SEBI New Proposal Rules for Share Market
Securities and Exchange Board of India’s (SEBI) proposal to launch a new investment product for high-risk investors will allow them to take advantage of the professionally managed futures and options market.
Also, it can give them an opportunity to gain access to new options of strategies like ‘long and short equity’ funds, ‘reverse ETFs’ etc. Experts have expressed this opinion. The market regulator is considering creating new investment options for investors with investable funds between Rs 10 lakh and Rs 50 lakh. Its aim is to bridge the gap between mutual funds and portfolio management services (PMS).
Different investment opportunities are opening up
Radhika Gupta, Managing Director and Chief Executive Officer (CEO) of Edelweiss Mutual Fund, said that India is finally opening up to different investment products. This can give an opportunity to earn profit by adopting strategies like ‘inverse ETF’. That is, there is no one way to invest now. ‘Inverse ETF’ is an exchange-traded fund (ETF) which is created using various derivatives to profit from the fall in the value of its related ‘benchmark’.
The regulator said in its consultation paper that the new asset class will provide a regulated product with features such as SIP (systematic investment plan), high risk appetite to meet the needs of the emerging category of investors. SEBI has suggested a minimum investment of Rs 10 lakh for the new asset class. It may also allow investing in futures and options for purposes beyond just risk hedging and rebalancing.
ALSO CHECK: GVK Power and Infrastructure: Another company bankrupt, debt of $1.8 billion, shares fell below Rs 10
Will attract investor
This move will attract investors with investable funds between Rs 10 lakh and Rs 50 lakh, who are getting attracted to unauthorized and unregistered portfolio management service providers. Anand Rathi Wealth Ltd. Deputy Chief Executive Officer Firoz Aziz said that SEBI’s decision is commendable. It introduces a new product category where investors can get benefits from futures and options markets managed by professionals.
Long and short equity
He said that stringent regulations similar to mutual funds using asset management companies (AMCs) will ensure transparency. Kaustubh Belapurkar, Director (Manager Research), Morningstar Investment Research India, said that SEBI’s consultation paper to introduce a new product category with higher minimum investment and more freedom to invest than mutual funds can help investors get access to new options of strategies like ‘long and short equity’ funds, reverse ETFs etc.
‘Long-short equity’ is an investment strategy. In this, ‘long’ and ‘short’ positions are taken in shares and share related products. For example, the fund can be bullish on the automobile sector and bearish on the IT sector. In such a situation, it will prefer to invest in the shares of the automobile sector for a long time, while it will prefer to make a profit by selling in the IT sector. Sandeep Jethwani, co-founder of Deserve, said that high-risk investors can now access a systematic option and make a profit without resorting to high minimum limits of PMS and AIFs or options outside the scope of regulation. This is really good for the protection of the wealth created by India.