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INDIAN EQUITY INVESTORS SURVEY 2010
Information Innovation Education Research
- Dr. Ranjan R. Chakravarty Head, Research & Product Development, MCX Stock Exchange
Highlights:
Huge potential for market penetration, development and financial inclusion
Financial education for better awareness and Competition for greater benefits
Mobile phones are the preferred channel for equity investing
Concise Report
- Survey conducted by The Nielsen Company
MCX Stock Exchange Ltd.Exchange Square, Suren Road, Andheri (East), Mumbai 400 093, India. Tel: +91-22-6731 9000, Fax: +91-22-6731 9004.
Email: info@mcx-sx.com Website: www.mcx-sx.com MCX
-SX/
Oct
ober
201
0IE
IS-C
R/
In alphabetical order
SHAREHOLDERS
Project Leader: Dr. Ranjan R Chakravarty, Head, Research & Product Development, MCX Stock Exchange
Project Team:Project Coordinator: Arbind Kumar, FRM, Research & Product Development, MCX Stock ExchangeProject Associate: Sooraj Rao, Research & Product Development, MCX Stock Exchange
Research Team:Research Coordinator: DG Praveen, Research & Product Development, MCX Stock ExchangeResearch Associates: Kaveri Deshmukh and Chaitanya Wangikar, Research & Product Development, MCX Stock Exchange
Communications Team: Amrita Nanavaty, Rini Mukherjee and Mohmad Shaikh, Communications, MCX Stock Exchange
Survey Team:The Nielsen Company
Acknowledgements:We are grateful for the support of Mr. Joseph Massey, Managing Director & CEO, MCX Stock Exchange, for the entirety of this project. We also gratefully acknowledge the contribution of Dr. Bandi Ram Prasad, President, FT Knowledge Management Company, Mr. U. Venkataraman, Executive Director, MCX Stock Exchange, Mr. Sanjit Prasad, Director, Business Development, MCX Stock Exchange, Mr. G. Sankaranarayanan, Sr. Vice President, Marketing and Business Development, MCX Stock Exchange, Mr. Saji Cherian, Head, Corporate Services and Market Development, MCX Stock Exchange, Ms. Latika Kundu, Head – Market Operations, MCX Stock Exchange, Mr. Setu Shah, Sr. Vice President, Communications, MCX Stock Exchange, and Ms. Jyoti Rai, former Vice President, Marketing and Business Development, MCX Stock Exchange. We thank each one of them for their suggestions and support, which have been critical for this project.
Indian Equity Investors Survey 2010
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Board Of Directors & Advisory Board
! Mr. Ashok Jha, IAS (Retd.) Chairman, Former Finance Secretary
! Mr. Jignesh Shah, Vice Chairman, Chairman & CEO, Financial Technologies (India) Ltd.
! Mr. Joseph Massey - MD & CEO
! Mr. V Hariharan - Director
! Dr. Nitish Sengupta, IAS, (Retd.) - Director, Former Revenue Secretary and Member Secretary, Planning Commission
! Mr. Atul Rai - Director, CEO & Managing Director, IFCI Limited
! Mr. Vepa Kamesam - Director, MD, Institute of Insurance & Risk Management, Hyderabad and Former Dy. Governor, RBI
! Mr. S S Thakur - Public Interest Director, Former Chairman, Central Depository Services (India) Ltd. and Founder Chairman, HDFC Bank Ltd
! Mr. C M Maniar - Public Interest Director, Senior Partner, Crawford Bayley & Co
! Mr. B D Sumitra - Director, Former Managing Director, CCIL and Former Deputy Managing Director, SBI
! Mr. C VR Rajendran - Director, General Manager - Corporation Bank
! Mr. V K Khanna - Director, General Manager - Union Bank of India
! Mr. P K Chhokra - Director, General Manager - Punjab National Bank
! Mr. A A Badshah - Director, General Manager – Bank of India
! Mr. U Venkataraman - Executive Director
! Mr. G N Bajpai, Chairman of Advisory Board, Former Chairman, SEBI & LIC
! Mr. Venkat Chary, IAS (Retd.), Former Chairman, Forwards Markets Commission (FMC), Former Secretary to the Chief Minister of Maharashtra
! Mr. A V Rajwade, Risk Management Consultant- Forex, IRD, Derivatives; Formerly with SBI
! Mr. Ganesh Rao, CEO, IBS Forex LtdFormer Chief Trader, FX, Bank of America
! Dr. L. C. Gupta, Director, SCMRD Former Member, SEBI
! Mr. Jamal Mecklai, CEO, Mecklai Financial
! Mr. Naresh Deshpande Former Principal Legal Advisor, RBI
! Mr. Paul Joseph, IES (Retd.), Principal Advisor, Former Principal Advisor, Planning Commission
2010
INDIAN EQUITY
INVESTORSSURVEY
BOARD OF DIRECTORS
ADVISORY BOARD
About MCX Stock Exchange
MCX Stock Exchange (MCX-SX), India’s new stock exchange, commenced operations in
the Currency Derivatives Segment on October 7, 2008 under the regulatory framework
of Securities & Exchange Board of India (SEBI) and Reserve Bank of India (RBI).
A new generation stock exchange, MCX-SX offers a world-class electronic platform for
trading in currency futures contracts and is currently the market leader in this segment.
Clearing and settlement is conducted through the MCX-SX Clearing Corporation Ltd.
(MCX-SX CCL).
Since inception, MCX-SX has been spearheading financial literacy and financial
inclusion in India, as is envisaged by the Govt of India. The Exchange has been the first
in India to unveil various revolutionary practices for currency price dissemination and in
spreading financial literacy in India. MCX-SX, till now, has conducted more than 400
investor education programmes across the country, averaging at least one per working
day, and has roped in a wide array of partners like the media, educational institutions,
trade bodies and international organisations to jointly promote financial literacy and
introduce global best practices in India.
True to its philosophy of ‘Systematic Development of Markets through ‘Information,
Innovation, Education and Research’, MCX-SX endeavours to ensure continuous
innovation and to introduce various new products under the extant regulatory
framework. The Exchange is poised to commence Equity segment and Equity Futures &
Options segment on receiving regulatory approvals. Besides, it is also committed to
expand its product offerings to include other asset classes such as Debt, Interest Rate
Futures, Index Funds and Exchange Traded Funds and SME segment securities, on
receiving regulatory approvals.
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15. Corporate Investors: Drivers to Increase Investments in Equity Market
Notes
Refer Table 46 of Indian Equity Investors Survey 2010
0 50 7525
Improve the aspect of regulatory regime 59
Improve the trading and settlement operations 51
Develop high market volume and liquidity 49
Promote competition in exchange sector that leads to better service 44
41Improve disclosure standard 41
Emphasise on the diversity of the firms listed 39
Greater use of technology 39
Better capitalised members 29
Permission for OTC products 7
15More innovative products
Survey Report2010
INDIAN EQUITY
INVESTORSSURVEY
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Growth over last decade
GDP
314%
Market Capital788%
Population117%
Exchange turnover
1488%
INTRODUCTION TO INDIAN EQUITY INVESTORS SURVEY 20101 2India's GDP in 2001 was US$ 414 Billion with a population of 1 Billion . Over this decade, as at 3 42010, the GDP stands at US$ 1.3 Trillion and India's estimated population is 1.173 Billion . This
dramatic growth has reflected itself in the Indian equity market, whose market capitalization 5 6stood at about US$ 165 billion in 2001 and has increased to over US$ 1.3 Trillion in 2010.
Note that in 2001-02, there were 21 regional stock exchanges across India in addition to 2 national exchanges. Of these 23 exchanges, 16 exchanges conducted active transactions. In 2008-09, the active exchanges had been reduced to 4.
Turnover Velocity as a measure of market liquidity shows turnover as a percentage to market capitalization. The following table highlights the comparative lack of liquidity in the Indian equity market.
Table 1: Total Turnover (Cash & Derivatives Segments) across stock exchanges: 2001-09
Stock Exchange
Ahmedabad Bangalore Bhubaneshwar Calcutta Cochin Coimbatore Delhi Gauhati Hyderabad ISE Jaipur Ludhiana Madhya Pradesh Madras Magadh (Patna) Mangalore Mumbai NSE OTCEI Pune SKSE Uttar Pradesh Vadodara
2001-02
14,844 70 -
27,075 27 -
5,828 -
41 55 -
857 16 24 - -
309,314 615,092
4 1,171
- 25,237
10
2004-05
- - -
2,715 - - - -
14 - - - -
27 - -
534,8293,687,125
---
5,343 -
2008-09
- - -
393 - - - - - - - - - - - -
1,112,343 13,762,505
- - -
89 -
1.48 0.007
- 2.71
0.0027 -
0.58-
0.004 0.01
- 0.09
0.0016 0.0024
- -
30.94 61.53 0.0004
0.12 -
2.52 0.001
` Crores % Share ` Crores % Share ` Crores % Share- - -
0.064 - - - -
0.0003 - - - -
0.0006 - -
12.6487.16
- - -
0.13 -
- - -
0.0026 - - - -- - - - - - - -
7.4892.52
- - -
0.0006 -
This dramatic increase in market value ought to have been consistent with increase in market development and penetration. However, we observe that this is not the case.
If we examine the distribution of turnover from 2001 to the present, we in fact see evidence of concentration across regions and cities with turnover being consolidated across two exchanges in Mumbai.
The following tables provide evidence.
Source: SEBI Handbook 2009, Table 18 & 26
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13. Corporate Investors: Barriers to Investing in Stock Market
Refer Table 41 of Indian Equity Investors Survey 2010
47Too much price fluctuation
32Lack of information about investment in equity
26Investing in equity (shares) is very risky
26It does not give guaranteed returns
21I would not get loan against a equity (shares) investment
16I have had a bad experience in equity (shares) in the past
11There are too many products that confuse me
11I don't know where to buy equity (shares) from
11Never approached by a broker/investment advisor
11Lack of access to trading on the stock exchange
0 5025
14. Corporate Investors: Scope for Improvement in Indian Equity Market
5 (Maximum scope of improvement) 1 (Least scope of improvement) 2 3 4
Innovations 2 2 20 41 34
Bureaucracy among exchange personnel 5 20 61 15
Technology 5 12 51 32
Accounting standard 2 27 39 32
Exchange as facilitator 32 46 22
Transperancy 5 24 41 29
5 2 22 44 27Transaction cost
2 5 20 41 29Financial intermediaries
2 2 32 41 22Risk management
7 17 49 27Market penetration
5 27 41 27Clearing services
24 51 24Banking services
0% 20% 40% 60% 80% 100%
Refer Table 45 of Indian Equity Investors Survey 2010
Survey Report2010
INDIAN EQUITY
INVESTORSSURVEY Introduction
2010
INDIAN EQUITY
INVESTORSSURVEY
Hyderabad
Rajkot
Cochin
Baroda
Bangalore
Jaipur
Indore
Coimbatore
Mangalore
Ludhiana
Kanpur
Patna
Pune
Gauhati
Bhubaneshwar
Others
Sub-total
City
2.85
0.29
0.79
0.62
2.79
1.16
1.08
0.6
0.12
0.53
0.95
0.11
1.03
0.12
0.07
12.51
25.62
2001-022.25
0.32
0.64
0.71
1.67
1.17
0.98
0.46
0.08
0.43
0.4
0.1
0.75
0.02
0.02
9.44
19.44
2004-051.73
1.28
0.76
0.7
0.62
0.56
0.49
0.33
0.22
0.17
0.07
0.03
0.03
0.01
0
5.7
12.7
2008-09Kolkata
Pune
Indore
Bangalore
Chennai
Kanpur
Cochin
Hyderabad
Baroda
Ludhiana
Gauhati
Patna
Mangalore
Coimbatore
Bhubaneshwar
Others
Sub-total
City
0.84
0.6
0.18
0.3
0.16
0.26
0.27
0.13
0.54
0.01
–
–
–
0.04
–
9.83
13.16
2001-020.96
0.63
0.46
0.74
0.4
0.44
0.12
0.2
0.02
0.34
0.06
0.07
0.07
0.06
0.02
11.44
16.03
2004-050.79
0.68
0.6
0.5
0.39
0.33
0.29
0.29
0.28
0.07
0.06
0.06
0.03
0.02
0.01
10.96
15.36
2008-09
NSEBSE
BSE
Mumbai
Ahmedabad
Rajkot
Delhi
Jaipur
Sub-total
City
84.01
0.97
0.32
1.31
0.23
86.84
2001-0275.33
3.14
1.71
3.05
0.74
83.97
2004-0572.4
4.76
3.76
2.85
0.86
84.63
2008-09Mumbai
Delhi
Kolkata
Ahmedabad
Chennai
Sub-total
40.2
19.4
9.15
2.49
3.56
74.8
47.39
14.92
12.46
2.91
2.88
80.56
55.85
14.97
9.24
5.27
1.97
87.3
City 2001-02 2004-05 2008-09
Table 2: Monthly Turnover Velocity across the World’s Stock Exchanges, January through August 2010
23.5%
70.1%
205.5%
395.6%
180.8%
239.1%
384.0%
117.1%
India
China
Taiwan
Korea
USA
Bombay SE
National SE India
Shanghai SE
Shenzhen SE
Taiwan SE Corp.
