In its board meeting last week, the capital market regulator, SEBI, made some significant announcements. The current SEBI chairperson, Mr. Tyagi, has been very particular about making the capital markets friendlier for the investors. The latest SEBI board meet focused on a number of areas including 3 of immediate interest for the equity investors. Here are some of the key implications of the announcements
Mutual fund impact
The regulator had been indicating at a re-haul of the fund cost structure for quite some time now. Fund costs or the total expense ratio (TER), is relatively high in India for mutual funds. An equity fund has an outer limit of 2.50% at the peak level and goes down with the AUM levels. Then there are 30 bps incentives for selling mutual funds in smaller towns and also a compensation for the GST paid on the management fees. The overall cost, therefore, goes up closer to 3% in most cases. SEBI has not only reduced the upper limit across all brackets by 25 basis points, but also urged funds to reduce the effective cost overall. The impact was visible on the stock price of HDFC AMC and Reliance AMC as it is now clear that the only way the TER will move is down. From a customer point of view, this is good news, especially when alpha is going to be a lot more difficult going ahead. Lower costs will really matter a lot for the investors at that point of time.
Definition of insider
This was something that was long coming. The regulator has decided to expand the definition of an insider to include business associates, family members, vendors, franchisees etc. The current definition was quite narrow and it permitted insider trading through proxies in most cases. That will essentially get plugged. Secondly, SEBI has also made distributors of SMS messages, WhatsApp messages and media analysts responsible and accountable for the outcome of their statements and actions. For example, the analyst or trader will now have to be more careful since they will be answerable in case any undue volatility or panic is created in the stock by such statements. It could be an open ended case but will go a long way in checking the misuse of informal media.
IPO timelines crunched
The SEBI board meeting has also crunched the total time for completion of the IPO process from T+6 days to just T+3 days. This will enable the investors to monetize their liquidity much faster. With ASBA in place, the time value loss will be minimal. Of course, banking could still be an issue but SEBI also proposes to allow UPI transactions in case of IPO applications. If that works out then the Indian IPO market could become a truly efficient market and also a lot safer. ©