There was no great disappointment in the market after Sebi decided not to change its extant policy on participatory notes (P-notes), despite intense speculation earlier that the regulator may review and, possibly, relax some of the earlier curbs on such instruments. In fact, the changes announced by Sebi on the pricing of qualified institutional placements (QIPs) and the reduction of the rights issue timeline have gone down well with the market.
Rashesh Shah chairman and CEO Edelweiss said that the P-Notes matter was addressed clearly earlier and it is good that it has not been touched again. ?Frequent changes in the rules is not good for the market. Overall, the regulator?s action has been fair and sound. I don?t see any major downside for the markets.?
?No news is good news,? said a senior functionary with an FII. While a section was expecting relaxation of norms, there were others who even feared tightening.
Arun Kejriwal of Kris, an investment advisory firm, said that the optimism in the market regarding the P-Notes had become contagious and they were expecting too much. ?One should not expect the regulator to change the policies too frequently. We do not expect the market to react to this tomorrow?, he said.
Overall, market players have welcomed Sebi?s decision to strengthen processes for the investors and issuers as well. Gaurang Mehta, from the investment banking team in ENAM, a leading merchant banker, said, ?It is certainly an efficient process and the issues which were held over due to regulatory issues, would now see the light of day.? Market players termed the Sebi board?s decision to revise the pricing norms for QIPs and preferential allotment as a step towards good price discovery which will help the investors. The mutual fund (MF) industry has appreciated the Sebi?s decision to standardize the format of abridged scheme-wise annual report and reduction in the time period for dispatch to unit holders. ?This will help the retail investors to restrategise their portfolio?, a senior fund manger from a fund house said.
The service of electronic bidding process for implementing of application supported by blocked amount (ASBA), an alternative mode of payment for initial public offerings (IPOs), has been tested by both the stock exchanges with the banks and they will be tested with the registrars, Sebi clarified. Chairman CB Bhave mentioned that the system could well be implemented in the next month. And this should cheer the issuers and also the investing community as large sums of monies invested in IPOs will remain in their accounts and not fill issuers? coffers even before allotment.
Portfolio managers, who had made a representation to the regulator on the need to create segregated accounts for clients could not get the relief they expected. ?Listed securities will have to be segregated and non-listed assets can be pooled,? said Bhave. Portfolio managers expect the cost of managing client funds to increase as new systems will have to be put in place and this cost will have to be passed on to the clients.
?Portfolio managers who handle smaller accounts will be the ones to suffer the most as there is little flexibility to pass on costs, especially in this kind of a market,? says Dayanand Hedge, a portfolio manager. Small and medium sized portfolio management outfits are expected to feel the pinch.
However, the market still expects to see some action in the P-Notes issue and all is not over yet on this front. ?The next board meeting after two months may see a review of the P-Notes issue and this will disappoint market participants,? says Alex Mathew head, research centre?Geojit Financial Services.