Korea Exchange
NASDAQ OMX
NYSE Euronext (US)
16.6%
51.0%
97.9%
194.4%
81.1%
152.7%
356.5%
125.4%
19.2%
57.0%
168.6%
345.1%
135.4%
171.7%
337.9%
124.7%
17.9%
54.1%
207.5%
447.2%
147.9%
188.6%
350.9%
132.1%
17.0%
57.4%
148.9%
285.2%
124.4%
190.3%
510.1%
183.3%
17.3%
54.9%
111.6%
263.8%
105.5%
162.8%
407.5%
160.8%
17.1%
53.9%
129.9%
281.1%
132.7%
173.5%
348.9%
137.2%
20.1%
58.4%
181.5%
377.6%
164.0%
161.9%
332.5%
125.8%
January2010
Country Exchange February2010
March2010
April2010
May2010
June2010
July2010
August2010
Source: World Federation of Exchanges
NSE
Table 3: Market Penetration: 2001 to 2009 City-wise Distribution of Turnover (Cash Segment) (in %)
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Furthermore, we note that over 80% of the turnover in India continues to come from the top 5 cities, a further indication of concentration, as Table 3 below demonstrates.
Source: SEBI Handbook 2009, Table 24
Above 80%Equity Turnover
in India continues to come from Top
5 cities
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11. SME Investors: Drivers to Increase Investments in Equity Market
Refer Table 33 of Indian Equity Investors Survey 2010
0 5025
67Improve the regulatory regime
46Improve trading and settlement operations
41Promote competition in exchange sector that leads to better service
39Greater use of technology
35More innovative products
12Permission for OTC products
1Easy operating system
Develop high market volume and liquidity 58
Improve disclosure standard 52
Better capitalised members 29
Emphasise on the diversity of the firms listed 26
5 (Maximum scope of improvement) 1 (Least scope of improvement) 2 3 4
Transaction cost
Financial intermediaries
Risk management
Market penetration
Clearing services
Banking services
0% 20% 40% 60% 80% 100%
3 10 22 38 23
4 4 26 39 20
1 9 14 45 23
1 3 23 39 26
3 1 22 43 20
1 3 19 29 42
Refer Table 32 of Indian Equity Investors Survey 2010
12. Corporate Investors: Investment in Different Instruments
0 50 7525
67Net Capital Market
Insurance 67
Equity/shares 57
Mutual Funds 52
Bank FDs 50
Debentures 20
Government Securities 15
Commodities 15
Real Estate 13
Refer Table 40 of Indian Equity Investors Survey 2010% of Corporate investing
CORPORATE INVESTORS
Introduction2010
INDIAN EQUITY
INVESTORSSURVEY Survey Report
2010
INDIAN EQUITY
INVESTORSSURVEY
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To add to the above observations on market penetration and financial inclusion, comparing direct participation in India’s equity markets could be greater, not only when benchmarked against developed countries, but even in comparison to other BRICs and Asian countries.
1.4%of India's population trades directly in equity market
Continuing the comparison, the equity segment globally contributes about 20 per cent of the total activity in the exchange traded financial markets while in India the corresponding figure is around 70 per cent.
Sources: World Federation of Exchanges and Exchange Websites
Table 5 below provides the comparison.
India and the World: Trading Across Asset Classes (in US $ Trillion), 2009.Table 5:
Asset Groups USA Europe Brazil 16India
Sources: India: NSDL & CDSL, 2009, China: SIPF China, 2010, Russia: MCD, South Korea: KSD, UK: UK Shareholders' Association Press Release, 2007, USA: ICI & SIFMA Report, 2008, Population
Statistics: CIA World Fact Book
Table 4 below highlights this fact.Table 4: India and the World: Direct Participation in Equity Markets
On a broader scale, among nations, India is positioned as a nation with a strong savingsrate, with a large penetration of mobile telephones. These and certain other salient macroeconomic facts are presented in Table 6 below.
Table 6: India and the World: Macro Economic Facts, 2009.
4.3
1.3
2,705 (SSE)
28%
NA
650
300
China1.2
1.12
1306 (BSE)
32%
32
550
80
IndiaGDP ($ trn) (2009 Est.)
Population (in bn) (2009)
Market Cap. ($ bn) (Dec 2009)
Gross household savings rate as
percentage of disposable income (2008)
No. of tax payers (in mn) (2007)
No. of mobile phones (in mn) (2009)
No of internet users (in mn) (2009)
Parameter US14.4
0.3
11,838 (NYSE)
4.4%
134
270
230
Sources: www.CIA.gov, www.world-exchanges.org and Others
UK2.2
0.06
2,796 (LSE)
2.5%
32
75
50
7India8China
9Russia10South Korea
11Uk12USA
13Population in Million1,173
1,330
139
48
61
310
Demat/Population (in %)1.4
9.4
2.2
7.4
16.41517.7
Demat Accounts in Million16.8
125
3
3.55
101454.8
4759
7242150
901
5.2%6.5%
80.4%2.3%5.5%
100%
12.428.8
620.90.07.2
669.3
EquityEquity DerivativesInterest RateFX DerivativesCommodity
Total
1.8%4.3%
92.8%0.0%1.1%
100%
0.61.57.93.4
0.02
13.4
4.7%11.2%58.8%25.1%0.2%
100%
1.23.70.00.81.6
7.3
16%51%0%
11%22%
100%
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10. SME Investors: Scope for Improvement in Indian Equity Market
Transperancy
Innovations
Bureaucracy among exchangepersonnel
Technology
Accounting standard
Exchange as facilitator
14 46 2610
9 7 9 41 30
3 7 35 33 16
3 9 14 41 29
6 4 23 36 25
3 10 29 33 16
0% 20% 40% 60% 80%
5 (Maximum scope of improvement) 1 (Least scope of improvement) 2 3 4
Refer Table 27 of Indian Equity Investors Survey 2010% of SME investing
79Insurance
53Equity/MF
50Fixed deposits
27Real Estate
15Government Securities
10Commodities
7Debt of companies
0 50 7525
8. SME Investors: Investment in Different Instruments
SME INVESTORS
9. SME Investors: Barriers to Investing in Stock Market
69Investing in capital markets is very risky
65Too much price fluctuation
56No guaranteed returns
42Lack of information about investing in capital markets
40Lack of access to trading on the stock exchange
31Friend/relatives had bad experience investing in capital markets
27Never approached by a broker/investment advisor
21Too many products that confuse me
21MFs offer low rate of return
19No loan available on investment in capital markets
19Bad experience with capital markets in the past
19No trust in brokers
17Money would get tied up for long time
12No knowledge of where to buy Equity/MF
0 5025
Refer Table 28 of Indian Equity Investors Survey 2010
75
Survey Report2010
INDIAN EQUITY
INVESTORSSURVEY Introduction
2010
INDIAN EQUITY
INVESTORSSURVEY
29%of Equity Turnover is concentrated in Top 10 companies
129.3%
28.2%
12.9%
11.4%
21%
19.6%
19.2%
Turnover of top 10 companies to total BSE
NSE
Shanghai SE
Shenzhen SE
Taiwan SE
Tokyo SE
Korea Exchange
ExchangeIndia
China
Taiwan
Japan
Korea
Country
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The opportunity for India lies across various factors. The first is in addressing concentration of companies that are traded within exchanges. In 2008 and 2009, close to one third of trading on India’s major two exchanges were concentrated in the top 10 companies. Elsewhere in Asia, the figure is much lower, highlighting the opportunity for India as a comparable Asian economy. The statistics are presented in Table 7 below.
Table 7: Concentration Comparison Across Asia: 2009.
1Source: World Federation of Exchanges 2009 & 2008
Taking the comparison from across Asia to across the world, another opportunity makes itself very evident. This is the opportunity to develop liquidity in India's capital markets. This can be seen by observing India's turnover velocity and comparing equity share traded value as percentage of GDP across countries. The opportunity for India is evident in the statistics presented in Table 8 below.
The opportunity to make the capital market a hub for raising resources for corporates has a long way to go in being fully tapped. This is evident from two markets. First, in market capitalization terms, India's corporate bond market is 3% of GDP, and 5% of the total bond market. Comparative statistics across Asia highlight the opportunity. These are presented in Table 9 below.
Table 8: India and the World: Market Liquidity, 2009
Turnover Velocity as a measure of market liquidity shows turnover as a percentage to their market capitalization Source: World Federation of Exchanges (2009)
(in US$ Trillion)
Table 9: India and Asia: Corporate Bond Markets, 2009.
Market Cap of Corporate Bond as % to GDP
India 3%
Malaysia 43%
Singapore 34%
Hong Kong 35%
Corporate Bond as % to Total Bond Market
India 5%
Malaysia 45%
Singapore 41%
Hong Kong 52%
Market Cap as % to GDP Equity (India) 110%
Source: WFE Statistics and ADB Asia Bond Monitor; As of Dec '09
India1.2
1.0
87%
BSE: 17.11%
NSE: 53.89%
4.3
7.8
181%
SSE: 129.9%
SHZE: 281.1%
ChinaUS0.9
1.6
170%
KSE: 173.51%
KoreaGDP
Equity share traded value
Equity share traded as a per cent to
GDP
Turnover Velocity (July‘10)
Country14.4
47
326%
NYSE: 137.21%
NASDAQ: 348.85%
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7. Ke
y ben
efits
to th
e ret
ail in
vesto
r thr
ough
com
petit
ion
Refe
r Tab
les 2
3(b)
& 2
3(d)
of I
ndia
n Eq
uity
Inve
stor
s Sur
vey
2010
Base
: (Res
pond
ents
who t
hink i
nves
tors
will b
enefi
t fro
m ne
w ex
chan
ges)
Bette
r Ser
vices
Lowe
r cos
t of t
rading
More
brok
ers p
rovid
ing se
rvice
sGr
eate
r nat
ional
pene
tratio
nBe
tter t
echn
ology
Innov
ative
prod
ucts
478 % 68 57 37 36 27 6
Ove
rall
151 % 73 63 26 42 25 1
Nor
th
89 % 65 44 40 22 30 13East
146 % 70 61 46 42 27 3
Wes
t
92 % 60 53 40 30 25 12
Sout
h
215 % 67 69 38 37 25 7
Tier
1
151 % 71 47 38 42 32 2
Tier
2
112 % 67 46 36 27 22 9
Tier
3
124 % 71 58 35 35 24 6
Busi
ness
man
56 % 84 48 32 48 25 5
Def
ence
Pers
onne
l
49 % 51 63 35 39 27 4
Hou
sew
ife
117 % 63 59 40 38 30 4
Sala
ried
68 % 74 56 35 24 31 4
Self
empl
oyed
64 % 64 55 45 38 22 13
Stud
ent
Introduction2010
INDIAN EQUITY
INVESTORSSURVEY Tables
2010
INDIAN EQUITY
INVESTORSSURVEY
www.m x-sx.comc5
Second, even the existing capital market activity in the equity market is not amenable to resource raising. This is due to the fact that over 75% of trading in equities and equity derivatives are cash settled. Statistics on India versus the rest of the world in terms of equity cash and derivatives are presented in Table 10 below.
Table 11: India and the World: Equity Cash and Derivatives Trading, 2009.
The opportunity in India is even greater if one considers the existing activity in the markets. The top 5 cities in India contribute 84% to trading in 2009-10, a figure up by 6% from 2001-02. Cash trading volumes from Mumbai and Delhi alone account for 65% of cash trading and 60% of mutual funds volume. This is contrasted with the fact that these cities account for only 24% of the national income pool. Hence, correcting this imbalance offers a huge opportunity to unlock value. The statistics are presented in Table 11 below.
4.3
125
75
India
7.8
100
0
China
9.1
45
55
Japan
6.3
24
76
HK
89.3
52
48
U.S.
