Friday, January 18, 2008

India's big woman investor? Or just big hype!

If there's anything that's bigger in India than the cricket Twenty-Twenty win or SRK starrer Chak De! it's probably the Reliance Power initial public offering that closes today. As I write this, the issue is around 50 times oversubscribed and the feeling that one gets is that riding the sensex boom every single Indian has become a savvy investor on the stockmarket. However, this belief for me now seems to be a hype, after the harassment that my mother suffered in trying to apply for a very few shares in this GREAT Reliance IPO. She's a retired school teacher who lives alone in Kolkata - the first hassle for her was trying to open a demat account. Apparently the Reliance IPO has caused a huge demand for opening the demat accounts and banks are working overtime to meet the rush.
In my mother's case, an agent from a prominent private bank who she had contacted came to her home and made her fill up the requisite form. Only when my mom went to the stockbroker's office to submit the application for the issue, she discovered he had opened a savings bank account for her and given her its number! Needless to say that she had no need for a svaings account.
Meanwhile, it was too late to apply for the IPO of the decade - no guarantee that she would have been allotted any shares even if her application went through. Further, mom who could have become a first time investor on the stockmarket failed to get the services of any stockbroker at her home. Surely, such services are available for people who are 65 and above. Well as far as India's great stockmarket boom is concerned - I think it's only for the net savvy, young people who open a demat account and start trading online. As for senior citizens, even if they are well educated and not computer illiterate, they remain at the mercy of idiots and unscrupulous agents. My mother has reiterated her faith in small postal savings - she walks down to the post office every month and chats up other retirees who are waiting in the queue. Even if the wait is long, no one's taking her for a ride after all.


AMR said...

It is very interesting that you would say that - the myth is that the more sophisticated the stock market regime and infrastructure, the more attention is paid to the small investor. And yet, never is that the case. Historically, India's supply of development finance (which really meant the supply of cheap capital to large corporations) was built on the efficacy of the public banking system and the small savings channels like the post office. Then we were told that these were highly inefficient and the new regime would correct all that. It may have corrected some things, but in terms of the claim of serving the small investor without internet access, well... A bigger worry for me is the safety of small investments, as we saw with the UTI fiasco.

ishani said...

I strongly feel that the really small investor without any vested interests or any muscle is still not getting served in India. There are hints of rampant insider trading and brokers' lobbies etc. WIth due respect to Sebi and without raising fingers against any particular issue, I also feel that allotment in IPOs which are oversubscribed in a big way, is hardly transparent. Finally, the way the markets move in India is also highly suspicious sometimes on the insider trading front. So where does the small investor stand a chance? For instance, when a bank agent opened a savings account for my mom instead of a demat account and effectively prevented her from applying for an IPO, how can I be sure that there were no vested interests at play?
As for UTI - the biggest scam where the guilty parties went totally unpunished, there are more in the waiting. For instance, I think the employees PF could well become cause for big harassment for common people in future.