When stock markets crash, as they have over the last few days, there's a huge demand the government do something since the aam aadmi is getting hit. This is not true, though there are good reasons for the government to do something considering that financial markets in India are double the size of GDP (they're 3 times GDP in China and over 4 times in the US), and around half of this comprises the equity markets. A survey by Invest India Foundation in May 2007 found that small investors (with incomes of under Rs 20,000 a month) invested just a sixth of the total investment by individuals in the stock markets "" individual investors, in turn, account for a very small fraction of the total equity holdings in the market with the bulk held by promoters, FIIs, mutual funds etc. In terms of market capitalisation, small investors earning less than Rs 20,000 a month account for less than one per cent. More important, the survey found three-fourths of these investors had been in the market since 2003 "" that is, they didn't get in and out of the market (at the wrong time at that!) as many believe. The country's investing population of 7.2 million, the survey found, had a total financial wealth of Rs 400,000 crore and roughly 30 per cent of this comprised equity holdings.
Literally small investors
(Equity exposure of small investors) | Annual Income
(in Rs) | Equity Exposure in Rs Crore | Mutual
Funds | Direct | Both | Total | | Less than 1 lakh | 1,748 | 3,673 | 764 | 6,185 | | 1-2.5 lakh | 6,910 | 3,300 | 4,125 | 14,335 | | 2.5-5 lakh | 17,954 | 7,339 | 16,876 | 42,169 | | More than 5 lakh | 13,849 | 12,653 | 31,032 | 57,534 | | Total | 40,461 | 26,965 | 52,797 | 120,223 | | Source: IIMS Dataworks, May 2007 |
|
