Dimensions Team: With the increased equity markets participation, do you think things have never been better in terms of job creation and entrepreneurship?

Mr. Francis Kurien: Capital markets has always supported job creation. Capital markets not only include share markets. Any industry has both good and bad. The reason people keep away from capital markets is because every three or four years there will be a downturn. If you look at the emerging markets, during 2008 it was good, then down, then again up and now down again due to global scenarios. In terms of entrepreneurship, today a lot of small investors are coming into the market. The capital market is the only place where you can gather small householder funds which can be used for development of industry.

Dimensions Team: What are global issues which are affecting capital markets today?

Mr. Francis Kurien: One global issue that we are all expecting is the interest rate rise in the US. Because the U.S was keeping very low interest rate so far, all foreign investors were investing in India. Now that the U.S is expected to raise interest rates people will get better returns in the U.S. In fact any issue like the terrorist attacks in France or any policy issue will show in the capital market. For example with the China issue the market was down 500 points. Even though India is stable, the capital markets is interconnected with global issues. Or take even the Greece issue. It affected capital markets.

Dimensions Team: You mentioned that anyone can open a de-mat account and start trading. We are seeing a rise in fund managers across the country. These are the people who have access to extensive analysis and sector trends. With that in mind, do you think an average retail investor stands a chance to make money in the capital markets while participating alone, rather than investing through these fund managers?

Mr. Francis Kurien: Yes. The fund managers do portfolio management. Your investment in a mutual fund is being controlled by a portfolio system. They will be investing in sectors which are performing along with government bonds, etc. If a sector is not performing they will redirect their investment elsewhere. It is not that only the fund managers can help you on this. If we take the average citizen, he does not know anything about the capital markets. If he has got some money and if he invests in a SIP (Systematic Investment Plan), after a certain number of years that money will have grown significantly. Today there are index based funds. If the NIFTY goes up, the index fund will also go up. SIPs are professionally managed. It is on unit basis. Suppose today we buy one unit for Rs.100. Tomorrow if the prices go down we can buy three units. So the price is averaged and you can make good returns. Mainly it is due to ignorance that people do not know about this.

Dimensions Team: Although there is more access to the markets, the average person is not able to make use of it without going to the fund managers.

Mr. Francis Kurien: He can. Today all of you read newspapers. Today the trading is screen based. You should just know how to buy and sell. Suppose Reliance is about to announce dividends and the prices go up from Rs.100 to Rs.120. We can make a profit of Rs.20 if we sell. But we don’t sell. Instead we get greedy expecting that the price will go up even more. Even the fund managers cannot predict what will happen tomorrow. Investment participation has to be made more broad-based. Young people like you have to get involved. Even Rs.1000 of your pocket money today will give you good returns tomorrow. When I train investors the question they ask most frequently “How much will I make”? Such people cannot make any money. This is not about how much will I make, it is about allocation of risk. If we have high risking ability, there ae products in the market to satisfy that ability. The futures trading is high risk. If you buy 100 lots with a small margin of 3-7% of the total value of the total contract and on expiry you will come out with a profit or loss.

Dimensions Team: People compare capital markets to gambling and hence are reluctant to invest. How do you think we can remove this perception?

Mr. Francis Kurien: Investors should not get into aggressive trading although aggressive traders exist. You see Rakesh Jhunjhunwalla on TV. He is a big trader. The common man cannot make gains like him. Today the basics of trading has changed into algorithm based trading. Suppose a trader has a logic about how the market works, he can use it to create an algorithm such that it automatically buys and sells based on price movements. It is already happening in large volume trading. You can even buy this logic and use it to make trades if you are a large volume trader. You can plug it into the screen based trading and it will happen automatically without any manual intervention. So it is not gambling. People are greedy today. If you go and invest long term you can easily make 10% in the market. But you cannot expect that if you sell tomorrow. You should know when to exit also. Today the media gives very good information. They tell when market goes up or down. The main discipline in the market should be that if I invest a thousand rupees and that investment goes up to Rs.5000, I should then take the principal amount of Rs.1000 and invest it elsewhere. People do not do that however. When people do not do that and say that I will wait some more time for the market to go up even more, then market comes down and they lose money. The cost of trading also has come down drastically. Earlier, brokerage percentages were quite high. Now it is very low. Only government taxes on transaction has gone up.

Dimensions Team: Recently sovereign gold bonds was launched by the government as a means of incentivising people to not keep gold as a security. However gold ETFs are existing in the market. What is your opinion about whether these sovereign gold bonds will succeed or not?

Mr. Francis Kurien: I do not think this will be successful. Householders are used to keeping gold in physical form. Even if householders invests in gold for 10 years they expect to get their gold back and not just money. We already have gold schemes in electronic form like ETFs. There is Reliance gold, Birla gold where you buy it and keep it electronically in your account and liquidate it anytime and take the money. There is no need to go the bank and liquidate your gold and take the money.

Dimensions Team: Brokerage firms today trade electronically. With that in mind, do you keep a separate cell besides the IT department just to analyse big data to see the investment trends?

Mr. Francis Kurien: Today the transactions happen under the anti-money laundering act in the capital market. As companies we have to file STR if we find any suspicious transactions. So we should have checking systems. Even if someone has lots of money they cannot just come and invest. They have to fulfil KYC norms. Earlier black money was being circulated in the markets. Today it is not possible. If you want to trade, you must first open a bank account. And third party transfer cannot happen for trading. You have to transfer funds from your own account to trade. This kinds of checks are there. In the market, there are also system checks to verify the artificially made up prices of small company shares using different accounts by the same person. So the intermediaries have to be very alert and report to the government any suspicious activity.

Dimensions Team: Who gives you the software and instruments to check on all this? Does NSE provide you with all this?

Mr. Francis Kurien: NSE has their own checks and balances mechanism. We have our own checks and balances system. We have a credit rating system, we have a risk analysis system. If any client wants to come and buy huge lots in the market, we won’t allow him. He should have the capacity. So we analyse all this. Tomorrow if something happens, SEBI will question us as to “why did you allow this”? I should be able to substantiate. So, today SEBI has very good control compared to foreign countries like China. That is why NSE has been able to come out with so many products.

Dimensions Team: Yesterday we got the news Yuan is likely going to enter the IMF basket and IMF policy makers are trying of change the calculation of the weight of the Chinese currency.

Mr. Francis Kurien: The market has already discounted it. Those two days when they depreciated the value of the Chinese currency the market was very volatile and today we can see that China’s GDP growth will be surpassed by India’s GDP growth. Among growing countries India is leading. However right now we are going through political issues which are affecting us. Investors are always reluctant to enter if they feel there is a threat to peace in the country.