The share of retail investors in the market cap of 2486 actively traded stocks on BSE has declined to a 5-year low. This figure was around 19% in March-2006, which is now 15.86% in March 2011.
Not surprisingly, this share started falling after the Indian Stock market crash of 2008. Which even surprisingly not increased during and after the two year rise of Indian Stocks Markets, when Sensex risen to 21000 levels from 8000 level lows. This is surprising as generally retail investors un-missing fully ride the when it is rising.
Vetting this fact, according to a report the cash segment turn over on BSE and NSE has also declined to more than 2 year low.
On the mutual fund side, the number of folios (investor accounts) has gone down to 3 crore 80 lacs in March 2011, from above 4 crore in March 2009. However, the sorry situation with mutual fund investment scenario has been blamed (rightly) by the industry to SEBI’s rules which cut hard on entry and exit loads, invariably reducing the distributors/agents interest in recommending and selling mf product/schemes. In our view, this is good for small investors. But isn’t it at the risk of retail investors only? In our view, if the Sebi and government seriously want to increase the participation of retail investors and that too through mutual fund route, then it must reinstate the entry and exit load which will in turn give mutual fund companies to offer their agents more incentive to sell mutual fund schemes. Perhaps the govt
can put cap on artificially higher commissions on NFOs and put rules that allow mutual funds to give similar or same commissions on existing schemes. Looking at the Indian Set up, the exponential growth of mutual fund industries (a dominance in fact) is necessary to bring in maximum possible participation of small investors into equities, as well as the best and only possible way of reducing the dominance and influence 'FII hot money' in Indian Stock Markets. We also recommend the exchanges, namely BSE and NSE to do investors awareness programmes on war foot basis rather than just sitting on their investors’ protection funds, if they want to rise the volumes.
can put cap on artificially higher commissions on NFOs and put rules that allow mutual funds to give similar or same commissions on existing schemes. Looking at the Indian Set up, the exponential growth of mutual fund industries (a dominance in fact) is necessary to bring in maximum possible participation of small investors into equities, as well as the best and only possible way of reducing the dominance and influence 'FII hot money' in Indian Stock Markets. We also recommend the exchanges, namely BSE and NSE to do investors awareness programmes on war foot basis rather than just sitting on their investors’ protection funds, if they want to rise the volumes.
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