The small investor is the aam aadmi (common man) of the stock market. He is the gallery the market participants play to. His inconveniences are amplified when policy changes are sought and the benefits that accrue to him are listed when new measures are to be introduced. He is the mask everyone on the Street wants to wear.
How has been the past year for the small investor? A rising market is like a casino, nobody needs an invitation for it, a big bull once told me. True. The stellar rally fuelled by the hopes of an economic revival and corporate earnings growth peddled by the new government under Prime Minister Narendra Modi saw the benchmark indices hit new highs every other week.
The BSE Sensex, which struggled to get past the 21,000s for six long years since the crash in 2008, finally broke free. Seven landmarks - 22,000, 23,000, 24,000, 25,000, 26,000, 27,000 and 28,000 - fell by the wayside as foreign inflows,reminding one of the heady days of 2007, when 1,000-point benchmarks fell by in matter of a few sessions.
It is important to note a 1,000-point rally today is only 3-3.5 per cent against five per cent earlier, due to the base effect. So, expect more 1,000s to get knocked off easily. As we approach the 30,000-mark, 1,500 should be the new 1,000. Newspapers and TV channels, though, would still prefer the rounder numbers.
These round numbers and screaming headlines have, no doubt, drawn in the small guy. Mutual funds have seen record inflows topping even the 2007 highs.
As assets under management of fund houses hit record highs, the regulator has stepped in to explore if some housekeeping can be done in terms of limiting up front commissions. Like all moves that might actually benefit the small investor, there is stiff resistance. I am sure the defendants of the commission have some convoluted theory on how it actually helps the small guy to not scrap these payouts that eat into returns.
Sebi's moves to kickstart the primary market have not produced any tangible results for small investors. Qualified Institutional Placements dominated it with issues worth Rs 31,684 crore. Initial public offerings and Follow on offerings, where small investors can buy shares, saw hauls of Rs 1,528 crore and Rs 497 crore, respectively according to Prime Data Base database. That is the worst tally in ten years. Even the offer for sale platform returned the lowest number in three years at Rs 5,000 crore as the government could not push through its big ticket share sales. On Monday, there were reports of further tweaks to the public issue framework. Let us hope these measures stimulate good quality companies to offer shares leaving enough on the table for the small investors making 2015 the year of the primary market.
Another area of concern for the aam aadmi of the Street is the U-turn in company law and Sebi regulations with relation to the related party transactions. While the first half of the year saw several encouraging steps towards empowerment of the minority investor, much of these have been undone by the Narendra Modi government on the pretext of improving ease of doing business. A middle path should be discovered.
Finally, a newly empowered Sebi has been busy this year, banning big boys like DLF, attaching assets of numerous ponzi players and even ordering its first arrest. Let these measures help it in delivering a transparent, fair and prosperous securities market for the small investor in 2015.
