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Rajya Sabha MP raises concerns to finance minister about the sorry state of stock markets

In a matter-of-fact letter to the finance minister, Rajeev Chandrasekhar, Rajya Sabha MP, has asked the government to address the burning issue of stock market reforms

Minister of state for finance Namo Narain Meena's startling and worrisome disclosures in Parliament regarding investor participation in stock markets has hit home hard. Moneylife has reliably learnt that Rajeev Chandrasekhar, Member of Standing Committee on Finance, in a letter to the finance minister, has called for the government to focus on and address the further deepening of the Indian stock market, as the depth of the market remains a major cause for concern. Moneylife had written about the finance ministry's startling revelations in Parliament (see: http://www.moneylife.in/article/72/8312.html and http://www.moneylife.in/article/72/8347.html).

Mr Chandrasekhar wrote, "…despite the perception of a healthy stock market in our country, the market remains narrow, shallow, illiquid and concentrated in the hands of a few individuals located in a few centres, even 20 years after India embarked on financial liberalisation and ostensibly unleashed a boom in stock investing and spreading  the equity cult." Rounding off his letter, the MP wrote, "I strongly believe that reforms and further deepening of our stock market is an important policy objective for the government to focus on and address."

The letter follows Mr Meena's startling disclosure in Parliament in response to a question asked by Mohammed Adeeb, a Member of the Rajya Sabha. On 10th August, the minister said only 30.90 lakh investors traded on the National Stock Exchange's (NSE) cash market in the April-June quarter. Of these 52% were retail, High Net-worth Individuals (HNIs) and corporate customers. Institutional investors and proprietary traders accounted for 48% of all trading (24% each).

The figures as broken down by Mr Meena are indeed worrisome for policymakers. The minister said that 90% of trading in the April-June 2010 period came from just 192,200 investors. Further, the minister said 80% of turnover came from just 41,654 investors. In other words, 1,50,546 investors (78%) accounted for just 10% of trading turnover. Further, the minister said 8,727 investors accounted for 70% of turnover among which 413 were proprietary traders, mainly brokerage houses. Mr Meena also said that 60% of trading came from a mere 1,563 traders and half the trading turnover (50%) came from a shockingly low 451, of which 156 were proprietary traders!

Highlighting these figures in his letter to the finance minister, Mr Chandrasekhar wrote, "I am sure these figures would be extremely worrisome for the government and yourself." The data shows that the market has neither depth nor diversity and only a small segment of Indians are involved in it - that too in the form of speculation by day traders in a few select products including the NSE's main index, Nifty.

The reality about the depth of Indian stock markets appears to have hit home, at least among a few government officials. It remains to be seen whether this translates into any meaningful action on the part of the government. 

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COMMENTS

natasha

6 years ago

contrary to public perception India does not have a very high savings rate at all .
Most of the savings are concentrated only in blackmoney . the middle class which is the backbone of the economy is dwindeling currently is totally having to service debt products like emis housing and car , credit card loans at floating interest rates , and 70 % of the population lives on only 20 rupees per day .
our GDP per capita is nearly as low as that of Pakistan which is a failed state .
What you see in the televisions is all hype and not true INDIA .
What your politicians BS about gdp and growth is utter humbug .If you talk gdp and it doesnt carry the entire country forward its useless .Show me the roads railroads bridges ports .

NOTE : your IPL 20-20 also contributes to GDP . It results in more tvs being sold more beer being drunk more sleepless nights more junk wafers food pizza donut being eaten more electricity being consumed more atf fuel being consumed ,more activity being done with so called socialites hopping from her eto htere and people going to stadia moving around and bookies rolling currency and money around and all this is complete wasteful expenditure .THIS IS ALSO CONTRIBUTING TO YOUR GDP . make a study of how much GDP is due to consumption and that to wasteful consumption .do you really need those batata chips and wafers . MOST INDIAN GDP is ABSOLUTELY WASTEFUL expenditure and this mostly currently comes out of the SAVINGs ...>>
nowadays .People have no work so they watch all this crap on tv night after night .

above is just example .

REPLY

Roopsingh Solanki

In Reply to natasha 6 years ago

I fully agree to your all points and real concerns-india is sitting on a volcano of critical problems-like population,poverty,un-employment,illiteracy,pollution,corruption-we can stretch this list to numerous factors-and still we live in 'euphoric 'state-we are just copying technology and development models which has been fully utilised in west-we are just best copiers but copying without brain-we never think we wont be able to accomodate so many cars on highways and city roads-and still we have no plans to start metro trains in most of multi-million cities-we dont have sewage or drinking water available to all-not enough toilets on city roads-we dont have hand pumps in citiies in case a war breaks and electricity will not be available( what people will drink if whole city gets cut of electric power)-have we ever planned for all these consequences-we are not trying to use renewable energy like wind or solar energy-we have best sunny months in world-but we are just wasting electricity on air conditioning to stop room heating-we are proving our selves as ''BIG BIG FOOLS"-

Aparna Ramachandra

6 years ago

Hi
everybody is making noise about reduced investors, not too much depth maturity in the market etc. But on the other hand we have one of the highest savings ratio....so hat does it mean. The average investor is not just wary, scared but also plain lazy. So I believe we also have to work towards not only building the investor community, but also make it more pro active. It needs be hammered that investing, investing with a goal and self discipline is the only mantra to ensure that your sons take care of you in old age (fat balance sheet!!!)...

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