Saturday, January 05, 2013
Why the Retail Investors have left the Indian Bourses?
It is true that these days, we are witnessing a daily redemption of units in huge quantities from the Indian Mutual Funds. These funds which once ruled the bourses in absence of any viable FII money, are now in a pitiable state. This shows that the apart from the direct participation, the retail investors are not even intersted through indirect means like MFs. If we analyse their case, then we find that their anger is justified. Apart from a few mutual funds most of them did not give good returns to the investors in the last 4-5 years. In the same way, the retail investors who genereally play in the small and mid cap counters have only seen, the value of their investments plument. It is because in the last 4-5 years though the indices have moved by huge delta and is threatening to break the all time high; the small and mid cap counters, which are the famous playing ground for this group has gone nowhere. What are the reasons for the same?
The fact of the matter is that: the retail investors are being treated badly not only by most of the brokerage houses, but also, by the stock exchanges, which it seems is making all out attempts so that a rally in the large cap contiunues. It seems they do not want the money to be diverted to the small and mid cap counters for the time being, as they probably first want the index to cross all time high. Whatever be the reasons, it is pity how the retail investors are holding stocks for more than 4-5 years without seeing any appreciation of the share pirce. This is the most unfortunate, especially we have a Finance Minister in the form of Mr.P Chidambaram.
Moreover, the stock exchanges have dubious group called T-group, where stocks are kept not for weeks but for months, for the reasons best known to them. This is like sending someone to Andaman Jail, during the time of British Raj. The stock exchanges never disclose why a particular stock has been placed in that group for so long!! Also, we see suddenly the circuits are being lowered only aftger two upper circuits. However, we did not see the same happening in the stock of Cinemax India Ltd, though it became more than 3 times in less than 3 months.
Besides, what is most laughable is when some stocks are put in the T-group and also their circuits are reduced to 1.89% (ridiculous), even on slight provocation,. This is primarily the reaons why the small and mid caps have not moved in tandem with the large caps. Instead of placing a scrip at 1.89%, why do the stock exchanges not stop trading in the scrip. If they want to make a mockery of trading they can do the same, but I feel such low circuit does not make sense, especially the fundamentals of a company is strong. The price of a scrip will rise or fall depending on the market sentiment, so I do not know why there has to be such ridiculous circuit filters? Yes, 5-20% circuit filters can be placed to reduce volatility, though I prefer 10-25% circuit filters, but then if this is the case, then why are circuit filters absent in the F & O segment? This is where the people loses maximum wealth, but then how is that the Stock Exchanges ignore this section and is after small and mid caps, where very small amount of trade takes place (often less than 30% of the total trade).
Therefore, I feel that unless the government takes stern action against the Indian Stock Exchange officials and replace them soon with investor friendly faces, I feel the retail investors would continue to evade the equity markets and invest in real estate and gold or other safe avenues. I therefore, urge upon the government to take steps so that any circuit below 5% is banned in India and also, let it discard the T-group, too. We are here to do business, so let us do business, instead of doing politics. Shame upon the Stock Exchanges of India!!