Seeing return of retail participation in market: NSE

The retail participation in the market has definitely gone up over the past 20 years and today there are close to 2 crore retail investors, says , Chitra Ramkrishna, MD & CEO, NSE, adding that it is still a very small proportion of the “total savours in the market.”

In an interview to CNBC-TV18, Ramkrishna said that disinvestment in large navratna PSUs are good pegs around which one can see the retail money coming in, which in turn helps in building a good momentum around retail participation.

Below is the transcript of Chitra Ramkrishna’s interview with Latha Venkatesh and Reema Tendulkar on CNBC-TV18.Latha: Just about a few weeks back you all celebrated your 20 years at NSE, 15 years here, what has been the biggest challenge? Has it been technology, has it been expectations? A: My heartiest congratulations to CNBC. As I was just sharing with your team, we have all been fortunate to be part of a period in markets where there have been tremendous changes and some of us have had a chance to be part of those changes. As electronic media you all have done a wonderful job of bringing a lot of transparency and information to the market. So, a very warm congratulations to all of you. Latha: You have seen the markets in 2003, you have seen the markets before, does it feel like a very big moment? Do you see retail participation yet again? A: Let us put it this way, that in these 20 years if you see how the markets have transformed, definitely the retail participation in the markets has increased. Today we are talking about close to 2 crore retail investors in the market but as I never tire of saying it is really a very small proportion of the total savers in the market. So, there is enough of task in front of people like you and us in the next 10 years. Reema: While we have seen an improvement in market breadth, we are still a long way compared to mature markets like the US as well as in London. What is your gut telling you, how soon can India be counted amongst those developed markets? A: Let us look at it this way; what does it take to build market breadth? There are three key factors as I can think of. First is you need to be able to offer a variety of products which serve different customer needs. I think we have about got there because today we are all multi asset class markets with equity, currency and fixed income most recently. So, that is a very good step for us to build on.The second is that when we talk of breadth of markets, we talk about what kind of savings actually gets channelised into the market. So, one is direct savings and second is indirect savings. When we talk about direct savings definitely the number which we talked about, more retail investors in the market, okay, but the second piece I think is something we all have been talking about which is indirect savings in the form of retrial monies and how and when they will start participating in the market. I think even as late as last week, we have been reading about how EPFO and others are seriously looking at putting some portion of the retrial monies into the market. I think these can be game changers in building the breadth in the market. Thirdly also it is about how much inclusion we are able to build into our agenda. When we talk about inclusion, we should talk on two facets. One is the issuers side so that it is not only 1600 companies which are able to raise capital from the market, how much are small and medium enterprises going to be able to raise money from the market efficiently and how much penetration can we actually achieve? Even today beyond the top 100 cities there are less than 10 lakh investors who come in. So, what we can we do to increase that? I think all these augur for building breadth in the market.

Latha: When I was asking you to compare with 2003, what I want to know us how do you gauge the flavour of the moment? We have had one damn good year in the equity markets, is it getting into a broader retail participation in your numbers, in the way you watch the markets? Are you getting a sense that there is a lot of growing retail interest? A: What I definitely sort of hear from many of my brokers is that definitely retail has started to come back in the market. Some of that is dormant investors who have started to now become active again. However, ETF initiative has brought in a lot of people who were not in the equity market before. So, I do see that coming in and typically large good navratna PSU disinvestments like the ones that we are seeing are very good pegs around which you see retail money coming in. We have seen that earlier so I think that helps us to build a good momentum around retail participation coming back. Latha: You spoke about ETF, now that is an exchange initiative that has increased inclusion as you put it, anything more that you have in mind in terms of inclusion or just new products?A: While we have the broad categories of new products definitely there is tremendous interest and potential to see variety of ETFs. So, it could be different thematic kind of ETFs or sectoral ETFs. So, we are hard at work trying to create some of those kind of products which will go well. However, from a mass perspective if you see, SIPs on ETF is the way to build that saving culture and bring a lot more retail in to the market. CPSE ETF for example, again another great idea. Latha: Has it picked up? A: No, it hasn’t yet picked up but ETF itself hasn’t yet picked up as much as we would all like to see. So, I think these are all different bets that one has to try and see which one catches the fancy of retail. Reema: Participation of retail is still very low. How can we incorporate technology to improve financial inclusion? A: This is what I would say is on top our minds when we talk about technology because technology helps reach people and gives information to people which hitherto could have been a cost or an access barrier. So, technology to penetrate into new places, second technology to ease the end-to-end access to our market, so, whether it is a mobile platform, whether it is internet these are all the different initiatives that one can think about.