1.8
70
30
Canada
4.6
74
26
UK
36.7
94
6
Germany
Total Annual Volume in US$ trillionSource: Mckinsey, FICCI Report on Capital markets 2020
178% of cash equities trading in India is intraday in nature which are also cash settled
1Trading in cash equities and equities derivatives , 2009
Cash equities Equity derivatives
Table 10: India and the World: Equity Cash and Derivatives Trading, 2009
Share of cash trading volume, mutual fund ownership and income by cities (FY 09, Percent)
Source: Mckinsey, FICCI Report on Capital markets 2020
Large potential to tap household savings
Next 410 most
populatedcities
Next 8most
populatedcities
Mumbai- Delhi
10
25
65
Cash tradingvolume
22
18
60
Retail mutualfunds
63
13
24
Income pool
Contribution from top 5 cities to total share trading
2001-02
78%
India China
2009
65%
2005-06
82%
2009-10
84%
65%of Equity Cash Market Turnover is generated from Mumbai and Delhi
www.m x-sx.comc 18
45-5
5ye
ars
200 % 64 28 22 10 16
33-4
4ye
ars
315 % 55 31 22 9 20
21-3
2ye
ars
387 % 53 33 16 11 27
Stud
ent
118 % 53 39 20 12 24
Self
empl
oyed
122 % 49 35 20 12 24
Sala
ried
215 % 58 32 17 7 20
Hous
ewife
13
0 % 58 28 25 12 22
Defe
nce
Pers
onne
l 93 % 54 25 19 8 32
Busin
essm
an22
4 % 60 29 17 9 18
Tier
323
7 % 49 38 8 3 21
Tier
232
2 % 65 28 40 8 11
Tier
134
3 % 53 30 7 16 34
Sout
h32
2 % 60 34 41 13 15
Wes
t 10
0 % 83 18 15 13 15
East
20
3 % 61 32 10 14 17
Nort
h 27
7 % 38 32 3 2 37
Over
all
902 % 56 31 19 10 22
Base
: (All r
espo
nden
ts)
Mob
ile ph
one
Inte
rnet
Bank
cros
s-sell
ingAT
M fu
nctio
nalit
yAl
l of t
he ab
ove
5. In
itiat
ives t
hat c
ould
impr
ove a
ccessi
bility
to tr
ading
on th
e Sto
ck Ex
chan
ge
Refe
r Tab
les 1
6(b)
, 16(
c), 1
6(e)
& 1
6(f)
of In
dian
Equ
ity In
vest
ors S
urve
y 20
10
Scal
ePe
rcen
tage
of R
espo
nden
ts1
17%
219
%3
20%
412
%5
12%
6 5%7 5%
8 3%9 1%
10 0%
80%
6. Re
tail i
nves
tors
view
on w
heth
er st
ock m
arke
t will
bene
fit fr
om co
mpe
tition
in st
ock e
xcha
nges
Stud
ent
157 % 17 22 24 10 8 3 6 3 1 0
Self
empl
oyed
162 % 21 19 20 11 8 3 8 4 1 2
Sala
ried
295 % 17 18 21 9 12 5 6 3 2 0
Hous
ewife
175 % 13 21 14 15 17 7 6 2 1 0
Defe
nce
Pers
onne
l
128 % 16 17 25 13 17 5 1 2 0 0
Busin
essm
an
290 % 17 20 17 15 11 6 2 3 0 0
45-5
5ye
ars
260 % 21 18 17 13 16 5 3 2 0 1
33-4
4ye
ars
419 % 17 17 18 9 14 6 5 3 1 0
21-3
2ye
ars
528 % 14 21 23 14 8 5 5 3 1 0
Sout
h
322 % 8 11 16 12 25 7 9 3 2 0
Wes
t
223 % 16 28 23 14 5 4 3 4 0 0
East
283 % 31 16 15 7 13 7 2 1 0 0
Nort
h
379 % 13 23 24 15 4 3 5 3 1 1
Over
all
1207 % 17 19 20 12 12 5 5 3 1 0
Base
: (All R
espo
nden
ts)
1- W
ill be
nefit
imm
ense
ly2 3 4 5 6 7 8 9 10
- Will
not b
enefi
t at a
ll
Refe
r Tab
les 2
1(a,
b),
21(d
) & 2
1(e)
of In
dian
Equ
ity In
vest
ors S
urve
y 20
10
Tables2010
INDIAN EQUITY
INVESTORSSURVEY Introduction
2010
INDIAN EQUITY
INVESTORSSURVEY
200111
22000.1mn
$160bn
200923
11800~3 mn
$600 bn260 mn
Companies:Offices:Agents:Sum Assured:Subscribers
Life Insurance Business
2002 2009
Service providers: 13 14
2001 2009
Subscribers: 36 mn 500 mn
Telecom Sector
Source: IRDA, RBI, SEBI, AMFI and TRAI
Table 12: India’s Financial Inclusion Opportunity
Strong Evidenceof Financial Inclusion in
Telecom & Insurance sectors
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India has experienced success with deregulation in the Life Insurance and Telecom sectors. The number of subscribers in Telecom has jumped from 36 million in 2002 to 500 million in 2009. Hence the growth and profit potential is obvious. In addition, the potential for financial inclusion through employment generation is evident in the Life Insurance sector, where the number of agents has risen from 100,000 in 2001 to about 3 million in 2009. The potential in releasing the funds available in the banking and asset management sectors in the Indian economy to the exchange traded space are immense. It is evident that just two major exchanges that exist at present do not bring sufficient trading and financial inclusion opportunity to the Indian public. These and other associated statistics are provided in Table 12 below.
As on December 2009
National Stock Exchanges: 2
Brokers: 2100
Trading Terminals: 200,000
Market Cap: $1120 bn
Direct Investors: ~15 mn
Capital Market
AMCs: 44
Branches: 2500
Agents: 64,000
AUM: $165 bn
Users: ~47 mn
Asset Groups
Number OfCommercial Banks: 170
Branches: 80,500
SCBs Agg deposits : $875 bn
Users: ~600 mn
Banks
www.m x-sx.comc17
3. D
river
s to i
nves
ting i
n Sto
ck M
arke
t
Base
: (All I
nves
tors)
Impr
oved
awar
enes
s of p
rodu
ctsIm
prov
ed aw
aren
ess o
f pro
cesse
sIm
prov
ed aw
aren
ess o
f tec
hnolo
gyTra
ding t
hrou
gh m
obile
Impr
oved
acce
ssibil
ity to
trad
ing on
the s
tock
ex
chan
geIn
trodu
ction
of ne
w pr
oduc
tsSa
les an
d mar
ketin
g by b
roke
rs
Refe
r Tab
le 1
0(b)
, 10(
c) &
10(
d) o
f Ind
ian
Equi
ty In
vest
ors S
urve
y 20
10
YES % 94 98 96 97 84 97 89 97 95 93 94 93 95 92 93 95 100
Over
allNo
rthEa
stW
est
Sout
hTie
r ITie
r II
Tier I
II21
-32 Y
ear
33-4
4 Yea
rs45
-55 Y
ears
Busin
essm
anDe
fence
perso
nnel
Hous
ewife
Salar
iedSe
lf em
ploye
dSt
uden
ts
NO % 6 2 4 3 16 3 11 3 5 7 6 7 5 8 7 5 0
4. In
tere
sted i
n atte
nding
train
ing pr
ogra
mm
es in
vicin
ity
Refe
r Tab
les 1
3(a)
, 13(
b) a
nd 1
3(c)
of I
ndia
n Eq
uity
Inve
stor
s Sur
vey
2010
Self
empl
oyed
73 % 62 63 56 38 37 32 19
444 % 59 53 43 41 39 30 26
Ove
rall
133 % 59 49 47 47 53 34 38
Nor
th
109 % 69 45 36 38 33 39 32East
82 % 63 48 45 56 49 21 21
Wes
t
120 % 48 68 43 26 24 23 12
Sout
h
176 % 64 64 45 40 36 26 16
Tier
1
159 % 49 50 45 39 38 26 26
Tier
2
109 % 67 39 35 44 48 42 43
Tier
3
134 % 55 47 42 34 37 25 31
Busi
ness
man
46 % 59 50 30 54 67 33 26
Def
ence
pers
onne
l
37 % 65 51 43 43 30 30 30
Hou
sew
ife
129 % 61 59 40 43 37 29 25
Sala
ried
Introduction2010
INDIAN EQUITY
INVESTORSSURVEY Tables
2010
INDIAN EQUITY
INVESTORSSURVEY
www.m x-sx.comc7
Finally, India can take inspiration from the success of deregulation and competition in the mature markets of the world. In the United States, there is no single exchange with 50% market share, and in Europe it is under 25%. Statistics about the US and Europe are presented in Table 13 below.
In light of the above facts, The Nielsen Company was commissioned to investigate the current status of the Indian equity market to estimate the level of desire and understanding in the public itself for Financial Inclusion and Development in the Equity Markets. This Survey Report is presented in the following pages.
Source: Thomson Reuters's European Market Share Report; * Excluding OTC reported & dark pools
There are 14 SEC registered national securities exchanges besides more than 73 active registered Alternative Trading Systems (deemed exchanges) in the US and over 20 registered Multi Trading
Facilities operating in Europe.
14.5
9.6
8.7
7.8
6.3
4.0
3.9
2.7
4.8
Avg. Daily Share Traded Value (in US$ Bn) (Apr '10)
23.2%
15.5%
14.0%
12.6%
10.0%
6.4%
6.1%
4.3%
7.9%
Market Share (%)
EUROPE
47.3%is the highest market share of any stock exchange in the US and Europe where as 92.5% is the Market Share of NSE
LSE Group
Euronext
CHI-X
Deutsche Boerse
Spanish Exchanges
Nasdaq OMX Nordic
SIX Swiss
BATS Europe
Others (24 platforms)
Trading Platforms(Europe)
NASDAQ OMX*
NYSE EURONEXT*
BATS
EDGE DIRECT
Boston EX
National SX
Chicago SX
CBOE
National Securities Exchanges
106.4
74.1
27.5
7.5
6.6
1.3
1.2
0.4
Avg. Daily Share Traded Value (in US$ Bn) (Jul '10)
47.3%
33.0%
12.2%
3.4%
2.9%
0.6%
0.5%
0.2%
Market Share (%)
UNITED STATES
Table 13: Competitive Scenario in U.S. and Europe.
