Sensex gains 223
Mumbai: After three days of uninterrupted fall, the stock market bounced back on Friday thanks to technical correction and clarification by the Securities and Exchange Board of India (SEBI) on participatory notes (PNs). International rating agency Moody's upgrading of India's rating also added to the bullish sentiment leading major stock indices up by four per cent, the highest gains in a single day seen in the last few years.

The market which opened firm on the last day of the week remained stable during the day. But rumours in the market that the SEBI will not ban PNs led to a sharp jump in the stock price in the last one hour of trading.
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Retail investors in MF distribution tangle
Mumbai: The current incentive structure encourages mutual fund distributors to hardsell mutual fund plans even when they do not fit the customer profile, leading brokers in the country admit privately, a business newspaper reported. "It has become quite common for distributors to sell, for example, pure equity plan to a retired person — completely wrong but brings good commission," a broker was quoted as saying.

Pure equity plans fetch the broker a commission anywhere between 1.5 per cent and 3.5 per cent with majority of managers passing on the entire entry load to them. When new plans are launched, they also get a fixed amount per application as additional commission. An industry insider said one AMC recently paid Rs 300 per application when it launched a new plan. Regulation allows such huge amounts to be accounted as issue expenses and amortised over five years.
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PNs only to registered bodies from 3 February
Mumbai: Ending uncertainties over the future of participatory notes (PNs), the Securities and Exchange Board of India (SEBI) on Friday ruled that PNs already issued and outstanding against "unregulated entities" will not be required to be sold in the market immediately. SEBI also decided to regulate the fresh issue of PNs by making it mandatory that from February 3, PNs against underlying Indian securities can be issued only to the registered entities.

SEBI said: "It has been decided that outstanding PNs against unregulated entities will be permitted to expire or to be wound down on maturity, or within a period of 5 years, whichever is earlier." This means, SEBI has effectively decided to control the inflow of funds into the equity market through PNs in the future but allowed the outstanding PNs issued to unregulated entities remain invested for a maximum of five years.
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