The retail conundrum - IV
In past three days we have highlighted that the debate on
indifference of household investors towards the publicly traded equity is not
only inadequate but perhaps misdirected also. Our informal survey of some
brokerages who primarily deal with household clients and many of their clients
highlighted many structural and systemic reasons for their disenchantment with
the listed equities.
In fact regulator and the government authorities took cognizance
of some of these reasons in recent past, and we do have yet seen a few steps
being taken. But we are still some distance from finding a sustainable cure the
malice. Some of the reasons that we found are worth noting and act upon are
listed below:
(a)
In past two decade, since the capital controls
were removed, listed equities have not been able to match the returns provided
by traditional sources of investment like real estate and gold. A deeper study
would reveal that the rise in market capitalization during these two decades is
mostly due to rise in quantum of publicly traded equity rather than rise in
earnings or PE re-rating.
(b)
The mutual fund and insurance industry has
grossly and consistently failed the investors in these two decades. Except for
2-3 fund houses, most fund managers have performed briefly and only during the
bubble like conditions.
(c)
Regulatory framework has evolved over past
couple of decades and is robust enough to prevent any systemic collapse in the
trade settlement. However, it has still not been able to effectively break the
malevolent promoter-operator nexus, causing frequent cases of price
manipulation.
(Source: InvesTrekk Research, BSE, World Gold Council, Value Research)
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