The upcoming meet of Confederation of Indian Industries to discuss ways of expanding and ‘deepening’ the Indian capital markets has no place for the retail investor. Has corporate India written off retail investors? Or do they continue to think that retail investors have nothing to contribute to policy making?

On 12 December, the Confederation of Indian Industries (CII) will hold its 4^th Capital Market Summit in Mumbai. A quick look at the agenda and the speakers shows that almost every capital market segment has a role and a space at the summit except the biggest stakeholder of all—the 10 million retail investors.
 

The theme of the summit is  “Deepening of Capital Markets: Faster Growth of the Economy” and the objective is: Facilitating raising of capital from domestic resources; restore capital markets as the centre for capital formation; and, building stable and mature capital markets. To our mind, all three objectives need to take into account the retail investor. More specifically, it should address why 20 years of economic liberalization and so-called capital market growth has halved the number of retail investor. The most recent survey commissioned by SEBI (Securities and Exchange Board of India) puts the retail investor population at 10 million, which is two million more than that reported by the D Swarup Committee report.
 

Without the presence of retail investors, markets lack depth and companies find it hard to make successful IPOs.
 

However, CII is apparently unconcerned. It has put together industry representatives of every kind -- investment bankers, private equity investors, mutual funds, at least four stock market chiefs, regulators, law firms and banks (which hard-sell products to investors) – to deliberate on how to grow the size of the capital market. It is satisfied that if they interact with lawyers, policy makers, investment bankers, advisors and other corporate stakeholders who are helpfully listed under “who should attend”, the summit should be successful.
 

Is it any surprise then that investors’ fury at repetitive, cumbersome Know Your Customer (KYC) processes are never addressed. It is any surprise that transmission of shares remains a slow, expensive and endless process? And is it any wonder that investors have voted with their feet and switched to bank fixed deposits, gold or real estate or tax-free bonds?
 

Retail mutual fund investors have also been pulling out of SIPs (systematic investment plans) in large droves. As many as 5.10 lakh SIPs were ceased before the completion of the stipulated tenure (http://www.moneylife.in/article/mutual-fund-sips-decline-further-who-is-to-blame/29873.html).
 

Here’s the irony—excluding trustee members, there is no direct representative from the mutual fund industry to speak either in the CII summit. In the past, summits of this sort at least had a token representation from investors, investor groups or at least analysts who were seen as the voice of the ordinary investor. But industry has now chosen to dispense even with this pretense.
 

Keeping retail investors out of capital market summits would have made sense if there were other forums for the regulators to address their concerns or interact with them. But this does not happen either.
 

The chief guest at CII’s summit is UK Sinha, the chairman of SEBI. In over two years at SEBI, Mr Sinha has diligently addressed a plethora of corporate summits or events organized by industry associations and chambers of commerce, but there is no record of his having addressed any genuine investor meets or directly engaging with investors.
 

In fact, under his tenure, SEBI does not even respond to investors’ email suggestions; worse even letters from retired secretaries of the government of India are mechanically transferred to the outsourced grievance redressal mechanism which sends out absurd replies like “the issue is not under SEBI’s jurisdiction”. This happened specifically in the case of former expenditure secretary EAS Sarma and has been published by Moneylife.
 

The bigger irony is that the finance ministry, the ministry of corporate affairs is forever exhorting market intermediaries and stock exchanges to conduct “financial literacy” seminars, as though lack of financial literacy and not bad policy making or mis-selling or regulatory apathy have driven away investors.