Sebi advises small investors not to trade directly in equities

Dalal Street: They should come through mutual funds

Small investors should not start trading directly in stock market as they don’t have adequate resources to take informed decision, Securities & Exchange Board of India (Sebi) U K Sinha (in pic) said on Saturday.

Sinha said the small investors should start investments in equities though mutual funds.

“First-time investors should be encouraged to come through mutual funds,” Sinha said at a workshop organised by the Sebi here.

He said the Rajiv Gandhi Equity Saving Scheme recently announced by the government would encourage investments in equities through mutual funds.  In the Union Budget for 2012-13, presented in March, Finance Minister Pranab Mukherjee proposed to introduce a new scheme called Rajiv Gandhi Equity Savings Scheme.
The scheme allows income tax deduction of 50 percent to new retail investors on investments up to Rs 50,000. In this scheme there will be lock-in period of three years.

This scheme is intended to individuals whose yearly income is less than Rs 10 lakh.
“Our understanding is, those individuals whose income is less than Rs 10 lakh per annum have less knowledge of markets,” said Sinha, adding generally the first time small investors become victims of market manipulation.

Sinha said the market regulator had taken a series of measures in the recent years to enforce compliance and curb market manipulation.

“Sebi is not a perfect institution, but we are trying to improve,” he said.
The Sebi chief Sinha said the Companies Bill, which is awaiting the parliament’s nod, is expected to address some of the issues related to compliance and market regulation.

“If the Companies Bill is passed, some of the problems we are facing today will be addressed,” the market regulator said.