Tarun Sharma Moneycontrol News
Market participants have been complaining that stringent margin norms, in particular, the recent additional surveillance mechanism (ASM) margin, which have exacerbated the weakness in small and midcap shares.
But SEBI chairman Ajay Tyagi feels that a robust margin system is important for protecting the interests of retail investors.
In a free-wheeling chat with select media, Tyagi said there was no “immediate plan” to review ASM or the Graded Surveillance Mechanism measure (GSM). On mutual funds, Tyagi said that instrument was the best way for retail investors to participate in the stock market action.
Edited excerpts:
Q: What was the agenda of the meeting with independent trustees of asset management companies?
A: The mutual fund industry has a very good story. Assets under management (AUM) have more than doubled in the last four years. It is a big industry; almost 20 percent the size of the banking industry. Therefore, there is a need to have a good governing system in place and trustee is the first level regulator, with a vantage view. It is very important for everyone, all stakeholders including independent trustees, to see that the good story of mutual fund continues. The meeting was to discuss this.
Q: Was there any discussion about mutual fund commissions at the meeting?
A: There was no discussion on the distribution commission. We are having a separate meeting with Association of Mutual Fund of India next month itself to discuss these issues. Lots of reform measures have been taken in TER (total expense ratio), distribution and some proposals are under consideration.
Q: In the last couple of years, a lot of retail money has flown into mutual funds. Have MFs become a strong counterbalance to foreign institutional investors?
A: Retail participation in the stock market has risen sharply over the last year, but a lot of them do not understand the market dynamics very well. For such investors, the best way to enter the market is through mutual funds. There are around 7.5 crore mutual fund folios. The AUM has doubled in the last four years; in fact, beyond the 15 cities-limit mutual fund AUM has tripled. On the investment side, the retail investor is coming in and providing market stability just like an institutional investor. Indian mutual funds have emerged as a tremendous stabilising factor. SEBI has done what is required and will continue to do so. SEBI is keeping a close watch and is fully committed towards investor protection.
Q: Do you think asset management companies getting listed on stock exchanges will increase transparency in the mutual fund space?
A: On corporate governance issue, we ourselves introduced the rule of having independent directors on the board only for five years plus another five years in line with the Companies Act. But, if they (asset management companies) get listed, that will further improve corporate governance.
Q: Is there any plan to re-look the Additional Surveillance Mechanism?
A: There is constant review with exchanges where surveillance decision happens. However, there is no immediate plan to do anything on this. ASM and GSM (Graded Surveillance Measure) have both been introduced for investor protection.
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