Here is our take on 10 market trends to watch out for in 2010.
Exchange-traded funds (ETFs): ETFs linked to gold, Nifty and Bankex are already there. The National Stock Exchange (NSE) is developing more ETFs based on its indices. It is also in touch with investment bankers to launch ETFs in overseas market based on Indian indices. Sources said Indian investors might also get to invest in the S&P 500 or the BRIC Index through ETFs.
Further, Benchmark Assets Management Company, a pioneer in ETFs in India, has sought the Securities and Exchange Board of India’s (Sebi’s) nod to launch ETFs based on government securities. This will enable small investors to invest in these securities. Benchmark is also launching an ETF based on Hang Sang in early January, besides an ETF based on NSE’s infrastructure index.
Consolidation among mutual funds (MFs): A decade ago, fund houses had to struggle to find investors. This year, after Sebi barred them from charging entry load, which used to go to MF distributors, the MF distribution network is at standstill. On the other hand, MF trading on stock exchanges, launched in November, will take time to pick up. Nearly two-third asset management companies are in the red. It is difficult for them to capitalise losses every year and market sources say many are searching for a respectable exit from the business.
More exchanges: The year will see the largest number of exchanges start operation in a single year. These include two stock exchanges, United Stock Exchange of India and MCX Stock Exchange, a spot exchange from the National Multi Commodity Exchange and two-three commodity futures exchanges — one from Kotak Mahindra Bank and Ahmedabad Commodity Exchange, one from Reliance ADAG and one from IT People.
Super-regulator: As financial markets take electronic and over-the-counter forms, they require regulation by many organisations such as Sebi, Irda and RBI. While making Sebi a super-regulator has been suggested by various committees, other regulators have different views. Sources say a super-regulator may see light of the day in 2010.
Action in exchange-traded corporate debt market: The corporate debt market is set for a big change and the trigger could be trading in corporate default swaps and corporate debt repos.
Online sale of commodities: Lakhs of farmers and traders will sell and buy commodities through electronic mandis. Three nationwide electronic mandis (from Multi-Commodity Exchange, National Commodities and Derivatives Exchange and Reliance Exchange Next) will become more active while the fourth one, from the National Multi Commodity Exchange, plans to start operations next year. The central government has also decided to sell wheat to flour mills through electronic exchanges.
Retail investors will be king: Sebi is expected to take more steps to empower small investors through improvement in disclosure norms and lowering of transaction costs.
IPOs through stock exchange: At present, mutual funds can make new fund offerings on exchanges. Now, investment banking circles have started discussing the possibility of launching initial public offers directly on exchanges. This is on the agenda of the stock exchanges too.
Employee referral: All IT companies have a platform — maintained by National Securities and Depository Limited — where they can find their employees’ previous record. Financial service sector companies, including banks and broking companies, expect to launch such a mechanism in 2010.
Dollar delivery in futures: While equity derivatives trades on stock exchanges are settled in cash, currency derivatives will see an important change next year. Not only will there be more currencies available for trading, there is a possibility that currency futures contracts will be made delivery-based.
