Wednesday, September 23, 2020

Farmers are not beggars

Farmers are not beggars. They need to have freedom. 

People say, we fought with the Britishers and got freedom. But, people did not get freedom till 1991 and after that, gradually we are getting more freedom.

When a bill is introduced to give freedom to farmers to sell to anyone/anywhere he likes and to have any agreement with anyone, those who support freedom must encourage. Those whoever is against the portions of the bill that are giving freedom, are against the basic rights (freedom).

If the bill has any part which is nothing to do with freedom, and if people oppose, it is their right. But, opposing the part which gives freedom is nothing but opposing the basic rights.

Other Comments for the bill.

C: Government would reduce Minimum Support Price (MSP) after this.

A: Fight against that reduction. Not against the bill that gives freedom. 

C: Small Farmers won't benefit out of it. 

A: Not getting benefits out of some freedom is not a reason to curb freedom.

C: Prices would increase after this bill

A: Then, you become a farmer and get more money. Till you become rich by farming, whatever extra that you pay for food, consider it as a price that you are paying to the farmers for curbing their freedom from 1947 till 2020.

C: This change is not enough

A: Yes. This is a very very small change and many many more reforms need to be brought to change the state of farmers. This is a baby step in that direction. 

C: We cannot trust corporates

A: You are not asked to trust corporates. You have freedom to trust or not. 

C: It is replaced by a different set of middlemen from the existing middlemen. [And many other related questions]

A: So what? What is the problem?

C: Why are farmers opposing?

A: When everything is kept as it is, but more freedom is given, a sane person should never oppose. If there is a fear of future reductions in others like MSP, they should fight for the reduction of MSP rather than the bill that gives freedom. 

Whenever any reform is brought, which gives freedom to a particular sector, the first set of people/organizations that oppose is, the existing people/organizations in that sector. Because, they lose the hold on that sector with the new entrants in that sector.

For example, if any state government liberalizes the transport sector and allows anyone to run buses without government approval, the first set of people who oppose would be the existing private bus operators. They may give any kind of reasons (either stupid or reasons that may look good). The private bus operators would have paid crores of rupees as bribe to the ministers and other officials to start their service. When others start without any bribe, they would be at serious disadvantage, and they cannot match the fare and suffer serious losses.

C: Government may close APMC

A: Once the farmers are given freedom, it is possible that, other government channels would become redundant, especially, if the private channels offer competitive prices. In those cases, even if APMC becomes redundant, government should keep it there for the name sake, so that, private channels won't become syndicate [However if the market is really open, there is a less chance for players forming syndicate.] 

Government's business is not do business. But, it should make sure that, monopoly/syndicate is not formed. In case, if there is a monopoly or syndicate, government should bring their own business/service, mainly to break the monopoly and syndicate. Government's business should be limited to breaking the monopoly/syndicate.

Any leader can promise to bring something like APMC and can bring it. But, except leaders like P.V.Narasimha Rao, Vajpayee and Modi, no other leader is bringing the freedom to people. For a very very small problem (which can be solved by anyone), we should not stop a major reform like this.

Monday, September 21, 2020

Changes to Multi Cap Mutual Funds by SEBI

The recent rule on expecting Multi Cap Mutual Funds to invest minimum 25% in each of the Large Cap, Mid Cap and Small Cap, is one of the worst rules that is brought by SEBI in the recent time. 

Post 2017, Multi Cap Mutual Funds is the only category, where AMCs have full freedom to invest in any stock. With this restriction, SEBI is curbing that freedom of AMCs. After this rule, there is no category, where AMCs have full freedom to invest in any stock. 

Not only SEBI is restricting the freedom of AMCs, it is forcing the investors to learn about Market and keep track of that. We can no longer just blindly trust AMC and invest. Before this rule, if any investor wants to invest, and if they trust on any AMC and they don't have any knowledge on anything else, they can just go with Multi Cap Mutual Fund of that AMC. With this restriction, they need to decide whether to invest in Large Cap, Mid Cap or Small Cap and change the investments based on the market. When AMC has freedom to change the investments, they can do it on behalf of the investors.

Another reason that is mentioned in the media is, the investments in Multi Cap Mutual Funds are like either Large Cap or Large & Mid Cap or one of the existing schemes. So, there is no need for another category. I don't know whether this reason is given by SEBI or not. This reason may look correct for those who are doing day trading or have very small duration for their investments. But, it won't work for those who are doing investments for the long term.

When freedom is given to AMCs, they may invest in the stocks that are going to perform better. When they do that, most of the time, that would match with one of the categories defined by SEBI. But, in a couple of years, when the market is changed, and if they think, other category stocks are going to perform better, the AMC may shift their investments to the other category. At any time, the Multi Cap may match with one of the categories, but, the main difference is, changing their investments based on the market from one category to another category. That basic freedom is removed from AMCs.

If SEBI wants, it can create a new category with this rule and let AMCs use the new category, if required. Or it can keep the present rule, but create a new category where the AMCs get full freedom on whichever stocks they want. 

In 2017, SEBI restricted the number of categories, forcing AMCs to offer only the basic categories and reduce the redundant categories. With this rule, Multi Cap is going to violate the principle that it had set. After this rule, instead of investing in Multi Cap, they can invest 1/3rd of that amount in each of the Large Cap, Mid Cap and Small Cap. If AMC is following the principle of having minimum strategies, then the return of the Multi Cap is exactly going to be the average of Large Cap, Mid Cap and Small Cap. Then, why do we need the Multi Cap category at all? We can remove that. 

In the same way, the Large & Mid Cap fund category is also redundant, because the AMC is forced to invest a minimum 35% in Large and 35% in Mid Cap. If the AMC has freedom to invest in any stock of Large & Mid Cap with 70% limit, then that category is of some use. But, with the present rule, investing in Large & Mid Cap is exactly the same as investing half of the investment in Large and another half in Mid Cap. 

I am not worried about the Large & Mid Cap fund, because it is just another redundant fund. What I am worried about is, removing the only category that was giving freedom. 

Before 1991, few officers in the government used to decide the IPO price. Everyone knows how bad it is for the stock market. This rule is also going in that direction, where few government officers are deciding what people need. 

All this may go in deaf ears, if there is some hidden reason for bringing this change. For example, if SEBI brought this rule to increase investments in Small Cap and Mid Cap, then irrespective of the correct logical reasons, this rule might not be changed. If there are hidden reasons like that, it is going to harm the country. 

"It will be a folly to ignore realities; facts take their revenge if they are not faced squarely and well." - Sardar Vallabhai Patel 

Sunday, September 20, 2020

Completed reading ISKCON Bhagavatham.

Completed reading ISKCON Bhagavatham.

I have taken 19 years to read the 18 volumes of ISKCON Bhagavatham.

Saturday, September 12, 2020

Worst Rule by SEBI - On Restrictions on Multi Cap

SEBI introduced one of the worst rules for the Mutual Funds. It is expecting multi cap mutual funds to have minimum 25% of the assets in each of the large cap, mid cap and small cap. Anybody who has little bit brain and maths knowledge can understand that, it is very very difficult for small caps to match the large caps. After the categorization of the mutual funds couple of years back, Multi Cap is the only type, where AMCs can invest in any stock they want. With this restriction, there is no type, where AMCs have full freedom to choose the stocks. Are we going back to Pre-1991 days?