A time for retrospection - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

A time for retrospection

Dec 28, 2001

A NYSE panel recently fined a broker for allegedly buying worthless stocks on his customer's behalf in exchange for kickbacks. In India the second part sounds quite familiar but very unfortunately the first part does not. It is not that the markets in the west are completely honest, but watching the guilty being brought to book instills some kind of faith in the minds of the retail investors. What is there for the retail investor in India to place his trust on? The Unit Trust of India?

The whole affair of UTI's 'dubious investments' has taken a back seat in minds of the people and the press. Probably feeling is that the market has already been hit and it is all over. But unfortunately the economic consequences are far reaching. This is because events like these scare the small investor away from the stock markets. This could be the reason that even after 130 year of having stock exchanges, the number of investors is just 19 m from a population of 1 bn (1.9%). And interestingly the 'small investor' is very critical for the growth of the economy.

The developed economies have not grown miraculously. These economies have grown because the household savings were properly channelised and made available to various sectors like manufacturing. These industries were able to efficiently utilize the money and give handsome returns to the investors.

India bleeding
Particulars* IDBI ICICI IFCI
Net NPAs as a % of loan portfolio 14.2% 5.2% 20.0%
* Numbers as on March 2001

Among the 'channels' between the 'savers' and the industries are the stock markets and the financial institutions. In India both the channels have disappointed to a certain extent. At one end, banks and financials institutions have very effectively utilized their resources to generate NPAs (non performing assets) and at the other end, the there has been a saga of stock market scams. Today we have reached a situation where FIs & banks are apprehensive about giving credit and the small investor is shying away from the stock markets. This could mean that access to capital is likely to be more difficult for entrepreneurs in the times to come.

Stock markets: A glorious past?
Year Event
1992 Securities Scam
1993-1996 The IPO Bubble
1995 CRB scam
1995 Plantation companies scam
1999 Mutual fund disaster
1998 BPL, Videocon and Sterlite price rigging
2001 K-10/UTI/Cyberspace Infosys scam

For a country that needs to support 16% of the worlds populations with just 2.4% of the land area this is certainly not good news. India desperately needs to grow and the entrepreneurs will have to be the countries growth engine. Banks and FIs have never been known to give money to ideas, they generally opt for established businesses. Therefore, these ideas will look forward to the 'small investors' but if the scams continue to repeat they might just not find any small investors.

This makes the job of the SEBI very critical. From being a watch dog that merely watches it will have to be more active. The faith in the markets has to be established before anything else. However, SEBI can not be blamed for all the small investors woes. Time and again people give into 'hot tips'. You as an investor need to be more cautious. After all it is your money at stake. Do not try to make 'most of the rally' but try owning sound businesses.


Equitymaster requests your view! Post a comment on "A time for retrospection". Click here!

  

More Views on News

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

Sundaram Bluechip Fund: Will Hold the Stable Horses (Outside View)

Sep 18, 2020

PersonalFn briefly outlines the newly launched NFO note HSBC Corporate Bond Fund.

Wait! Don't Chase Smallcaps Now (Profit Hunter)

Sep 18, 2020

Let the markets take a breather before you jump in.

How Much Money Do You Need to Be a Professional Trader? (Fast Profits Daily)

Sep 17, 2020

In this video I'll answer a question I get asked often: How much capital do I really need to trade the markets for a living? Let's find out...

A Contrarian View on Whether You Should Load Up on Small Caps podcast (Views On News)

Sep 17, 2020

Rahul Shah discusses whether the SEBI circular is the perfect time to start investing in good quality small caps

More Views on News

Most Popular

How the 8-Year Cycle Can Help Identify Multibaggers (Fast Profits Daily)

Sep 11, 2020

This is how you can apply the greed and fear cycle in the market to pick stocks.

I Recommended this Stock over Page Industries because it's Relevant to Doubling Your Income (Profit Hunter)

Sep 7, 2020

Things are not often what they seem in the market and how you can take advantage of this.

The NASDAQ Whale Could Harm Your Portfolio (Fast Profits Daily)

Sep 7, 2020

The discovery of Softbank pushing up prices on the NASDAQ will cause volatility in the market. Stay alert!

This Could Be the Best September for Auto Stocks (Profit Hunter)

Sep 11, 2020

Here's why I think this month could be a great for auto stocks.

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE SENSEX


Sep 18, 2020 (Close)

MARKET STATS