Increase in lot size of F&O

Increase in lot size of F&O

The next month means November expiry there would be increase in lot size of index and stock future and option segment. For controlling the speculative trading of retail trader in F&O segment, market regulator SEBI has issued some guidelines to increase the lot size. The value of minimum derivative contract will increase to Rs 5 lakh. Earlier this limit was Rs 2 lakh.

Now the expert says the volume of future contract may be shift towards option segment. In option you have to pay only premium amount not the whole margin. So the expectation is there may be 5% drop in turnover of future segment. Option contract have some complex calculation for valuation so it is very difficult to participate the retail trader in this segment. The other problem is liquidity, the stock option is not much liquid. Only index options may witness the some increase in turnover.

In the last one month, the average daily turnover of option segment has been 1.5 lakh crore whereas in future segment it was just only Rs 43,000 crore. Some future contract lot size has increased up to 3 times. The lot size of nifty is 25 at present which would be 75 from next November month. So the margin would be also triple. Many stocks lot size got doubled so needed margin has also become double. The participation of retail obviously would be come down.

Overall, now the trading in derivative segment would be much costlier for retail trader.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Colour code for Mutual Fund

We often see the mis-selling of the financial products. Mis selling is a common thing in the financial industry that happens to almost everybody's life. To control mis-selling in mutual fund, SEBI has issued guideline for colour coding of mutual funds. The new guidelines to be effective from July 1, 2013, for all existing and forthcoming mutual fund products. Now onwards, product labels with scheme detail would be disclosed on common application form and advertisements. The labels would also include detail about the nature of schemes such as to create wealth or provide regular income in an indicative time horizon (short/ medium / long term)

There is also colour code for displaying the product risk. A blue colour coded box would indicate low risk, yellow box would indicate a medium risk, while brown box would be represent schemes with high risk. As per the guidelines, mutual funds would also have to include a disclaimer that "investors should consult their financial advisers if they are not clear about the suitability of the product".

These new colour code would provide investors an easy understanding of the kind of product/scheme they are investing in and its suitability to them.

For more detail about any other query related investment, you can contact me through my email.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Twitter id : @trivedi_arvind

Beware from MLM and fraud comanies with greed of high return

Beware Investor from MLM and fraud companies

I have said many times in past that keep away from MLM ( Multilevel Marketing Companies) or Ponzi Schemes and those companies agent who promise huge return in short period. Today, I have read Indian express newspaper and sharing some fact and figure with you about these companies.

 The government yesterday said it has found 87 companies across the country to have disappeared after raising funds totalling Rs 342 crore through public issues. In these companies most of established in Gujrat state. Besides, 87 other companies are also being probed by the government agencies for duping the general public through illegal Multi-Level Marketing (MLM) or Ponzi schemes and West Bengal tops this list with as many as 73 such entities.

The market regulator Sebi has also detected as many as 669 companies to have duped the investors of Rs 7,435 crore through illegal collective investment schemes, Corporate Affairs Minister Mr Sachin Pilot informed the Lok Sabha.

The entities are classified as 'vanishing companies' if they cease to file their balance sheets and other documents after raising capital and the whereabouts of their offices or directors become untraceable.

In the Ponzi or MLM investments, the companies generally raise the money from general public and ask each investor to lure others into these schemes with a promise of huge returns. However, the operators disappear after some time, leaving the gullible investors in lurch.

In reply to another query on vanishing companies, the Corporate Minister said that the government had initially identified 238 such entities that have raised money through public issues. Out of these, 119 companies were put under a 'watch list', as they began filing their balance sheets and other documents with the Registrar of Companies or stock exchanges. Out of the remaining 119 companies, 32 companies are presently under liquidation, while 87 others have been classified as 'vanishing companies', Pilot said.

As per the state-wise list, 26 companies out of the total 87 such untraceable firms were registered in Gujarat. Gujarat is followed by Andhra Pradesh (13), Tamil Nadu (10), Maharashtra (9), Delhi (5), West Bengal (5), Madhya Pradesh (5), and Uttar Pradesh (4) for such companies. Regions such as Chandigarh, Karnataka have two such firms each, while one company each are from Orissa and Punjab. FIR has been filed against all the 87 companies and prosecutions has been filed against 85 of them.

The state-wise list of the companies indulging illegal Ponzi schemes is topped by West Bengal (73), followed by Delhi and Tamil Nadu with five each such companies. Besides, two such companies were found in Rajasthan and one each in Karnataka and Uttar Pradesh.

"Out of these companies, 75 have been wound up and the money refunded to the investors. 552 companies were prosecuted (and) convictions have been secured in 124 cases," Pilot said.

The Minister further said that various regulatory agencies are also taking steps to sensitise the public against such schemes, while newspaper editors are also sensitised to exercise caution in accepting advertisements pertaining to acceptance of deposits of un-incorporated bodies.

While Sebi is also conducting various investor awareness programs in this regard, the RBI is in process of undertaking a comprehensive campaign aimed at alerting the public against falling prey to Ponzi schemes and other monetary malpractices.

If you have some queries about investment and financial plan please feel free to ask.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Distributors Fee reduced by AMFI

Welcome move from AMFI to boost for mutual fund industry

Since last 2 weeks I was out of city in my native place spending good time with family and relatives. It is very good sign that small city resident specially young generation investing in mutual fund. There are very good potential for growing mutual fund industry in near future. Only need is to spread awareness and benefit of investing in mutual fund with honest and ethics. There should not be miss- selling of product as it is very bad to grow for this industry.

SEBI has already taken a step to boost this mutual fund industry. Now one more good news for mutual fund distributors that Association of Mutual Fund  in India (AMFI) has reduced the registration fees for mutual fund distributors to increase the penetration of mutual funds and incentivize distributors beyond the metros.

The revised fee will be applicable from November 1. First time Individual Financial Advisors (IFAs) will now have to pay only Rs 3,000 for registration, compared with Rs 5,000 earlier. The renewal fees for existing IFAs is reduced Rs1500 from Rs2500 earlier.

In August SEBI created a new category of distributors which includes individuals like senior citizens, postal agents, retired teachers and other retired government officials who have been in service for at least 10 years in their respective organisations. The fee for this category has been fixed at Rs 3,000 per person.

The registration fee for NBFCs has been reduced by 80% from Rs 5 lakh earlier to Rs 1 lakh now and the renewal fee from Rs 2.50 lakh to Rs 50,000 now. Earlier all types of banks, be it private, or co-operative had to pay Rs 5 lakh as registration fee. Now, AMFI has introduced a separate category for regional rural banks, district central co-op. banks that have to pay Rs 1 lakh for getting MF distribution license.

Many distributors were demanding that fees be reduced as after the abolition of entry load, their income had reduced. Many market expert assume that this reduction in fee will lead to higher number of distributors entering in Tier-2 and Tier-3 cities which will benefit the industry over a period of time. This is in keeping with SEBI's aim to get more retail participation from beyond the tier-I and tier-II cities.

So overall it is good move from AMFI to increase retail participation form smaller and medium sized cities.

If you have any query regarding investment please feel free to ask.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com