Even as Indian equities are a widely publicised asset class, retail investors continue to take a cautious approach towards the market, and attracting them continues to be a challenge for the industry, say experts representing various segments of capital markets.
Speaking at an investor conference organised by Assocham, experts ranked lack of trust and transparency, and weak corporate governance as biggest challenge to low level participation in Indian capital markets.
?Due to market manipulation, weak corporate governance and regulatory framework, retail investors have no trust in secondary market,? said Gopal Jain, who is the managing partner of Gaja Capital ? an India-focused private equity firm.
According to Zia Mody, the managing partner of AZB & Partners, the average middle class investor has become cautious than ever before. Mody said,?We need a sophisticated regulator. Retail investors will not come back in hurry… Only honest market would bring back retail investors.?
In addition, experts also highlighted other important factors ? complicated regulatory framework, compliance bottlenecks, inherent risk aversion attitude of retail investors, good performance of other asset classes like real estate and gold ? that were affecting retail participation in capital markets.
Girish Nadkarni, the executive director, head of equity capital market and institutional equities, Avendus Capital, said returns on asset class from an individual?s savings would determine how much he would invest in the future. Gold and real estate have given significant returns in the recent past.
?Equity is perceived highly unsafe. There are no schemes to attract retail participation. Moreover, offering discount is an artificial measure to attract retail investors towards a risk instrument,? Nadkarni said.
Experts also attributed use of free pricing mechanism and discounts in public issues, coupled with lack of investor education as another reason that has resulted in low participation by retail investors.
