Street veteran Parikh hangs broking boots

His firm executed its last trades in the second week of March, according to an NSE notification

Dalal Street veteran Parag Parikh, known for his behavioural-finance-based approach to investing, turned 60 in February. At a time when most people look to retire from active life, Parikh is busy reorienting his business from a brokerage to an asset management company (AMC).

Parag Parikh Financial Advisory Services (PPFAS) last traded on March 14, 2014, according to a notification from the National Stock Exchange dated June 17 which said that its membership had been surrendered.

A company official confirmed the move.

The switch to asset management is a new turn in a career that has spanned more than three decades on Dalal Street.

Parag Parikh first entered the equity business as a sub-broker in 1979. In 1983 he managed to purchase a membership of the Bombay Stock Exchange, then an elite club of brokers with an expensive buy-in. He gathered the necessary funds only after his mother and wife sold a part of their jewellery to finance the venture.

Always interested in studying the businesses of the companies he invested in, Parikh began offering equity research as a service in 1985, and netted a fair number of foreign institutional investors (FIIs) when liberalisation opened its doors to them in the early nineties.

Part of the reason that Parikh’s business is looking to asset management and turning away from the shrinking margins in broking is also a regulation which limits how much of its trading volume a mutual fund can route to a single broker. The Securities and Exchange Board of India’s regulations require that asset managers can only allocate five per cent of its volumes to a single broker.

“An asset management company shall not purchase or sell securities through any broker...which is average of five per cent or more of the aggregate purchases and sale of securities made by the mutual fund in all its schemes...” say the Sebi mutual fund regulations.

“As an AMC we need to use at least twenty different brokers,” said Rajeev Thakkar, director, PPFAS.

“We have not been active for quite some time but we had 650 clients under PMS (Portfolio Management Services) and the broking platform was used at the time,” added Thakkar, who is also designated as chief investment officer at PPFAS Asset Management, according to a note on its website.

The AMC has to justify in writing any breach of this limit and report the same to the trustees on a quarterly basis, according to the regulations.

Parikh’s shift to asset management is another part of a career which always seems as fascinated by the new as it is by the traditional. As a person who achieved success on Asia’s oldest stock exchange, Parik continued to learn, attending Harvard between 1994 and 1996.

Later, the euphoria around technology stocks which went up every day despite already sky-high valuations  got him interested in behavioural finance — which looks to understand the reasons behind the behaviour of crowds when it comes to investing.

He also meditates every day for an hour.

Despite a childhood attack of polio, he golfs on weekends, besides swimming and jogging for exercise.