www.m x-sx.comc 16Ba
se: (A
ll Res
pond
ents)
No gu
aran
teed
retu
rns
Too m
uch p
rice f
luctu
ation
Inve
sting
in ca
pital
mar
kets
is ve
ry ris
ky
Lack
of in
form
ation
abou
t inv
estin
g in c
apita
l mar
kets
Neve
r app
roac
hed b
y a br
oker
/ inv
estm
ent a
dviso
r
No kn
owled
ge of
whe
re to
buy E
quity
/MF/
ULIPs
Not e
noug
h mon
ey to
inve
st in
Capit
al m
arke
ts
No lo
an av
ailab
le on
inve
stmen
t in c
apita
l mar
kets
Too m
any p
rodu
cts th
at co
nfus
e me
Frien
d/re
lative
s had
bad e
xper
ience
inve
sting
in ca
pital
mar
kets
No tr
ust i
n bro
kers
Mon
ey w
ould
get t
ied up
for l
ong t
ime
MF/
ULIPs
offer
low
rate
of re
turn
Lack
of ac
cess
to tr
ading
on th
e sto
ck ex
chan
ge
1207 % 66 65 62 56 50 47 45 40 35 35 33 29 27 25
Over
all
466 % 66 69 67 47 52 44 45 43 34 33 31 24 27 19Ti
er 1
424 % 67 66 60 59 51 48 41 41 32 36 36 33 28 22Ti
er 2
317 % 65 57 58 63 45 50 50 33 42 38 32 32 25 38Ti
er 3
290 % 63 64 62 51 41 42 38 37 32 29 31 27 25 23
Busin
essm
an
128 % 62 55 65 66 57 46 42 38 30 34 30 27 24 27
Defe
nce
pers
onne
l
175 % 65 67 57 66 49 51 54 43 40 34 36 31 26 33
Hous
ewife
295 % 69 65 63 55 51 46 43 37 38 39 36 31 25 23
Sala
ried
162 % 70 67 59 46 50 44 41 44 30 39 28 26 33 17Self
empl
oyed
157 % 68 66 68 57 57 57 61 45 39 37 36 36 30 31
Stud
ent
Refer
Table
s 9(c)
& 9(
e)of In
dian E
quity
Inve
stors
Surv
ey 20
10
2. Ba
rrier
s to i
nves
ting i
n Sto
ck M
arke
t
Tables2010
INDIAN EQUITY
INVESTORSSURVEY Introduction
2010
INDIAN EQUITY
INVESTORSSURVEY
www.m x-sx.comc 8
1! Bloomberg Statistics /Ticker name: INGCGDP INDEX
2! www.indiabudget.nic.in/es2001-02/chapt2002/tab91.pdf
3! Bloomberg Statistics /Ticker name: INGCGDP INDEX
4! CIA World Fact Book, https://www.cia.gov/library/publications/the-world-factbook/geos/in
5! March 2001 Market Capitalization Statistics in INR from SEBI Handbook 2009, Table 17, and
USDINR RBI Reference Rate as at March 30,2001 from RBI website http://www.rbi.org.in/scripts/ReferenceRateArchive.aspx6
! March 2010 Market Capitalization Statistics in USD. Bloomberg Statistics/Ticker: WCAUINDI7
! Demat Accounts: National Securities Depository Limited Press Release, August, 2009 & Central Depository Services Limited : http://www.cdslindia.com/8
! China Securities Investor Protection Fund Corporation (SIPF), Overview Statistics of Securities Market as on May 31, 2010. http://www.sipf.com.cn/images/en/chinassecuritiesmarketoverview /marketdata /2010/06/30/ F7256A2C1A1A26BED2B14B38C70BEA5B.pdf9
! Moscow Central Depository Incorporation: http://www.english.mcd.ru/company.htm10
! Korean Securities Depository: http://www.ksd.or.kr/eng/html/introduction/ceomessage.home11
! UK Shareholders’ Association Press Release, July, 200712
! Investment Company Institute & The Securities Industry & Financial Markets Association/Equity & Bond Ownership In America, 2008, Key Findings/Pg. 113
! CIA World Fact Book, https://www.cia.gov/library/publications/the-world-factbook/geos/(Select Country) as accessed on August 18, 201014
! Number of US households investing in equities15
! Ratio of household investors to population16
! 2009-10
FOOTNOTES
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1. In
vestm
ent m
ade i
n diff
eren
t ins
trum
ents
Refe
r Tab
les 2
(b) &
2(e
) of I
ndia
n Eq
uity
Inve
stor
s Sur
vey
2010
Base
: (All R
espo
nden
ts)
Insu
ranc
eFix
ed de
posit
sGo
ld or
silve
rRe
al es
tate
Mut
ual fu
nd sc
hem
esEq
uity
ULIPs
PPF
Gove
rnm
ent s
chem
es (N
SC et
c)Go
vern
men
t bon
dsCh
it fu
nds
Debt
1207 % 86 49 43 25 23 18 15 11 11 7 7 1
Over
all
379 % 83 34 54 41 16 23 17 12 12 10 2 1
Nort
h28
3 % 96 75 19 11 31 21 11 11 16 7 2 2East
223 % 86 54 57 22 22 23 14 17 10 3 5 1
Wes
t32
2 % 80 39 43 19 25 7 16 8 7 8 18 1
Sout
h29
0 % 88 48 47 31 28 27 20 4 8 6 11 2
Busin
essm
an12
8 % 93 65 43 23 24 18 13 19 13 15 2 0
Defe
nce
175 % 80 37 44 18 13 7 7 7 12 5 8 1
Hous
ewife
295 % 89 54 44 22 26 21 19 24 15 5 4 1
Sala
ried
162 % 86 48 46 38 31 20 16 7 14 12 7 2Self
empl
oyed
157 % 77 41 32 15 10 9 5 3 4 3 5 0
Stud
ent
RETAIL INVESTORS
Introduction2010
INDIAN EQUITY
INVESTORSSURVEY Tables
2010
INDIAN EQUITY
INVESTORSSURVEY
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This survey is different from its precursors in many respects and is also similar. The similarity lies in the subject matter and objective, wherein the preferences of Indian investors are sought to be understood and updated. The differences are in sample selection and in survey methodology. The SEBI/NCAER survey surveyed households across rural and urban India, whereas this Survey, similar to the L C Gupta surveys, was focused on urban households. This survey used single questionnaires and employed a professional survey agency, unlike the L C Gupta surveys, which employed university teachers, bank managers, etc, in addition to research professionals.
The SEBI/NCAER survey was the first major survey of its kind and sought to investigate the population of individual investors who had invested directly or indirectly in the equity market. This survey provides an update to these indicators for 2010. It also provides an update to several other elements of the SEBI/NCAER survey, including updates on investors’ expectations from the market.
This survey extends the L C Gupta Surveys by extending the study of market perception beyond households to a broader investor class. Significantly, the L C Gupta Surveys had highlighted the need for investor education. This survey provides evidence that helps further this aspect very clearly.
Since this a survey of present and potential investors, it has included both individuals and institutions. In the case of individuals, henceforth referred to as retail investors, it was conducted across India, spanning geographies (all four zones), ages and occupations. In the case of institutions, it was not limited to traditional institutions but included all corporate as well as senior finance executives of small and medium industries who invested on behalf of their institutions. Note must be made that institutions were surveyed here as investors and not as sell side institutions looking to issue paper in the equity market. The Survey has made an effort to include as broad a cross-section of the public as possible, yet has controlled for factors such as education, age and occupation, in order to draw out an informed opinion about the market even from respondents who were non-investors.
The starting point of the Survey was the cognisance of the fact that just 1.4% of India’s population 1invests directly in the equity market . Hence, in the quest for informed and considered opinion
about various aspects of the equity market, certain sampling controls were imposed. These were designed to ascertain the opinions of that portion of the retail population that is most likely to participate in the market.
At the macro level, the Survey was directed at cities, although spread across all geographic zones of the country. India’s 4 major metros — Mumbai, Delhi, Kolkata and Chennai — were included, which were called Tier I for purposes of this Survey. The next level of development, called Tier II, was represented by Bangalore, Vijayawada, Lucknow and Ahmedabad, and currently non-metropolitan cities but potentially at the next level of development — represented by Guwahati, Bhubaneshwar, Jaipur and Ludhiana — were classified as Tier III. Semi-urban and rural sections of
2the population, which constitute 71% of India’s population , did not qualify for this survey, in the interest of integrity of information content.
Businessmen invest the
most (27%) and
Housewives invest the
least (7%) in equity
markets
PurposeThis Survey of retail and institutional respondents has mapped out their collective opinion regarding various facets of the Indian equity market. The objective of the Survey was to accurately ascertain the opportunities and the means to achieve them that are inherent in the equity market today, and what the public desires of this industry going forward. Its precursors, at a national level, were the “Survey of Indian Investors” by SEBI/NCAER, 1999, the Society for Capital Market Research and Development sponsored “Indian Shareowners: A Survey”, 1991, “Household Investors Survey”, 2004, and “The Changing Investment Preferences of Indian Households”, 2008,
Aalso known as the L C Gupta Surveys.
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!
!
!
!
!
!
!
!
1. Kar, P., I. Natarajan and J.P. Singh, Survey of Indian Investors”, SEBI-NCAER, 1999.
2. Gupta, L.C., “Indian Shareowners: A Survey”, Society for Capital Market Research & Development, 1991.
3. Gupta, L.C., “Indian Household Investors Survey”, Society for Capital Market Research & Development, 2005.
4. Gupta, L.C., “The Changing Investment Preferences of Indian Households”, Society for Capital Market Research & Development, 2008.
1National Securities Depository Limited Press Release, August, 2009 & Central Depository Services Limited: http://www.cdslindia.com/2Source: CIA Factbook India. (www.cia.gov/library/publications/the-world-factbook/geos/in.html).3Survey restricted to educated homemakers.4Post graduate and above.5Source: Table 1, 8 and 12.6IRDA Annual Report 2001, Table No.18: Distribution Channel Statistics 2000-01.7IRDA Annual Report 2009, Table No.47: Details of Individual Agents of Life Insurers.8SEBI’s Handbook of Statistics on Indian Securities Market 2009, Table 1: SEBI Registered Market Intermediaries.
FOOTNOTES
AREFERENCES
Report2010
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INVESTORSSURVEY Report
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INVESTORSSURVEY
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The Institutional Investors were drawn from two populations — Corporate (including Financial Institutions and Banks) and SMEs. For Corporates, CFOs and Treasury Heads were interviewed across three Tier I cities and one Tier II city. 25% of the Corporate population were Financial Institutions. For Small and Medium Enterprises, CFOs and their equivalent were interviewed from clusters in 12 cities across India. Details of the sample stratification are discussed in the Survey Methodology section in the detailed report.
The following sections highlight, in terms of the key findings of the Survey. The respective tables and sections are referred wherever appropriate in the following sections. The following sections are divided into: Gaps in the Indian equity market, Addressing the Gaps and Looking Ahead. All the findings reported are from actual survey responses.
i. Across the country, only 18% of those surveyed invested in equities.3ii. Businessmen surveyed invest the most and housewives invest the least. Only 7% of
housewives surveyed invest in equities, followed by students at 9%, defence personnel at 18%, self-employed at 20%, salaried at 21% and businessmen at 27%.
iii. Among Institutional Investors, 53% of SMEs and 57% of Corporates surveyed invested in equities.
(Refer Tables 1, 8 and 12)
i. Across the country, 50% of those surveyed were never approached by brokers or investment advisors.
ii. Businessmen were the most-approached segment by brokers and investment 4advisors. However, 57% of defence personnel, 57% of students and 51% of salaried
personnel have never been approached.
iii. Within Institutional Investors surveyed, 27% of SMEs and 11% of Corporates have never been approached by brokers or investment advisors.
(Refer Tables 2, 9 and 13)
i. Across the country, 56% of those surveyed conveyed a lack of information about investing as a major barrier to participating in the market.
ii. In Tier III cities, 63% identified lack of information as a major reason for their non-participation, in Tier II it was 59% and in Tier I, it was 47%.
iii. Additionally, 47% of those surveyed have no knowledge of where to buy Equity, Mutual Funds or ULIPs.
iv. In Tier III cities, 50% of those surveyed attributed non-participation to lack of knowledge about where to buy Equity and Equity-linked products, followed by Tier II cities at 48% and Tier I at 44%.
v. Among Institutional Investors, 42% of SMEs and 32% of Corporates conveyed lack of information about investing as a major barrier to participating in capital markets.
(Refer Tables 2, 9 and 13)
1. Opportunities in the Indian equity market: Penetration, Development, Reach and Provision of Financial Knowledge
a. Penetration and development opportunities
b. Opportunity for increasing reach
c. Opportunity in imparting financial knowledge
50% of Retail,
27% of SME and
11% of Corporate respondents are yet
to be approached by a broker/ investment
advisor
KEY FINDINGS:
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iv. Among Institutional Investors surveyed, 41% of SMEs and 44% of Corporates felt that promoting competition in the exchange sector would lead to better services.
(Refer Tables 7, 11 and 15)
i. Over half the retail respondents surveyed (57%) felt that more competition in exchanges will lead to a lower cost of participation in the capital markets.
ii. Across zones, the North (63%) and the West (61%) were seen to hold this opinion most strongly. Tier I cities (69%) most strongly perceived this benefit.
iii. Across occupations, this benefit was strongly perceived by housewives (63%), followed by salaried personnel (59%), businessmen (58%) and students (55%)
(Refer Table 7)
The first major finding of this Survey is that there is huge scope to enhance market penetration leading to financial inclusion. This is further supported by the need for market development increasing reach and imparting greater financial knowledge. Secondly, it is clear that measures to increase access to the markets are welcome, and there is a great keenness to be imparted financial training if it could be conducted at a reasonably convenient location. All means to increase access, including mobile telephony or cross-selling, appear welcome.
Finally, respondents to this Survey have expressed their opinion about what they expect India’s equity market to look like in the future. They have clearly expressed a desire for more competition in this space. Opinion appears to be in favour of competition and benefits therefrom in the equity markets going forward. This holds true across surveyed occupations, ages, geographies and Tiers of cities. Further, the effort to achieve greater financial inclusion appears to be the desired and a preferred remedy emanating from this Survey.
