Compulsory demat account!

The Regulators have an amazing ability to amaze me.  Somebody attending the IOSCO conference has written about the 7 course meals and boring sessions through which one can sleep.

Now we have a new provision coming which says all mutual funds should be held in demat form. Which means you have to open a demat account, demat all your holdings, PAY annual charges, pay transaction costs, run the risk of a demat fraud,….all for nothing.

I think it was Mr. S V Prasad (any mf veteran can help if I am wrong) who did away with the certificate and made the mutual fund holding a statement. As the mutual fund units cannot be sold, or pledged without the invovlement of the issuing fund house, the mf statement has no great meaning. It is like saying you should dematerialise your bank account statement. It is just as stupid. Yes if some people want to transact on the net then they just have to go to the fund website of a distributor website and transact. Why it should be dematted and extra costs incurred, I am clueless. Surely regulators have far more greater brains than I have and some thought would have gone into it.

Of course if it goes through (which it will given that Regualtors do not even hear, leave alone listen) it will mean more business revenues for Nsdl, cdsl, banks, stock holding corporation, etc. – and you know who pays the bill. L O L.

recommendation: buy shares of Hdfc, Hdfc bank, Icici, Kotak, …these will be the biggest beneficiaries in the first round of this nonsense.

Personally it is better to shift to direct equity if the costs go up by another small unit. God bless them.

Not sure how people like IFA Galaxy are planning to react. Though this has not direct implication for the IFA chances are most people will become so called ‘direct’ investors through demat. Which means the aum shifts from the small guy to the big banks. Fantastic business decision by demat organisations.

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2 Responses to “Compulsory demat account!”

  1. Karan Khaitan on June 13th, 2010 at 10:02 pm

    What you fail to realise is that there are no capital gains charged on mutuals funds held through demat account for a period of over one yr. so while small brokerage and STT is incurred…in the long rain, it will save the investor from long term capital gains tax!

  2. Why do you allow comments like Karan to give such a brilliant interpreatation of the the Income tax act? L O L. Not sure whether he is interpreting the demat act, the income tax act or the sebi act.

    Or does he have an advance copy of the Direct Tax Code?

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