Its lonely being an equity investor in India.
Consider the following facts:
1.The entire mutual fund industry in India had inflows of only 3099 Crores (around 620 M$) for its equity schemes (including ELSS) for the period Feb 2011- Feb 2012 (source AMFI). Is it any wonder that international mutual funds famed for their equity expertise are shutting shop and leaving this country ?
2.Number of demat accounts opened this year is around 10 Lakhs (1 Million).The total number of demat accounts in this country is around 1.98 Crores.That means only 1.6% of the country’s population has a demat account.Tomorrow, if the stock exchanges shut down, 98% of the country will shrug their shoulders and move on !!
3.Plummeting brokerage commissions , cumbersome compliance rules and lackluster equity markets have led to 6500 sub brokers shutting shop.The remaining brokers too seem to be an endangered species.
The Government has finally made an attempt to broad base the equity cult using the Rajiv Gandhi Equity Scheme.
If Indians love one thing, its a good tax break.
In this scheme, there is a 50 per cent tax deduction to first time retail investors with :
- Annual income of less than Rs 10 lakh
- Investment up to Rs 50,000 in a year
- Investment in the top 100 listed entities in BSE and NSE
- Lock-in period of three years (this may reduce to a year .)
Critics have complained that this scheme entails green investors doing direct investing instead of going thru the mutual fund route.
But if this scheme works, then it can change the face of the Indian equity markets.