Financial inclusion appears to be an achievable goal for the Equity market. This is evidenced by the success of market penetration strategies in Insurance during this decade. The Survey shows that in 2010, 86% of retail, 79% of SMEs and 67% of Corporate respondents invest in Insurance as against
518% of Retail, 53% of SMEs and 57% of Corporate respondents investing in Equity . During this 6decade, the number of Insurance agents has grown 25-fold, from 1,15,715 in 2001 to 29,37,435 in
72009 , whereas the number of Cash Equity brokers has actually reduced from 9,712 in 2001 to 8,652 8in 2009 .
It is important to revisit what was noted at the outset, that the opinions emanating from this Survey are from the most informed part of the investor population. Accordingly, it can be estimated that the need for market penetration and development highlighted herein are much larger in pervasiveness than even appear here, and the appetite for their redressal, with the solutions suggested is, equivalently, many orders of magnitude larger.
II. Lower cost of participation
CONCLUSION
of retail respondents feel competition among exchanges will lead to lower cost of participation
Over half (57%)
Report2010
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INVESTORSSURVEY
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2. Meeting the Potential: Increasing participation, reach and financial knowledge
a. Drivers for increasing participation: Improve awareness and access
I. Improve awareness
II. Improve access
III. Improve Operational Efficiency
b. Increasing reach: Preferred channels
i. A majority of those surveyed demanded an improved awareness of products (59%) and processes (53%) in order to increase their participation in the equity markets.
ii. Increased product awareness was demanded by 69% of the East zone, 63% of the West zone and 59% of the North. Among tiers, Tier III cities at 67% showed the greatest demand.
iii. Increased process awareness was demanded by a majority (68%) of respondents from the South zone, followed by the North (49%). Tier I cities (64%) demanded improved process awareness, followed by Tier II cities (50%).
(Refer Table 3)
i. A significant portion (39%) of those surveyed felt that improved accessibility to trading on the stock exchange would bring them to the market. Across zones, this was strongly echoed in the North (at 53%), followed by the West (49%).
ii. Across occupations, a clear majority (67%) of defence personnel identified this as a major driver to bring them to participate in the market. Businessmen, salaried and self-employed felt this was a significant driver (37%).
(Refer Table 3)
i. Institutional Investors surveyed demanded high market volume and liquidity (58% of SMEs and 49% of Corporates), which in turn, would increase their participation in capital markets.
ii. Institutional Investors surveyed also felt that if the disclosure standards were to be improved, (52% of SMEs and 41% of Corporates) it would be a major driver to their investing in equity markets.
iii. Institutional investors also stressed that improved trading and settlement procedures (46% of SMEs and 51% of Corporates), would enable them to increase their investment activity in the equity market.
(Refer Tables 11 and 15)
i. A majority (56%) of the retail respondents surveyed preferred Mobile telephony as the preferred channel that would improve their access to the market. This was followed by the Internet (31%) and bank cross-selling (19%).
ii. This preference for Mobile telephony is reinforced strongly across zones and Tiers, with 83% of the West and 65% of Tier II cities expressing strong demand for it as a key enabler.
iii. This is true even across occupations, with housewives (58%) and salaried (58%) preferring it most strongly, followed by defence personnel (54%) and students (53%). Interestingly, the age group 45-55 years preferred it most strongly (64%), followed by 33-44 year olds (55%) and 21-32 year olds (53%).
iv. The Internet, not surprisingly, was significant among students (39%), in Tier III cities (38%) and among the youngest segment of the population—21-32 year-olds (33%), but in no cases was it preferred to Mobile telephony.
Improved awareness of
products (59%) and
processes (53%)
would enable increased participation in equity
market
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v. Bank cross-selling was seen as an option next to Mobile telephony only in the South zone (41%) and in Tier II cities (40%). However, again, in no case was it preferred to the Mobile telephony.
This is significant, because it shows that cities such as Bangalore, which is technologically advanced, may be open to bank cross-selling. This also indicates the next step that one may consider taking beyond Mobile telephony, in terms of providing access to the market.
vi. Within Institutional Investors surveyed, 71% of SMEs and 75% of Corporates felt there is room for improvement in banking services.
(Refer Tables 5, 10 and 14)
i. An overwhelming majority (94%) of retail respondents surveyed confirmed that they would attend market-oriented training programmes in finance, were any offered in their vicinity.
ii. This was resoundingly confirmed across zones. 98% of the North, 97% of the West and 96% of the East confirmed this.
iii. This is true across occupations, with 95% of defence personnel, 95% of self-employed, 93% of businessmen and 93% of salaried personnel confirming this demand.
(Refer Table 4)
I. An overwhelming majority (80%) of retail respondents surveyed believe that the stock market industry will benefit from competition.
ii. This is supported across zones, with 86% of the West, 82% of the East, 79% of the North and 72% of the South holding this opinion.
iii. This strong opinion is held across all ages — the age group 45-55 years with the strongest opinion at 85%, followed by the 21-32 age group, at 80% and the 33-44 age group at 75%.
Similarly, this opinion is reinforced across occupations with defence personnel, at 88%, holding this opinion most strongly; students at 81% also overwhelmingly support this view, followed by businessmen at 80%, similarly for housewives at 80%, self-employed at 79%, and salaried at 77%. We note that even the weakest opinion is overwhelmingly in favour of greater competition in the equity markets.
(Refer Table 6)
i. A great majority (68%) of retail respondents surveyed felt that more competition in exchanges will lead to the investor receiving better services.
ii. This opinion was especially strongly expressed in the North zone (73%), followed by the West (70%).
iii. 84% of defence personnel surveyed hold this view, as do 74% of self-employed, 71% of businessmen, 64% of students and 63% of salaried personnel.
c. Increasing financial knowledge: Training
3. Looking Ahead: The demand for more competition in the Indian equity markets and the perceived benefits
a. The public demand for greater competition in the Indian equity markets
b. Perceived benefits to the retail investors from competition: Better services and lower cost of participation
I. Better services
Overwhelming majority of retail
management
(94%) are willing
to attend financial training programmes
held in their vicinity
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2. Meeting the Potential: Increasing participation, reach and financial knowledge
a. Drivers for increasing participation: Improve awareness and access
I. Improve awareness
II. Improve access
III. Improve Operational Efficiency
b. Increasing reach: Preferred channels
i. A majority of those surveyed demanded an improved awareness of products (59%) and processes (53%) in order to increase their participation in the equity markets.
ii. Increased product awareness was demanded by 69% of the East zone, 63% of the West zone and 59% of the North. Among tiers, Tier III cities at 67% showed the greatest demand.
iii. Increased process awareness was demanded by a majority (68%) of respondents from the South zone, followed by the North (49%). Tier I cities (64%) demanded improved process awareness, followed by Tier II cities (50%).
(Refer Table 3)
i. A significant portion (39%) of those surveyed felt that improved accessibility to trading on the stock exchange would bring them to the market. Across zones, this was strongly echoed in the North (at 53%), followed by the West (49%).
ii. Across occupations, a clear majority (67%) of defence personnel identified this as a major driver to bring them to participate in the market. Businessmen, salaried and self-employed felt this was a significant driver (37%).
(Refer Table 3)
i. Institutional Investors surveyed demanded high market volume and liquidity (58% of SMEs and 49% of Corporates), which in turn, would increase their participation in capital markets.
ii. Institutional Investors surveyed also felt that if the disclosure standards were to be improved, (52% of SMEs and 41% of Corporates) it would be a major driver to their investing in equity markets.
iii. Institutional investors also stressed that improved trading and settlement procedures (46% of SMEs and 51% of Corporates), would enable them to increase their investment activity in the equity market.
(Refer Tables 11 and 15)
i. A majority (56%) of the retail respondents surveyed preferred Mobile telephony as the preferred channel that would improve their access to the market. This was followed by the Internet (31%) and bank cross-selling (19%).
ii. This preference for Mobile telephony is reinforced strongly across zones and Tiers, with 83% of the West and 65% of Tier II cities expressing strong demand for it as a key enabler.
iii. This is true even across occupations, with housewives (58%) and salaried (58%) preferring it most strongly, followed by defence personnel (54%) and students (53%). Interestingly, the age group 45-55 years preferred it most strongly (64%), followed by 33-44 year olds (55%) and 21-32 year olds (53%).
iv. The Internet, not surprisingly, was significant among students (39%), in Tier III cities (38%) and among the youngest segment of the population—21-32 year-olds (33%), but in no cases was it preferred to Mobile telephony.
Improved awareness of
products (59%) and
processes (53%)
would enable increased participation in equity
market
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v. Bank cross-selling was seen as an option next to Mobile telephony only in the South zone (41%) and in Tier II cities (40%). However, again, in no case was it preferred to the Mobile telephony.
This is significant, because it shows that cities such as Bangalore, which is technologically advanced, may be open to bank cross-selling. This also indicates the next step that one may consider taking beyond Mobile telephony, in terms of providing access to the market.
vi. Within Institutional Investors surveyed, 71% of SMEs and 75% of Corporates felt there is room for improvement in banking services.
(Refer Tables 5, 10 and 14)
i. An overwhelming majority (94%) of retail respondents surveyed confirmed that they would attend market-oriented training programmes in finance, were any offered in their vicinity.
ii. This was resoundingly confirmed across zones. 98% of the North, 97% of the West and 96% of the East confirmed this.
iii. This is true across occupations, with 95% of defence personnel, 95% of self-employed, 93% of businessmen and 93% of salaried personnel confirming this demand.
(Refer Table 4)
I. An overwhelming majority (80%) of retail respondents surveyed believe that the stock market industry will benefit from competition.
ii. This is supported across zones, with 86% of the West, 82% of the East, 79% of the North and 72% of the South holding this opinion.
iii. This strong opinion is held across all ages — the age group 45-55 years with the strongest opinion at 85%, followed by the 21-32 age group, at 80% and the 33-44 age group at 75%.
Similarly, this opinion is reinforced across occupations with defence personnel, at 88%, holding this opinion most strongly; students at 81% also overwhelmingly support this view, followed by businessmen at 80%, similarly for housewives at 80%, self-employed at 79%, and salaried at 77%. We note that even the weakest opinion is overwhelmingly in favour of greater competition in the equity markets.
(Refer Table 6)
i. A great majority (68%) of retail respondents surveyed felt that more competition in exchanges will lead to the investor receiving better services.
ii. This opinion was especially strongly expressed in the North zone (73%), followed by the West (70%).
iii. 84% of defence personnel surveyed hold this view, as do 74% of self-employed, 71% of businessmen, 64% of students and 63% of salaried personnel.
c. Increasing financial knowledge: Training
3. Looking Ahead: The demand for more competition in the Indian equity markets and the perceived benefits
a. The public demand for greater competition in the Indian equity markets
b. Perceived benefits to the retail investors from competition: Better services and lower cost of participation
I. Better services
Overwhelming majority of retail
management
(94%) are willing
to attend financial training programmes
held in their vicinity
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The Institutional Investors were drawn from two populations — Corporate (including Financial Institutions and Banks) and SMEs. For Corporates, CFOs and Treasury Heads were interviewed across three Tier I cities and one Tier II city. 25% of the Corporate population were Financial Institutions. For Small and Medium Enterprises, CFOs and their equivalent were interviewed from clusters in 12 cities across India. Details of the sample stratification are discussed in the Survey Methodology section in the detailed report.
The following sections highlight, in terms of the key findings of the Survey. The respective tables and sections are referred wherever appropriate in the following sections. The following sections are divided into: Gaps in the Indian equity market, Addressing the Gaps and Looking Ahead. All the findings reported are from actual survey responses.
i. Across the country, only 18% of those surveyed invested in equities.3ii. Businessmen surveyed invest the most and housewives invest the least. Only 7% of
housewives surveyed invest in equities, followed by students at 9%, defence personnel at 18%, self-employed at 20%, salaried at 21% and businessmen at 27%.
iii. Among Institutional Investors, 53% of SMEs and 57% of Corporates surveyed invested in equities.
(Refer Tables 1, 8 and 12)
i. Across the country, 50% of those surveyed were never approached by brokers or investment advisors.
ii. Businessmen were the most-approached segment by brokers and investment 4advisors. However, 57% of defence personnel, 57% of students and 51% of salaried
personnel have never been approached.
iii. Within Institutional Investors surveyed, 27% of SMEs and 11% of Corporates have never been approached by brokers or investment advisors.
