In a recent interview with CNBC renowned fund manager Samir Arora expressed his disappointment of Indian investors in equity markets by saying “Indian investors are world’s biggest losers”.
He adds that in a year when FII have poured in USD29 bln on the back of fundamental growth and resilience of Indian economy after 2008 global credit crisis; while the domestic investor’s participation have remained below average.
He also added that since Jan 2000, Foreign Investors have put a USD91 bln in Indian markets. While the mutual fund investments has been a meager at only USD 2 bln during this same 11 years span.
He goes on to contend that real public only owns 1% equity in India. Also citing a morgan Stanley report only 3% of average indian’s total assets are in equities.
DAILY VOLUMES:
BSE CASH SEGMENT- between 2000 to 5000 cr. (all mainly cash segment)
NSE CASH PLUS DERIVATIVE SEGMENT- around 1,30,000 cr.
NSE FIGURES PRESENTED IN PARLIAMENT GIVING DATA OF TRADING AND INVESTING ACTIVITY ALSO UNCOVERED THE SHALLOWNESS OF INDIAN MARKETS AND LACK OF PARTICIPATION BY AVERAGE INDIAN:
The data were presented by Mr.Meena, Minister of State for Finance, on 10 Aug, 2010 in Parliament in response to questions asked by two MPs.
The analysis of data is shocking and startling. You will find out in reality how shallo, narrow, concentrated our stock markets are.
While reading this keep in mind we are 2nd fastest growing economy, with close to USD 1 trillion in GDP, with 2nd largest population at 110 cr. plus.
BELOW ARE SOME SHOCKING EXCERPTS FROM IT:
The data corresponds for the three-month period from April 2010 to June 2010.
Total investors traded on NSE cash segment in Aprl-June 10 | 30.90 lac Only | 52% of these were retail, HNIs and corporate investors. |
Inst. investors and Proprietary trades counted for-48% of this. | ||
90% of total trading came from 192,200 investors. 80% came from just 41,654 investors. | Thus, rest of 1,50,546 investors accounted for the rest of meager 10% volumes. | |
Only 8,727 investors accounted for 70% of turnover among which 413 were proprietary traders, mainly brokerage houses. 60% of trading came from a mere 1,563 traders and 50% of the trading volumes came from an ridiculously low number of 451 entities of which 156 were proprietary traders… | ||
DERIVATIVES SITUATION- | ||
Only 5.75 lac entities traded. | ||
90% of it volume came from 18,035, meaning 97% of traders accounted for only 10%, and only 3% (18,035 ) accounted for 90% of the period’s all the derivatives turnover. | ||
Only 2,188 investors accounted for 80% of derivatives turnover. | ||
537 investors account for 70% of trading. | ||
223 investors accounted for 60% of trading. | ||
50% of all NSE Derivative segment TO came from 106 parties including 58 proprietary accounts!!! | ||
INDEX OPTIONS ACCOUNTED FOR WHOPPING 55% OF DAILY F N O VOLUMES. | ||
Daiyly trading in index futures accounted for 11% of total f n o volumes. | ||
INTRADAY TRADING- | ||
In f and o 67% trades were intraday trades. | ||
In cash segment 64% of trades were intraday nature trades. | ||
BROKERAGE COMPANIES AND STOCKS- | ||
25 brokerage companies accounted for 42% of equity cash and 43% of stock derivatives turnover. | ||
In cash segment top 10 stocks accounted for 24%. | ||
And in derivative segment top 10 stock accounted for 38% of total derivatives turnover. | ||
Conclusions and contemplations:
This whole data and figures of trading and investing activity on NSE, country’s top stock exchange which account for 90% of stock market volumes (10% of BSE), is only for a quarter’s period and not whole year; however the figures are so worse and shocking that giving benefit of doubt regarding taking the whole year or even more than a year into account would not suffice to prove that the weird pictured of depth and width of our stock markets is anything better than how we see it after looking at these data.
Massive trading volumes figures published every day hides this naked reality of Indian stock markets that they are dominated by few entities and that it is far far far away from any meaning and sense of average investor inclusion in capital market activities.
NSE has been also criticized for constantly fighting against Right to Information Act applicability on it, which shows its reluctance to transparency and attitude of hiding things which it obviously doesn’t want people to know!
With such a shallow participation with only 106 entities who account for half of the derivatives Turn Over, WHY the markets can’t be said to be a CASINO…than a fair trading platform in any sense and meaning?
Doesn’t this mean that markets movements are not dependent on investors sentiments at general but interests of the few entities who put most of the volumes for e.g. the 2188 investors who accounted for 80% of trading. It is clear that the rest 20% however in lacs do not have any impact and consequently are not at all any part of price discovery in markets.
Activities on bourses weather investing or trading is concentrated among few players, and there is almost nil participation by so-called retail investors or average Indian investors.
The activity on the bourses are more of a nature in speculative than by any means a fundamental investing.
Time and again nse is accused to include try to bring more and more stocks forcefully, into derivatives segment to ramp up volumes and their profits.
Looking at these it becoming even concrete that there does not exist any such thing as ‘price discovery’ in Indian markets and the prices of stocks are influenced by activity and interests of few entities and investors rather than a huge base.
We see many stocks jumping up 10-20% a day and falling sharply on following day (so many times without any news flow). This also supports the data which suggests that few gamblers cause such movements. For them its all about today’s play and more often than not, the retail investor is the one who loses out by hoarding into a wrong stock at wrong prices.
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