Skip to main content

Only a few takers for online Mutual Fund trading

Half Of AMCs Yet To List Schemes On Bourses; Brokers Too Less Enthusiastic



ABOUT two months after their launch, activity on mutual fund (MF) platforms of stock exchanges remains comatose, as investors continue to stick to the age-old system of buying and selling products through distributors. One reason for this is over half of the asset management companies (AMCs) are yet to list their products on stock exchanges. But more significantly, most stock brokers are less enthusiastic about providing services to transact mutual fund schemes through the new platform. 

   Though brokers publicly maintain that trading of mutual fund products is the next big thing for them, they are slowly realising the practical difficulties of scaling up the business. Brokers earn majority of their revenues from regular trading of stocks by clients, but mutual fund schemes can't be bought or sold in the same manner as shares. 

   Mutual funds are trying to project their products as long-term ones, while brokers will find it viable only if they are able to churn volumes. There is a clash in the business philosophy here 

   Due to lack of clarity about revenues from this business in the foreseeable future, most brokers are unwilling to invest in a big way to service mutual fund trades. 

   Stock exchanges launched the online mutual fund platforms after Securities and Exchange Board of India (SEBI) in August 2009 restricted commission payments by asset management companies to distributors. This resulted in distributors losing interest to sell mutual fund products, prompting Sebi to allow stock exchanges to introduce a platform through which schemes can be sold, with stock brokers being the intermediary. 

   NSE launched its platform on November 30, 2009 and BSE started on December 4, 2009. In December, BSE's platform recorded 739 contracts valued at about Rs 18.5 crore and NSE's platform recorded 1079 contracts of Rs 4.47 crore value. About Rs 13,060 crore was redeemed from the mutual fund industry in December. 

   In January, BSE's platform recorded 463 contracts valued at Rs 10.52 crore and NSE's recorded 253 contracts of Rs 3.14 crore value. About Rs 32,860 crore was redeemed from fund houses in January. Retail investors are also not finding much merit in choosing stock brokers over distributors at this juncture. 

   This is because buying or selling mutual funds through stock exchanges requires opening a demat account and a large section of mutual fund investors don't have one. Also, for investors, whose purchases are small in quantity, there is no cost advantage. 

   Many brokers are not comfortable about having clients that just transact mutual fund schemes. This is because brokers risk the possibility of their money being locked in for a few days, if client defaults. A broker is required to pay the stock exchange, after confirming with the client, before 10 a.m the day after the order is made by the client. Now, if the client defaults even after the confirmation, the broker gets to know it only after the cheque is cleared. 
 

 

Popular posts from this blog

National Savings Certificate

National Savings Certificate Here's everything you need to know about the 5-year savings scheme offered by the Government This is a 5-year small savings scheme of the government. From 1 July 2016, a National Savings Certificate (NSC) can be held in the electronic mode too. Physical pre-printed NSC certificates have been discontinued and replaced with Public Provident Fund-like passbooks. What's on offer The minimum amount you can invest in them is Rs100 and there is no upper limit. Under this scheme, all deposits up to Rs1.5 lakh qualify for deduction under section 80C of the Income-tax Act, 1961. The interest earned is taxable. You can invest in multiples of Rs 100. These certificates can be owned individually, jointly and also on behalf of minors. The interest rates for all small savings schemes are released on a quarterly basis. The effective rate for NSC from 1 October to 31 December is 8%. The interest is calculated on an annual compounding basis and is given along w...

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

Mutual Fund Review: HDFC Index Sensex Plus

  In terms of size, HDFC Index Sensex Plus may be one of the smallest offerings from the HDFC stable. But that has not dampened its show, which has beaten the Sensex by a mile in overall returns   HDFC Index Sensex Plus is a passively managed diversified equity scheme with Sensex as its benchmark index. The fund also invests a small proportion of its equity portfolio in non-Sensex scrips. The scheme cannot boast of an impressive size and is one of the smallest in the HDFC basket with assets under management (AUM) of less than 60 crore. PERFORMANCE: Being passively managed and portfolio aligned to that of the benchmark, the performance of the index fund is expected to follow that of the benchmark and in this respect, it has not disappointed investors. Since its launch in July 2002, the fund has outperformed Sensex in overall returns by good margins.    While every 1,000 invested in HDFC Index Sensex Plus in July 2002 is worth 6,130 now, a similar amount invested in Sensex then wo...

Different types of Mutual Funds

You may not be comfortable investing in the stock market. It might not seem like your cup of tea. But you can start by investing in Mutual Funds. Many first-time investors invest in Mutual Funds. This is because they do not know how to invest in individual securities. Basic information on Mutual Funds People invest their money in stocks, bonds, and other securities through Mutual Funds. Each Fund has different schemes with specific objectives. Professional Fund Managers look after these schemes. Your Fund Manager could help you invest in a scheme that suits your financial goal. Functioning of Mutual Funds You could make money through Mutual Funds in different ways. A single Mutual Fund could hold many different stocks, bonds, and debentures. This minimizes the risk by spreading out your investment. You could earn dividends from stocks and interest from bonds. You could also earn capital by selling securities when their price increases. Usually, you could choose to sell your share any t...

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now