bhutto assassination.

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