Mutuals Ideal Vehicle For Retail Investors

Business Standard: How do you think technology will contribute towards attracting the retail investor back to the bourses.?

Ashith Kampani: The expansion of BOLT will help in weaning back the retail investor to the bourses. The screen-based trading system is far more efficient and transparent as compared with the open outcry system which was prevalent earlier.

Also, inter connectivity between the exchanges will help the investor to get the best price for his stocks. In the US, large companies which are well connected to the stock exchanges have set up discount brokerage firms whereby the retail investors can phone in their orders to the agent. Alternatively, there is an automated system which takes the orders and executes them at the best market price.

 

Already, brokerage rates have come down drastically over the last few years. With technology advancing at a very rapid rate, it wont be long before there is a similar system in India.

BS: Do you think the retail investor will ever ome back?

AK: With the advanced technology, brokers will be able to reach out to the retail investor. H e doesnot have to come to Mumbai to place an order for acquiring or selling shares.

BS: But most investors lost heavily at the stock markets. How do you expect them to risk their hard earned money once again?

AK: The small investor would make a return to the equity market but having burnt his fingers in the earlier attempt, he is wary this time. Mutual funds would be the ideal vehicle for the small investor to make a come back to the capital market. Cynics might say that almost all the mutual funds are doing poorly at the moment. But one has to remember that the performance of the mutual funds is closely related to stock market conditions.

The government should allow pension funds to be invested in the equity market which will provide a boost in terms of liquidity. The stock markets are on the revival path, but right now the activity is concentrated in a few stocks. Some B group stocks are doing well, but the market still lacks the depth which could lure the retail investor back.

Till a few months back, the retail investor seemed to prefer the debt market for investments. But with the stock markets looking up, there is a gradual shift towards the equity segment.

The first half of the current fiscal wont be all that encouraging as the oil price hike will take its toll on the first half corporate results, but the second half should be better. The retail investors should be flocking back to the market in 1998-99.

BS: Do you feel the Indian markets are over regulated?

AK: Thanks to increased vigilance on the part of the regulatory bodies, the scenario at the stock markets have improved considerably of late. But more stringent measures would be better in the interests of the investor as well as the market.

In spite of all the efforts on the part of the regulatory authority there are certain grey areas like insider trading and price rigging which have not been totally eliminated. In the West, there have been instances where such cases have traced back to the culprits years after the incident actually took place. Such high levels of surveillance have to be enforced in Indian markets too.