'Investors love banks over equity markets'

Indian stock exchanges have not been able to inculcate equity culture and attract any new investor to invest in stocks over last two decades, despite innumerable efforts and automation.

“The investor has just eluded the markets,” Ashish Chauhan, managing director and CEO of India’s oldest stock exchange Bombay Stock Exchange said.

“We have erred on two fronts. Today, stock exchanges and brokers seem to be interested only in volumes. Earlier stock exchanges earned their money from listing fees and brokers relied on transaction fees. Later, exchanges began earning by charging a tiny charge of up to Rs 300 on a transaction of every one crore rupees. This saw exchanges and brokers focus more on volumes,” Chauhan said while speaking in Ahmedabad on topic of ‘Current Issues and Developments in Capital Markets’.

The other major problem, he said, was that while we have used technology to change the way we operate exchanges, the mindset of most of the promoters, companies and even policy makers remains the same. “Most of the policy makers and bureaucrats love banks over stock markets, as they can always call up a bank and get them to invest money in any company. But they cannot ask any investor in the stock market to do so. So they love banks over equity markets,” he said.

He, however, is more hopeful of the future and said that he expected the current market cap of Indian stock exchanges to rise to $15-$16 trillion in coming two decades, from around $2.6 trillion currently. “What will see this jump is demographics of India which today has almost 60 per cent of its population below the age of 35 years. China grew in last 35 years riding on its demographic advantage. Next 35 years are going to be for India,” he added.

Batting for investment in equity, he asked audience to look at non-IT technology stocks in the areas of nanotechnology, robotics, 3D printing and life sciences to get non-linear growth on their investments. He said that investors would always get better returns on equity markets than putting their money in banks or other assets if they are cautious with their money.

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