The markets regulator Securities and Exchange Board of India (Sebi) sees no merit in relaxing the 10 percent investment limit on a single share for actively managed mutual fund (MF) schemes, its boss said Wednesday.
“The 10 percent limit is intended for diversification. Just because some programs outperform doesn’t mean you’re raising the ceiling. That will be a reinforcement that a program has moved up and you are allowing more investment in the same program. For the sake of diversification, the 10 percent ceiling is something that remains, ”said Ajay Tyagi, president of Sebi, while addressing the media at a market summit organized by the industry body Confederation of Indian Industry ( CII).
The MF industry has highlighted the challenges it faces in matching the returns generated by the benchmark Sensex and Nifty indices, as the weighting of India’s most valuable company, Reliance Industries, has approached 15 percent in the indices. reference.
“Certainly there are challenges in measuring performance, as indices do not have a cap on stocks, while mutual fund schemes have a 10 percent cap on stocks,” the industry body recently said. Amfi.
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When asked about operational challenges highlighted by foreign portfolio investors (FPIs) in reducing the trade settlement cycle to T + 1, Tyagi said: “Having an early settlement is in everyone’s interest. It will help increase liquidity and reduce margins. It cannot be anyone’s argument that we want to solve it late. But there are some operational issues regarding FPIs and custodians due to time differences and other factors. We will take everyone’s opinion and suggestions before finalizing anything. “
On the increasing cases of non-compliance by brokers, Tyagi said that Sebi will take corrective action soon. He said there are reasons to increase the amount in the investor protection fund (IPF).
“I agree that IPF is woefully insufficient. We have examined this and will soon take action in consultation with the stock exchanges to increase the IPF. We will not allow that to be a criterion for delaying payment in the event of a broker’s default, ”said Tyagi.
Tyagi also said there was merit in the proposal by some industry players to introduce capital adequacy for the brokerage industry. “There are all kinds of brokers in the system. The net worth requirement was established nearly a decade ago. So that area needs reform. We will examine this. Capital adequacy should be the first level of consideration. “
Sebi’s boss said delivery-based trade should be encouraged. He said the regulator has introduced rules to increase initial margins for intraday operations, which will start operating from December. “This will further reduce speculation.”
Tyagi expressed concern about the resignations of independent directors. “I must admit that the (issue) of the independent director is a puzzle that we are still trying to solve.
They are the voice of minority shareholders. To what extent do they have to be accountable, how do they fit into the board structure, what kind of people should be appointed… these are the issues that concern us, “he said.
Tyagi said Sebi would urge directors who quit to state their reasons clearly to the public and not give “cryptic reasons.”
He also asked the industry to help finalize the rules on reclassifying promoters as ordinary shareholders. Tyagi said it remains a contentious issue.
In his speech, the president of Sebi highlighted the positive conclusions of the market. “While one hears repeatedly that liquidity and low interest rates are the only primary factors driving markets higher, and that there is a disconnect between the market and the real economy, I would like to present to you some positive aspects of the recovery. From the market. “
Tyagi said that contrary to popular perception, post-Covid gains in the market have been broad-based. He said investor participation and business turnover had increased substantially over the past year, and 6.3 million demat accounts have been added in the first half of the current fiscal year, compared to just 2.74 million during the same last fiscal year period.
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