Ministry : Securities and Exchange Board of India

Department/Board : SEBI

Press Release No. : 43/2016

Date : 01.03.2016

SEBI DRG II Study Suggests Measures To Enhance Retail Participation

The Securities and Exchange Board of India released today the Development Research Group - II (DRG- II) Study titled, "The elusive retail investor: How deep can (and should) India's stock markets be?". The study is co-authored by Prof. C. P. Chandrasekhar, Dr. Sarat Malik, Ms. Akriti.

SEBI DRG II Study titled: "The elusive retail investor: How deep can (and should) India's stock markets be?" has suggested various measures to enhance retail investor participation in Securities market.

About the Study

The economic and financial liberalisation since the early 1990s have transformed India's stock markets. The Securities and Exchange Board of India has built and strengthened its market monitoring and regulatory apparatus. Besides measures that simplify the rules, ensure the possibility, improve the ease and reduce the cost of retail investor entry and activity in stock markets, the market regulator has looked for ways of incentivising retail investor participation in the markets. Yet, the prevailing perception has been that the individual, small, 'retail' investor has been less important in the market.

The present study examined the actual trends in and possible influences on the allocation of household and individual savings to investment in financial instruments; the factors underlying the perceived inter-temporal volatility in retail investor presence in the equity market, and the implications this has for investor behavior; is there any basis for the expectation that participation of retail investors would transform equity markets and enable them to perform their presumed functions better? and the experience in other emerging and developed markets in this regard.

The main findings of the study are:

(a) Identify any impediments to retail investor entry and participation, taking into account the need of such investors to invest in small lots and their weakness relative to institutional and high net worth individuals when seeking to acquire shares.

(b) Strengthen regulation aimed at guarding against market manipulation and price rigging.

(c) There is need to ensure that information disclosure by issuers of equity and listed companies is comprehensive and clear.

(d) It is necessary to educate investors not only on the potential savings opportunities in the market, but also on an evidence-based, investment strategy.

(e) It is necessary to strengthen the mutual fund distribution network in order to attract retail investors to the Indian Capital markets.