(Refer Tables 2, 9 and 13)
i. Across the country, 56% of those surveyed conveyed a lack of information about investing as a major barrier to participating in the market.
ii. In Tier III cities, 63% identified lack of information as a major reason for their non-participation, in Tier II it was 59% and in Tier I, it was 47%.
iii. Additionally, 47% of those surveyed have no knowledge of where to buy Equity, Mutual Funds or ULIPs.
iv. In Tier III cities, 50% of those surveyed attributed non-participation to lack of knowledge about where to buy Equity and Equity-linked products, followed by Tier II cities at 48% and Tier I at 44%.
v. Among Institutional Investors, 42% of SMEs and 32% of Corporates conveyed lack of information about investing as a major barrier to participating in capital markets.
(Refer Tables 2, 9 and 13)
1. Opportunities in the Indian equity market: Penetration, Development, Reach and Provision of Financial Knowledge
a. Penetration and development opportunities
b. Opportunity for increasing reach
c. Opportunity in imparting financial knowledge
50% of Retail,
27% of SME and
11% of Corporate respondents are yet
to be approached by a broker/ investment
advisor
KEY FINDINGS:
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iv. Among Institutional Investors surveyed, 41% of SMEs and 44% of Corporates felt that promoting competition in the exchange sector would lead to better services.
(Refer Tables 7, 11 and 15)
i. Over half the retail respondents surveyed (57%) felt that more competition in exchanges will lead to a lower cost of participation in the capital markets.
ii. Across zones, the North (63%) and the West (61%) were seen to hold this opinion most strongly. Tier I cities (69%) most strongly perceived this benefit.
iii. Across occupations, this benefit was strongly perceived by housewives (63%), followed by salaried personnel (59%), businessmen (58%) and students (55%)
(Refer Table 7)
The first major finding of this Survey is that there is huge scope to enhance market penetration leading to financial inclusion. This is further supported by the need for market development increasing reach and imparting greater financial knowledge. Secondly, it is clear that measures to increase access to the markets are welcome, and there is a great keenness to be imparted financial training if it could be conducted at a reasonably convenient location. All means to increase access, including mobile telephony or cross-selling, appear welcome.
Finally, respondents to this Survey have expressed their opinion about what they expect India’s equity market to look like in the future. They have clearly expressed a desire for more competition in this space. Opinion appears to be in favour of competition and benefits therefrom in the equity markets going forward. This holds true across surveyed occupations, ages, geographies and Tiers of cities. Further, the effort to achieve greater financial inclusion appears to be the desired and a preferred remedy emanating from this Survey.
Financial inclusion appears to be an achievable goal for the Equity market. This is evidenced by the success of market penetration strategies in Insurance during this decade. The Survey shows that in 2010, 86% of retail, 79% of SMEs and 67% of Corporate respondents invest in Insurance as against
518% of Retail, 53% of SMEs and 57% of Corporate respondents investing in Equity . During this 6decade, the number of Insurance agents has grown 25-fold, from 1,15,715 in 2001 to 29,37,435 in
72009 , whereas the number of Cash Equity brokers has actually reduced from 9,712 in 2001 to 8,652 8in 2009 .
It is important to revisit what was noted at the outset, that the opinions emanating from this Survey are from the most informed part of the investor population. Accordingly, it can be estimated that the need for market penetration and development highlighted herein are much larger in pervasiveness than even appear here, and the appetite for their redressal, with the solutions suggested is, equivalently, many orders of magnitude larger.
II. Lower cost of participation
CONCLUSION
of retail respondents feel competition among exchanges will lead to lower cost of participation
Over half (57%)
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This survey is different from its precursors in many respects and is also similar. The similarity lies in the subject matter and objective, wherein the preferences of Indian investors are sought to be understood and updated. The differences are in sample selection and in survey methodology. The SEBI/NCAER survey surveyed households across rural and urban India, whereas this Survey, similar to the L C Gupta surveys, was focused on urban households. This survey used single questionnaires and employed a professional survey agency, unlike the L C Gupta surveys, which employed university teachers, bank managers, etc, in addition to research professionals.
The SEBI/NCAER survey was the first major survey of its kind and sought to investigate the population of individual investors who had invested directly or indirectly in the equity market. This survey provides an update to these indicators for 2010. It also provides an update to several other elements of the SEBI/NCAER survey, including updates on investors’ expectations from the market.
This survey extends the L C Gupta Surveys by extending the study of market perception beyond households to a broader investor class. Significantly, the L C Gupta Surveys had highlighted the need for investor education. This survey provides evidence that helps further this aspect very clearly.
Since this a survey of present and potential investors, it has included both individuals and institutions. In the case of individuals, henceforth referred to as retail investors, it was conducted across India, spanning geographies (all four zones), ages and occupations. In the case of institutions, it was not limited to traditional institutions but included all corporate as well as senior finance executives of small and medium industries who invested on behalf of their institutions. Note must be made that institutions were surveyed here as investors and not as sell side institutions looking to issue paper in the equity market. The Survey has made an effort to include as broad a cross-section of the public as possible, yet has controlled for factors such as education, age and occupation, in order to draw out an informed opinion about the market even from respondents who were non-investors.
The starting point of the Survey was the cognisance of the fact that just 1.4% of India’s population 1invests directly in the equity market . Hence, in the quest for informed and considered opinion
about various aspects of the equity market, certain sampling controls were imposed. These were designed to ascertain the opinions of that portion of the retail population that is most likely to participate in the market.
At the macro level, the Survey was directed at cities, although spread across all geographic zones of the country. India’s 4 major metros — Mumbai, Delhi, Kolkata and Chennai — were included, which were called Tier I for purposes of this Survey. The next level of development, called Tier II, was represented by Bangalore, Vijayawada, Lucknow and Ahmedabad, and currently non-metropolitan cities but potentially at the next level of development — represented by Guwahati, Bhubaneshwar, Jaipur and Ludhiana — were classified as Tier III. Semi-urban and rural sections of
2the population, which constitute 71% of India’s population , did not qualify for this survey, in the interest of integrity of information content.
Businessmen invest the
most (27%) and
Housewives invest the
least (7%) in equity
markets
PurposeThis Survey of retail and institutional respondents has mapped out their collective opinion regarding various facets of the Indian equity market. The objective of the Survey was to accurately ascertain the opportunities and the means to achieve them that are inherent in the equity market today, and what the public desires of this industry going forward. Its precursors, at a national level, were the “Survey of Indian Investors” by SEBI/NCAER, 1999, the Society for Capital Market Research and Development sponsored “Indian Shareowners: A Survey”, 1991, “Household Investors Survey”, 2004, and “The Changing Investment Preferences of Indian Households”, 2008,
Aalso known as the L C Gupta Surveys.
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!
!
!
!
!
!
!
!
1. Kar, P., I. Natarajan and J.P. Singh, Survey of Indian Investors”, SEBI-NCAER, 1999.
2. Gupta, L.C., “Indian Shareowners: A Survey”, Society for Capital Market Research & Development, 1991.
3. Gupta, L.C., “Indian Household Investors Survey”, Society for Capital Market Research & Development, 2005.
4. Gupta, L.C., “The Changing Investment Preferences of Indian Households”, Society for Capital Market Research & Development, 2008.
1National Securities Depository Limited Press Release, August, 2009 & Central Depository Services Limited: http://www.cdslindia.com/2Source: CIA Factbook India. (www.cia.gov/library/publications/the-world-factbook/geos/in.html).3Survey restricted to educated homemakers.4Post graduate and above.5Source: Table 1, 8 and 12.6IRDA Annual Report 2001, Table No.18: Distribution Channel Statistics 2000-01.7IRDA Annual Report 2009, Table No.47: Details of Individual Agents of Life Insurers.8SEBI’s Handbook of Statistics on Indian Securities Market 2009, Table 1: SEBI Registered Market Intermediaries.
FOOTNOTES
AREFERENCES
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1! Bloomberg Statistics /Ticker name: INGCGDP INDEX
2! www.indiabudget.nic.in/es2001-02/chapt2002/tab91.pdf
3! Bloomberg Statistics /Ticker name: INGCGDP INDEX
4! CIA World Fact Book, https://www.cia.gov/library/publications/the-world-factbook/geos/in
5! March 2001 Market Capitalization Statistics in INR from SEBI Handbook 2009, Table 17, and
USDINR RBI Reference Rate as at March 30,2001 from RBI website http://www.rbi.org.in/scripts/ReferenceRateArchive.aspx6
! March 2010 Market Capitalization Statistics in USD. Bloomberg Statistics/Ticker: WCAUINDI7
! Demat Accounts: National Securities Depository Limited Press Release, August, 2009 & Central Depository Services Limited : http://www.cdslindia.com/8
! China Securities Investor Protection Fund Corporation (SIPF), Overview Statistics of Securities Market as on May 31, 2010. http://www.sipf.com.cn/images/en/chinassecuritiesmarketoverview /marketdata /2010/06/30/ F7256A2C1A1A26BED2B14B38C70BEA5B.pdf9
! Moscow Central Depository Incorporation: http://www.english.mcd.ru/company.htm10
! Korean Securities Depository: http://www.ksd.or.kr/eng/html/introduction/ceomessage.home11
! UK Shareholders’ Association Press Release, July, 200712
! Investment Company Institute & The Securities Industry & Financial Markets Association/Equity & Bond Ownership In America, 2008, Key Findings/Pg. 113
! CIA World Fact Book, https://www.cia.gov/library/publications/the-world-factbook/geos/(Select Country) as accessed on August 18, 201014
! Number of US households investing in equities15
! Ratio of household investors to population16
! 2009-10
FOOTNOTES
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1. In
vestm
ent m
ade i
n diff
eren
t ins
trum
ents
Refe
r Tab
les 2
(b) &
2(e
) of I
ndia
n Eq
uity
Inve
stor
s Sur
vey
2010
Base
: (All R
espo
nden
ts)
Insu
ranc
eFix
ed de
posit
sGo
ld or
silve
rRe
al es
tate
Mut
ual fu
nd sc
hem
esEq
uity
ULIPs
PPF
Gove
rnm
ent s
chem
es (N
SC et
c)Go
vern
men
t bon
dsCh
it fu
nds
Debt
1207 % 86 49 43 25 23 18 15 11 11 7 7 1
Over
all
379 % 83 34 54 41 16 23 17 12 12 10 2 1
Nort
h28
3 % 96 75 19 11 31 21 11 11 16 7 2 2East
223 % 86 54 57 22 22 23 14 17 10 3 5 1
Wes
t32
2 % 80 39 43 19 25 7 16 8 7 8 18 1
Sout
h29
0 % 88 48 47 31 28 27 20 4 8 6 11 2
Busin
essm
an12
8 % 93 65 43 23 24 18 13 19 13 15 2 0
Defe
nce
175 % 80 37 44 18 13 7 7 7 12 5 8 1
Hous
ewife
295 % 89 54 44 22 26 21 19 24 15 5 4 1
Sala
ried
162 % 86 48 46 38 31 20 16 7 14 12 7 2Self
empl
oyed
157 % 77 41 32 15 10 9 5 3 4 3 5 0
Stud
ent
RETAIL INVESTORS
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Finally, India can take inspiration from the success of deregulation and competition in the mature markets of the world. In the United States, there is no single exchange with 50% market share, and in Europe it is under 25%. Statistics about the US and Europe are presented in Table 13 below.
In light of the above facts, The Nielsen Company was commissioned to investigate the current status of the Indian equity market to estimate the level of desire and understanding in the public itself for Financial Inclusion and Development in the Equity Markets. This Survey Report is presented in the following pages.
Source: Thomson Reuters's European Market Share Report; * Excluding OTC reported & dark pools
There are 14 SEC registered national securities exchanges besides more than 73 active registered Alternative Trading Systems (deemed exchanges) in the US and over 20 registered Multi Trading
Facilities operating in Europe.
14.5
9.6
8.7
7.8
6.3
4.0
3.9
2.7
4.8
Avg. Daily Share Traded Value (in US$ Bn) (Apr '10)
23.2%
15.5%
14.0%
12.6%
10.0%
6.4%
6.1%
4.3%
7.9%
Market Share (%)
EUROPE
47.3%is the highest market share of any stock exchange in the US and Europe where as 92.5% is the Market Share of NSE
LSE Group
Euronext
CHI-X
Deutsche Boerse
Spanish Exchanges
Nasdaq OMX Nordic
SIX Swiss
BATS Europe
Others (24 platforms)
Trading Platforms(Europe)
NASDAQ OMX*
NYSE EURONEXT*
BATS
EDGE DIRECT
Boston EX
National SX
Chicago SX
CBOE
National Securities Exchanges
106.4
74.1
27.5
7.5
6.6
1.3
1.2
0.4
Avg. Daily Share Traded Value (in US$ Bn) (Jul '10)
47.3%
33.0%
12.2%
3.4%
2.9%
0.6%
0.5%
0.2%
Market Share (%)
UNITED STATES
Table 13: Competitive Scenario in U.S. and Europe.
