24-Sep-2017: Graded Surveillance Measure by Securities and Exchange Board of India (SEBI)
More than 900 companies are being monitored under the Graded Surveillance Measure, designed by market regulator Securities and Exchange Board of India (SEBI).
SEBI introduced the measure to keep a tab on securities that witness an abnormal price rise that is not commensurate with financial health and fundamentals of the company such as earnings, book value, price to earnings ratio among others.
The underlying principle behind the graded surveillance framework is to alert and protect investors trading in a security, which is seeing abnormal price movements. SEBI may put shares of companies under the measure for suspected price rigging or under the ambit of ‘shell companies’. The measure would provide a heads up to market participants that they need to be extra cautious and diligent while dealing in such securities put under surveillance.
Once a firm is identified for surveillance it goes through six stages with corresponding surveillance actions and the restrictions on trading in those securities gets higher progressively.
In the first stage the securities are put in the trade-to-trade segment (meaning no speculative trading is allowed and delivery of shares and payment of consideration amount are mandatory). A maximum of 5% movement in share price is allowed.
In the second stage, in addition to the trade-to-trade segment, the buyer of the security has to put 100% of trade value as additional surveillance deposit. The deposit would be retained by the exchanges for a period of five months and refunded in a phased manner.
In the third stage, trading is permitted only once a week i.e. every Monday, apart from the buyer putting 100% of the trade value as additional surveillance deposit.
In the fourth stage, trading would be allowed once a week and the surveillance deposit increases to 200% of the trade value.
In the fifth stage, trading would be permitted only once a month (first Monday of the month) with additional deposit of 200%.
In the sixth and final stage, there are maximum restrictions. Trading is permitted only once a month at this stage, with no upward movement allowed in price. Also, the additional surveillance deposit would be 200%.
There would a quarterly review of securities. Based on criteria, the securities would be moved from a higher stage to a lower stage in a sequential manner. The challenge for the small investors is that these announcements are often made at very short notice and implemented from the next day itself thus giving those who have already entered the stock less than adequate time to exit it. There is also potentially another risk. For example, even if time is given, the stock might crash next day on the news, triggering the lower price circuit and leaving no exit opportunity.
4-Aug-2017: New Exchange Traded Fund (ETF) by the Name “BHARAT 22”
The Union Finance Minister Shri Arun Jaitley announced a new Exchange Traded Fund (ETF) by the name BHARAT 22. Bharat 22 consists of 22 stocks of CPSE's, PSB's & strategic holding of SUUTI. Compared to energy heavy CPSE ETF, Bharat 22 is a well-Diversified portfolio with 6 sectors (Basic Materials, Energy, Finance, FMCG, Industrials & Utilities). The Bharat 22 Index will be rebalanced annually. ICICI Prudential AMC will be the ETF Manager and Asia Index Private Limited (JV BSE and S& P Global) will be the Index Provider.
In the Budget Speech of 2017-18, the Finance Minister Shri Arun Jaitley had promised to use ETF as a vehicle for further disinvestment of shares. The target for CPSE’s disinvestment in 2017-18 was set at Rs 72,500 crore. During the current Financial Year 2017-18, the Government has realised approx. Rs 9,300 crore through nine disinvestment transactions so far.
Globally ETF Assets have grown significantly. Globally today there are 4 trillion dollar worth Assets Under Management (AUM). These are expected to touch $7 trillion by 2021. Large Investors (Sovereign/Pension Funds) prefer investing in ETFs due to the benefits of ETF being Low cost & Less risky; being Highly Liquid assets; Transparent Investment and that these can be traded at Real Time Market Price.
Highlights of Growth of ETF market in India include:
Flexibility in Investment guidelines of PF to invest in equity/ETF.
ETF Assets Under Management (AUM) has grown ~5 times in last 3 years.
ETF has been a preferred instrument for investment by PF's following flexibility given to them by govt. for their investments.
Government raised Rs.8500 crore by divesting through CPSE ETF in FY'16-17.
9-Jul-2017: India to join Global Foreign Exchange Committee.
India will soon get a seat on the Global Foreign Exchange Committee (GFXC), a newly-constituted forum of central bankers and experts working towards promotion of a robust and transparent forex market. The newly expanded and formalised GFXC, which will meet regularly, replaces a similar but more informal organisation of eight foreign exchange committees — namely those from Australia, Canada, Euro area, Hong Kong, Japan, Singapore, UK and the US. The GFXC will also now include representatives from existing, or soon to be established, foreign exchange committees or similar structures in Brazil, China, India, Korea, Mexico, South Africa, Sweden and Switzerland.
The Global Foreign Exchange Committee (GFXC) was established in May 2017 as a forum bringing together central banks and private sector participants with the aim to promote a robust, liquid, open, and appropriately transparent foreign exchange market in which a diverse set of participants, supported by resilient infrastructure, are able to confidently and effectively transact at competitive prices that reflect available information and in a manner that conforms to acceptable standards of behaviour. The committee has been set up under the guidance of the Bank for International Settlements (BIS), an international financial organisation owned by 60 member central banks, representing countries from around the world.
Objectives of the GFXC are: To promote collaboration and communication among the local foreign exchange committees (FXCs) and non-GFXC jurisdictions with significant FX markets; To exchange views on trends and developments in global FX markets, including on the structure and functioning of those markets, drawing on information gathered at the various FXCs; and To promote, maintain and update on a regular basis the FX Global Code (the Code) and to consider good practices regarding effective mechanisms to support adherence.