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| Edited By: |Source: DNA |Updated: Mar 16, 2018, 06:54 AM IST
Though the start of the National Stock Exchange’s Mutual Fund Service System on Monday was impressive, marketmen feel there could be hiccups ahead.
Mutual funds (MFs) garnered Rs 77.69 lakh worth of assets from 300 applications on the first day of the system that allows transactions in mutual funds through stock-broker terminals.
To provide a fillip to MF sales through the stock platform — initially rolled out through 1.5 lakh terminals of National Stock Exchange (NSE) — goodies are being offered by all entities involved. NSE, National Depository Services (India) (NSDL) and stock brokers have waived charges for the initial period.
Sebi has also clarified that no entry load norm would be applicable on investments made in mutual fund schemes through the online platform launched by the NSE.
UTI Mutual Fund was the first to offer its 30 select schemes on the exchange. It received over 300 applications worth Rs 75 lakh on the first day. “Others such as Tata MF, Birla MF, Reliance MF, ICICI MF and Fidelity MF are expected to come on board soon,” said Gagan Rai, MD and chief executive officer, NSDL.
However, while the move (new platform) is beneficial to institutional distributors, independent financial advisors (IFAs) could be hit.
“Post August 2009, when the MF commission regime changed, transactions in MFs through IFAs dropped almost 8-9%, while online MF transactions rose by 6-7%. This indicates that institutional distributors (equipped with adequate trading and online investment platforms) would benefit more,” said Vinesh Menon, head - retail distribution at Bajaj Capital.
IFAs are enraged at the decision to permit selling through stock terminals. They say people without advisory skills should not be allowed to sell mutual funds.
Rajendra Dhulla, who runs advisory services via Pratham Services, said, “There are about 2 lakh Amfi-certified agents in the country. How will they sell mutual funds through the Bolt without knowledge about funds?”
Another IFA requesting anonymity said stock brokers would try to sell stocks to people who wish to invest in mutual funds, by promising higher returns.
An industry observer said there is an issue about trusting brokers. “Under the new system, the cheque of the amount to be invested has to be given in favour of the stock broker and not the fund house. People would not be comfortable with writing a cheque in favour of the broker as they are not sure about what would be done with the money.”
He added that only individuals already exposed to investing in shares would opt for stock platform. “Only individuals, who account for 8% of the total holdings in BSE-500 stocks, would be interested initially,” the observer added.
Though some claim that IFAs can use the platform to transact, it is questionable whether they would be willing to share the income with stock brokers. “There is no clarity on the trail commissions that IFAs and distributors earn,” said the industry observer.
The Amfi platform for buying and selling MFs, which is likely to be launched in March as per Amfi chairman A P Kurian and Jaideep Bhattacharya, chief marketing officer of UTI Mutual Fund, would try to iron out the hurdles based on initial response to the stock platform, experts said.