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Base
: (All R
espo
nden
ts)
No gu
aran
teed
retu
rns
Too m
uch p
rice f
luctu
ation
Inve
sting
in ca
pital
mar
kets
is ve
ry ris
ky
Lack
of in
form
ation
abou
t inv
estin
g in c
apita
l mar
kets
Neve
r app
roac
hed b
y a br
oker
/ inv
estm
ent a
dviso
r
No kn
owled
ge of
whe
re to
buy E
quity
/MF/
ULIPs
Not e
noug
h mon
ey to
inve
st in
Capit
al m
arke
ts
No lo
an av
ailab
le on
inve
stmen
t in c
apita
l mar
kets
Too m
any p
rodu
cts th
at co
nfus
e me
Frien
d/re
lative
s had
bad e
xper
ience
inve
sting
in ca
pital
mar
kets
No tr
ust i
n bro
kers
Mon
ey w
ould
get t
ied up
for l
ong t
ime
MF/
ULIPs
offer
low
rate
of re
turn
Lack
of ac
cess
to tr
ading
on th
e sto
ck ex
chan
ge
1207 % 66 65 62 56 50 47 45 40 35 35 33 29 27 25
Over
all
466 % 66 69 67 47 52 44 45 43 34 33 31 24 27 19Ti
er 1
424 % 67 66 60 59 51 48 41 41 32 36 36 33 28 22Ti
er 2
317 % 65 57 58 63 45 50 50 33 42 38 32 32 25 38Ti
er 3
290 % 63 64 62 51 41 42 38 37 32 29 31 27 25 23
Busin
essm
an
128 % 62 55 65 66 57 46 42 38 30 34 30 27 24 27
Defe
nce
pers
onne
l
175 % 65 67 57 66 49 51 54 43 40 34 36 31 26 33
Hous
ewife
295 % 69 65 63 55 51 46 43 37 38 39 36 31 25 23
Sala
ried
162 % 70 67 59 46 50 44 41 44 30 39 28 26 33 17Self
empl
oyed
157 % 68 66 68 57 57 57 61 45 39 37 36 36 30 31
Stud
ent
Refer
Table
s 9(c)
& 9(
e)of In
dian E
quity
Inve
stors
Surv
ey 20
10
2. Ba
rrier
s to i
nves
ting i
n Sto
ck M
arke
t
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200111
22000.1mn
$160bn
200923
11800~3 mn
$600 bn260 mn
Companies:Offices:Agents:Sum Assured:Subscribers
Life Insurance Business
2002 2009
Service providers: 13 14
2001 2009
Subscribers: 36 mn 500 mn
Telecom Sector
Source: IRDA, RBI, SEBI, AMFI and TRAI
Table 12: India’s Financial Inclusion Opportunity
Strong Evidenceof Financial Inclusion in
Telecom & Insurance sectors
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India has experienced success with deregulation in the Life Insurance and Telecom sectors. The number of subscribers in Telecom has jumped from 36 million in 2002 to 500 million in 2009. Hence the growth and profit potential is obvious. In addition, the potential for financial inclusion through employment generation is evident in the Life Insurance sector, where the number of agents has risen from 100,000 in 2001 to about 3 million in 2009. The potential in releasing the funds available in the banking and asset management sectors in the Indian economy to the exchange traded space are immense. It is evident that just two major exchanges that exist at present do not bring sufficient trading and financial inclusion opportunity to the Indian public. These and other associated statistics are provided in Table 12 below.
As on December 2009
National Stock Exchanges: 2
Brokers: 2100
Trading Terminals: 200,000
Market Cap: $1120 bn
Direct Investors: ~15 mn
Capital Market
AMCs: 44
Branches: 2500
Agents: 64,000
AUM: $165 bn
Users: ~47 mn
Asset Groups
Number OfCommercial Banks: 170
Branches: 80,500
SCBs Agg deposits : $875 bn
Users: ~600 mn
Banks
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3. D
river
s to i
nves
ting i
n Sto
ck M
arke
t
Base
: (All I
nves
tors)
Impr
oved
awar
enes
s of p
rodu
ctsIm
prov
ed aw
aren
ess o
f pro
cesse
sIm
prov
ed aw
aren
ess o
f tec
hnolo
gyTra
ding t
hrou
gh m
obile
Impr
oved
acce
ssibil
ity to
trad
ing on
the s
tock
ex
chan
geIn
trodu
ction
of ne
w pr
oduc
tsSa
les an
d mar
ketin
g by b
roke
rs
Refe
r Tab
le 1
0(b)
, 10(
c) &
10(
d) o
f Ind
ian
Equi
ty In
vest
ors S
urve
y 20
10
YES % 94 98 96 97 84 97 89 97 95 93 94 93 95 92 93 95 100
Over
allNo
rthEa
stW
est
Sout
hTie
r ITie
r II
Tier I
II21
-32 Y
ear
33-4
4 Yea
rs45
-55 Y
ears
Busin
essm
anDe
fence
perso
nnel
Hous
ewife
Salar
iedSe
lf em
ploye
dSt
uden
ts
NO % 6 2 4 3 16 3 11 3 5 7 6 7 5 8 7 5 0
4. In
tere
sted i
n atte
nding
train
ing pr
ogra
mm
es in
vicin
ity
Refe
r Tab
les 1
3(a)
, 13(
b) a
nd 1
3(c)
of I
ndia
n Eq
uity
Inve
stor
s Sur
vey
2010
Self
empl
oyed
73 % 62 63 56 38 37 32 19
444 % 59 53 43 41 39 30 26
Ove
rall
133 % 59 49 47 47 53 34 38
Nor
th
109 % 69 45 36 38 33 39 32East
82 % 63 48 45 56 49 21 21
Wes
t
120 % 48 68 43 26 24 23 12
Sout
h
176 % 64 64 45 40 36 26 16
Tier
1
159 % 49 50 45 39 38 26 26
Tier
2
109 % 67 39 35 44 48 42 43
Tier
3
134 % 55 47 42 34 37 25 31
Busi
ness
man
46 % 59 50 30 54 67 33 26
Def
ence
pers
onne
l
37 % 65 51 43 43 30 30 30
Hou
sew
ife
129 % 61 59 40 43 37 29 25
Sala
ried
Introduction2010
INDIAN EQUITY
INVESTORSSURVEY Tables
2010
INDIAN EQUITY
INVESTORSSURVEY
www.m x-sx.comc5
Second, even the existing capital market activity in the equity market is not amenable to resource raising. This is due to the fact that over 75% of trading in equities and equity derivatives are cash settled. Statistics on India versus the rest of the world in terms of equity cash and derivatives are presented in Table 10 below.
Table 11: India and the World: Equity Cash and Derivatives Trading, 2009.
The opportunity in India is even greater if one considers the existing activity in the markets. The top 5 cities in India contribute 84% to trading in 2009-10, a figure up by 6% from 2001-02. Cash trading volumes from Mumbai and Delhi alone account for 65% of cash trading and 60% of mutual funds volume. This is contrasted with the fact that these cities account for only 24% of the national income pool. Hence, correcting this imbalance offers a huge opportunity to unlock value. The statistics are presented in Table 11 below.
4.3
125
75
India
7.8
100
0
China
9.1
45
55
Japan
6.3
24
76
HK
89.3
52
48
U.S.
1.8
70
30
Canada
4.6
74
26
UK
36.7
94
6
Germany
Total Annual Volume in US$ trillionSource: Mckinsey, FICCI Report on Capital markets 2020
178% of cash equities trading in India is intraday in nature which are also cash settled
1Trading in cash equities and equities derivatives , 2009
Cash equities Equity derivatives
Table 10: India and the World: Equity Cash and Derivatives Trading, 2009
Share of cash trading volume, mutual fund ownership and income by cities (FY 09, Percent)
Source: Mckinsey, FICCI Report on Capital markets 2020
Large potential to tap household savings
Next 410 most
populatedcities
Next 8most
populatedcities
Mumbai- Delhi
10
25
65
Cash tradingvolume
22
18
60
Retail mutualfunds
63
13
24
Income pool
Contribution from top 5 cities to total share trading
2001-02
78%
India China
2009
65%
2005-06
82%
2009-10
84%
65%of Equity Cash Market Turnover is generated from Mumbai and Delhi
www.m x-sx.comc 18
45-5
5ye
ars
200 % 64 28 22 10 16
33-4
4ye
ars
315 % 55 31 22 9 20
21-3
2ye
ars
387 % 53 33 16 11 27
Stud
ent
118 % 53 39 20 12 24
Self
empl
oyed
122 % 49 35 20 12 24
Sala
ried
215 % 58 32 17 7 20
Hous
ewife
13
0 % 58 28 25 12 22
Defe
nce
Pers
onne
l 93 % 54 25 19 8 32
Busin
essm
an22
4 % 60 29 17 9 18
Tier
323
7 % 49 38 8 3 21
Tier
232
2 % 65 28 40 8 11
Tier
134
3 % 53 30 7 16 34
Sout
h32
2 % 60 34 41 13 15
Wes
t 10
0 % 83 18 15 13 15
East
20
3 % 61 32 10 14 17
Nort
h 27
7 % 38 32 3 2 37
Over
all
902 % 56 31 19 10 22
Base
: (All r
espo
nden
ts)
Mob
ile ph
one
Inte
rnet
Bank
cros
s-sell
ingAT
M fu
nctio
nalit
yAl
l of t
he ab
ove
5. In
itiat
ives t
hat c
ould
impr
ove a
ccessi
bility
to tr
ading
on th
e Sto
ck Ex
chan
ge
Refe
r Tab
les 1
6(b)
, 16(
c), 1
6(e)
& 1
6(f)
of In
dian
Equ
ity In
vest
ors S
urve
y 20
10
Scal
ePe
rcen
tage
of R
espo
nden
ts1
17%
219
%3
20%
412
%5
12%
6 5%7 5%
8 3%9 1%
10 0%
80%
6. Re
tail i
nves
tors
view
on w
heth
er st
ock m
arke
t will
bene
fit fr
om co
mpe
tition
in st
ock e
xcha
nges
Stud
ent
157 % 17 22 24 10 8 3 6 3 1 0
Self
empl
oyed
162 % 21 19 20 11 8 3 8 4 1 2
Sala
ried
295 % 17 18 21 9 12 5 6 3 2 0
Hous
ewife
175 % 13 21 14 15 17 7 6 2 1 0
Defe
nce
Pers
onne
l
128 % 16 17 25 13 17 5 1 2 0 0
Busin
essm
an
290 % 17 20 17 15 11 6 2 3 0 0
45-5
5ye
ars
260 % 21 18 17 13 16 5 3 2 0 1
33-4
4ye
ars
419 % 17 17 18 9 14 6 5 3 1 0
21-3
2ye
ars
528 % 14 21 23 14 8 5 5 3 1 0
Sout
h
322 % 8 11 16 12 25 7 9 3 2 0
Wes
t
223 % 16 28 23 14 5 4 3 4 0 0
East
283 % 31 16 15 7 13 7 2 1 0 0
Nort
h
379 % 13 23 24 15 4 3 5 3 1 1
Over
all
1207 % 17 19 20 12 12 5 5 3 1 0
Base
: (All R
espo
nden
ts)
1- W
ill be
nefit
imm
ense
ly2 3 4 5 6 7 8 9 10
- Will
not b
enefi
t at a
ll
Refe
r Tab
les 2
1(a,
b),
21(d
) & 2
1(e)
of In
dian
Equ
ity In
vest
ors S
urve
y 20
10
Tables2010
INDIAN EQUITY
INVESTORSSURVEY Introduction
2010
INDIAN EQUITY
INVESTORSSURVEY
29%of Equity Turnover is concentrated in Top 10 companies
129.3%
28.2%
12.9%
11.4%
21%
19.6%
19.2%
Turnover of top 10 companies to total BSE
NSE
Shanghai SE
Shenzhen SE
Taiwan SE
Tokyo SE
Korea Exchange
ExchangeIndia
China
Taiwan
Japan
Korea
Country
www.m x-sx.comc 4
The opportunity for India lies across various factors. The first is in addressing concentration of companies that are traded within exchanges. In 2008 and 2009, close to one third of trading on India’s major two exchanges were concentrated in the top 10 companies. Elsewhere in Asia, the figure is much lower, highlighting the opportunity for India as a comparable Asian economy. The statistics are presented in Table 7 below.
