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MF sale through bourses small change for industry: Dhirendra Kumar

I wonder if stock exchanges have the wherewithal, the gearing, the motivation and the business model to reach out to many investors directly, says Value Research CEO.

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Last Updated: Feb 27, 2020, 03.36 PM IST
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Dhirendra Kumar2-1200
If I as an investor want to go to BSE, register myself as an investor and then buy any funds directly, I have to see how stock exchange looks at it as a business opportunity and where is the money.
Sebi will now allow investors to directly buy and sell mutual funds via exchanges. Earlier you needed mutual fund distributors or agents who allowed you to use the platform. How big a change is this?

It is a small change because mutual funds can be bought in multiple ways. People can go to mutual fund companies’ websites to buy directly, or they can go to mutual fund utilities and buy any kind of fund of funds directly. Then you have these mutual fund platforms Paytm money, ETMoney and many others, who are enabling direct plan purchases. You also have a few intermediaries. So, this is a very small change.

I think this is not a big thing, because I wonder if stock exchanges are geared to address investors directly. Stock exchanges always deal with their brokers and some intermediary and people were dealing with stock exchange indirectly either through an RIA or a broker. I wonder if stock exchanges have the wherewithal, the gearing, the motivation, and the business model to reach out to many investors directly. If I as an investor want to go to BSE, register myself as an investor and then buy any funds directly, I have to see how stock exchange looks at it as a business opportunity and where is the money.

So, this is just an addition to the distribution platforms which are available for various investors?

Yes, it is an incremental thing. It is bringing about parity. A lot of people might ask why enable direct plans and why not eliminate the broker in stocks because mutual funds do not require settlement. There is no counter-party risk. If you want to buy a mutual fund, you put your money and you get the allotment based on that day’s NAV. If your cheque bounces, the allotted units can be cancelled or you will not be able to redeem that money. When you are buying stock, there is always a counter-party and there are two brokers to it: there is a broker for the buyer and there is a broker for the seller. In the case of mutual funds, you give your money, you get your allotment. If I want to buy 100 crores worth of an X fund I can do it. I can buy it worth Rs 5,000. So there is never a counter-party risk which is a key role played by a broker. So it is enablement, I do not think it is a big turning point in the life of the mutual fund the way they are being sold today.

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