MC Inside Edge: F&O continues to be a bigger draw for youngsters, a concentrated bet on defence, silence of the MFs

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The regulator may be trying hard to clamp down on derivatives trading, but it can do little to curb the enthusiasm of youngsters, many of whom still feel that it is easy route to riches. Last week, a Mumbai-based financial services firm known for its value investing credo had held an investor camp in Chennai. The idea was to preach the gospel of equity investing and the rewards it promised to true believers. The turnout was impressive, but most of the questions that were asked of the speakers after their presentations were related to options trading. Thanks to SEBI’s relentless efforts, it is now widely known that nine out of ten retail traders lose money in derivatives trading. Yet, every newcomer seems to be hopeful, or maybe overconfident, that he or she will be in that tenth who wins.

Chink in the armour

A mid-sized mutual fund’s decision to start an index fund for defence stocks has drawn sniggers from rivals. Defence is the buzzword right now and every broker and mutual fund worth their salt is trying to cash in on the craze, given the strong appetite for sector among retail investors. Rival fund houses point out that while in theory the scheme is supposed to be investing in a basket of stocks, a disproportionate amount of money will continue to go to the two or three heavyweight stocks that have come to represent the sector as a whole. Also, pure play defence stocks are not many, (though there are plenty of claimants to the title), which means the performance of the fund will be heavily dependent on how the top two stocks fare.

Compliance concerns

The regulator as well as asset management companies have been working towards creating an internal mechanism for compliance, without having to face constant scrutiny from SEBI. But some fund houses are concerned that with the latest development of SEBI's raid on a high profile mutual fund, these plans may hit a roadblock. Currently, most fund houses are maintaining a shall not speak policy on the issue with the AMC in news. Is it a case of true industry solidarity or concerns that they could be the next to face regulatory scrutiny?