The Indian equity market is becoming like the Wimbledon – happens in England, but for foreigners. Similar our equity markets are based on Indian stocks (what we think as Indian like Hdfc, Icici, …) but largely a play by the FII.
Let us look at what happened to the Retail Indian Investor:
a. Invested in Real Estate: The so called average Indian investor is now so happy with a 80% Real estate, 10% gold and 10% bank fixed deposit asset allocation ratio, that he is NOT considering equity investments.
b. Redeeming his Mutual Fund Investments: Most investors are busy redeeming their equity investments as the Index keeps going up. At 22,000 index chances are there will be far more redemptions than at 21000.
c. Hit by inflation: Those who have not lost their jobs have been hit by inflation. This has reduced their capacity to invest.
Really cannot think of too many other reasons for the exit of the retail investor. Those who have some surplus CONTINUE to invest in ULIPs, classic endowment plans, real estate plots, bank fixed deposits, …etc.
So the Indian equity markets are left with only the FII (the Indian mutual funds, ulips, etc. are now reducing in size), LIC (traditional plans concentrate on debt much more than equity, but still LIC is a big investor).
Younger investors are actively discouraged by their parents – so they stay away from the markets.
However I do not blame the average investor. The terribly poor quality of corporate governance, the terrible anti investor stand of the MF and Life Insurance industry (actively helped by their regulator) are not really inviting people to invest.
RIP Indian Retail Investor. Not too many tears will be shed for you. Except of course by those people who are used to sucking your blood regularly.
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