Table 7: Concentration Comparison Across Asia: 2009.
1Source: World Federation of Exchanges 2009 & 2008
Taking the comparison from across Asia to across the world, another opportunity makes itself very evident. This is the opportunity to develop liquidity in India's capital markets. This can be seen by observing India's turnover velocity and comparing equity share traded value as percentage of GDP across countries. The opportunity for India is evident in the statistics presented in Table 8 below.
The opportunity to make the capital market a hub for raising resources for corporates has a long way to go in being fully tapped. This is evident from two markets. First, in market capitalization terms, India's corporate bond market is 3% of GDP, and 5% of the total bond market. Comparative statistics across Asia highlight the opportunity. These are presented in Table 9 below.
Table 8: India and the World: Market Liquidity, 2009
Turnover Velocity as a measure of market liquidity shows turnover as a percentage to their market capitalization Source: World Federation of Exchanges (2009)
(in US$ Trillion)
Table 9: India and Asia: Corporate Bond Markets, 2009.
Market Cap of Corporate Bond as % to GDP
India 3%
Malaysia 43%
Singapore 34%
Hong Kong 35%
Corporate Bond as % to Total Bond Market
India 5%
Malaysia 45%
Singapore 41%
Hong Kong 52%
Market Cap as % to GDP Equity (India) 110%
Source: WFE Statistics and ADB Asia Bond Monitor; As of Dec '09
India1.2
1.0
87%
BSE: 17.11%
NSE: 53.89%
4.3
7.8
181%
SSE: 129.9%
SHZE: 281.1%
ChinaUS0.9
1.6
170%
KSE: 173.51%
KoreaGDP
Equity share traded value
Equity share traded as a per cent to
GDP
Turnover Velocity (July‘10)
Country14.4
47
326%
NYSE: 137.21%
NASDAQ: 348.85%
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7. Ke
y ben
efits
to th
e ret
ail in
vesto
r thr
ough
com
petit
ion
Refe
r Tab
les 2
3(b)
& 2
3(d)
of I
ndia
n Eq
uity
Inve
stor
s Sur
vey
2010
Base
: (Res
pond
ents
who t
hink i
nves
tors
will b
enefi
t fro
m ne
w ex
chan
ges)
Bette
r Ser
vices
Lowe
r cos
t of t
rading
More
brok
ers p
rovid
ing se
rvice
sGr
eate
r nat
ional
pene
tratio
nBe
tter t
echn
ology
Innov
ative
prod
ucts
478 % 68 57 37 36 27 6
Ove
rall
151 % 73 63 26 42 25 1
Nor
th
89 % 65 44 40 22 30 13East
146 % 70 61 46 42 27 3
Wes
t
92 % 60 53 40 30 25 12
Sout
h
215 % 67 69 38 37 25 7
Tier
1
151 % 71 47 38 42 32 2
Tier
2
112 % 67 46 36 27 22 9
Tier
3
124 % 71 58 35 35 24 6
Busi
ness
man
56 % 84 48 32 48 25 5
Def
ence
Pers
onne
l
49 % 51 63 35 39 27 4
Hou
sew
ife
117 % 63 59 40 38 30 4
Sala
ried
68 % 74 56 35 24 31 4
Self
empl
oyed
64 % 64 55 45 38 22 13
Stud
ent
Introduction2010
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INVESTORSSURVEY Tables
2010
INDIAN EQUITY
INVESTORSSURVEY
www.m x-sx.comc3
To add to the above observations on market penetration and financial inclusion, comparing direct participation in India’s equity markets could be greater, not only when benchmarked against developed countries, but even in comparison to other BRICs and Asian countries.
1.4%of India's population trades directly in equity market
Continuing the comparison, the equity segment globally contributes about 20 per cent of the total activity in the exchange traded financial markets while in India the corresponding figure is around 70 per cent.
Sources: World Federation of Exchanges and Exchange Websites
Table 5 below provides the comparison.
India and the World: Trading Across Asset Classes (in US $ Trillion), 2009.Table 5:
Asset Groups USA Europe Brazil 16India
Sources: India: NSDL & CDSL, 2009, China: SIPF China, 2010, Russia: MCD, South Korea: KSD, UK: UK Shareholders' Association Press Release, 2007, USA: ICI & SIFMA Report, 2008, Population
Statistics: CIA World Fact Book
Table 4 below highlights this fact.Table 4: India and the World: Direct Participation in Equity Markets
On a broader scale, among nations, India is positioned as a nation with a strong savingsrate, with a large penetration of mobile telephones. These and certain other salient macroeconomic facts are presented in Table 6 below.
Table 6: India and the World: Macro Economic Facts, 2009.
4.3
1.3
2,705 (SSE)
28%
NA
650
300
China1.2
1.12
1306 (BSE)
32%
32
550
80
IndiaGDP ($ trn) (2009 Est.)
Population (in bn) (2009)
Market Cap. ($ bn) (Dec 2009)
Gross household savings rate as
percentage of disposable income (2008)
No. of tax payers (in mn) (2007)
No. of mobile phones (in mn) (2009)
No of internet users (in mn) (2009)
Parameter US14.4
0.3
11,838 (NYSE)
4.4%
134
270
230
Sources: www.CIA.gov, www.world-exchanges.org and Others
UK2.2
0.06
2,796 (LSE)
2.5%
32
75
50
7India8China
9Russia10South Korea
11Uk12USA
13Population in Million1,173
1,330
139
48
61
310
Demat/Population (in %)1.4
9.4
2.2
7.4
16.41517.7
Demat Accounts in Million16.8
125
3
3.55
101454.8
4759
7242150
901
5.2%6.5%
80.4%2.3%5.5%
100%
12.428.8
620.90.07.2
669.3
EquityEquity DerivativesInterest RateFX DerivativesCommodity
Total
1.8%4.3%
92.8%0.0%1.1%
100%
0.61.57.93.4
0.02
13.4
4.7%11.2%58.8%25.1%0.2%
100%
1.23.70.00.81.6
7.3
16%51%0%
11%22%
100%
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10. SME Investors: Scope for Improvement in Indian Equity Market
Transperancy
Innovations
Bureaucracy among exchangepersonnel
Technology
Accounting standard
Exchange as facilitator
14 46 2610
9 7 9 41 30
3 7 35 33 16
3 9 14 41 29
6 4 23 36 25
3 10 29 33 16
0% 20% 40% 60% 80%
5 (Maximum scope of improvement) 1 (Least scope of improvement) 2 3 4
Refer Table 27 of Indian Equity Investors Survey 2010% of SME investing
79Insurance
53Equity/MF
50Fixed deposits
27Real Estate
15Government Securities
10Commodities
7Debt of companies
0 50 7525
8. SME Investors: Investment in Different Instruments
SME INVESTORS
9. SME Investors: Barriers to Investing in Stock Market
69Investing in capital markets is very risky
65Too much price fluctuation
56No guaranteed returns
42Lack of information about investing in capital markets
40Lack of access to trading on the stock exchange
31Friend/relatives had bad experience investing in capital markets
27Never approached by a broker/investment advisor
21Too many products that confuse me
21MFs offer low rate of return
19No loan available on investment in capital markets
19Bad experience with capital markets in the past
19No trust in brokers
17Money would get tied up for long time
12No knowledge of where to buy Equity/MF
0 5025
Refer Table 28 of Indian Equity Investors Survey 2010
75
Survey Report2010
INDIAN EQUITY
INVESTORSSURVEY Introduction
2010
INDIAN EQUITY
INVESTORSSURVEY
Hyderabad
Rajkot
Cochin
Baroda
Bangalore
Jaipur
Indore
Coimbatore
Mangalore
Ludhiana
Kanpur
Patna
Pune
Gauhati
Bhubaneshwar
Others
Sub-total
City
2.85
0.29
0.79
0.62
2.79
1.16
1.08
0.6
0.12
0.53
0.95
0.11
1.03
0.12
0.07
12.51
25.62
2001-022.25
0.32
0.64
0.71
1.67
1.17
0.98
0.46
0.08
0.43
0.4
0.1
0.75
0.02
0.02
9.44
19.44
2004-051.73
1.28
0.76
0.7
0.62
0.56
0.49
0.33
0.22
0.17
0.07
0.03
0.03
0.01
0
5.7
12.7
2008-09Kolkata
Pune
Indore
Bangalore
Chennai
Kanpur
Cochin
Hyderabad
Baroda
Ludhiana
Gauhati
Patna
Mangalore
Coimbatore
Bhubaneshwar
Others
Sub-total
City
0.84
0.6
0.18
0.3
0.16
0.26
0.27
0.13
0.54
0.01
–
–
–
0.04
–
9.83
13.16
2001-020.96
0.63
0.46
0.74
0.4
0.44
0.12
0.2
0.02
0.34
0.06
0.07
0.07
0.06
0.02
11.44
16.03
2004-050.79
0.68
0.6
0.5
0.39
0.33
0.29
0.29
0.28
0.07
0.06
0.06
0.03
0.02
0.01
10.96
15.36
2008-09
NSEBSE
BSE
Mumbai
Ahmedabad
Rajkot
Delhi
Jaipur
Sub-total
City
84.01
0.97
0.32
1.31
0.23
86.84
2001-0275.33
3.14
1.71
3.05
0.74
83.97
2004-0572.4
4.76
3.76
2.85
0.86
84.63
2008-09Mumbai
Delhi
Kolkata
Ahmedabad
Chennai
Sub-total
40.2
19.4
9.15
2.49
3.56
74.8
47.39
14.92
12.46
2.91
2.88
80.56
55.85
14.97
9.24
5.27
1.97
87.3
City 2001-02 2004-05 2008-09
Table 2: Monthly Turnover Velocity across the World’s Stock Exchanges, January through August 2010
23.5%
70.1%
205.5%
395.6%
180.8%
239.1%
384.0%
117.1%
India
China
Taiwan
Korea
USA
Bombay SE
National SE India
Shanghai SE
Shenzhen SE
Taiwan SE Corp.
Korea Exchange
NASDAQ OMX
NYSE Euronext (US)
16.6%
51.0%
97.9%
194.4%
81.1%
152.7%
356.5%
125.4%
19.2%
57.0%
168.6%
345.1%
135.4%
171.7%
337.9%
124.7%
17.9%
54.1%
207.5%
447.2%
147.9%
188.6%
350.9%
132.1%
17.0%
57.4%
148.9%
285.2%
124.4%
190.3%
510.1%
183.3%
17.3%
54.9%
111.6%
263.8%
105.5%
162.8%
407.5%
160.8%
17.1%
53.9%
129.9%
281.1%
132.7%
173.5%
348.9%
137.2%
20.1%
58.4%
181.5%
377.6%
164.0%
161.9%
332.5%
125.8%
January2010
Country Exchange February2010
March2010
April2010
May2010
June2010
July2010
August2010
Source: World Federation of Exchanges
NSE
Table 3: Market Penetration: 2001 to 2009 City-wise Distribution of Turnover (Cash Segment) (in %)
www.m x-sx.comc 2
Furthermore, we note that over 80% of the turnover in India continues to come from the top 5 cities, a further indication of concentration, as Table 3 below demonstrates.
Source: SEBI Handbook 2009, Table 24
Above 80%Equity Turnover
in India continues to come from Top
5 cities
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11. SME Investors: Drivers to Increase Investments in Equity Market
Refer Table 33 of Indian Equity Investors Survey 2010
0 5025
67Improve the regulatory regime
46Improve trading and settlement operations
41Promote competition in exchange sector that leads to better service
39Greater use of technology
35More innovative products
12Permission for OTC products
1Easy operating system
Develop high market volume and liquidity 58
Improve disclosure standard 52
Better capitalised members 29
Emphasise on the diversity of the firms listed 26
5 (Maximum scope of improvement) 1 (Least scope of improvement) 2 3 4
Transaction cost
Financial intermediaries
Risk management
Market penetration
Clearing services
Banking services
0% 20% 40% 60% 80% 100%
3 10 22 38 23
4 4 26 39 20
1 9 14 45 23
1 3 23 39 26
3 1 22 43 20
1 3 19 29 42
Refer Table 32 of Indian Equity Investors Survey 2010
12. Corporate Investors: Investment in Different Instruments
0 50 7525
67Net Capital Market
Insurance 67
Equity/shares 57
Mutual Funds 52
Bank FDs 50
Debentures 20
Government Securities 15
Commodities 15
Real Estate 13
Refer Table 40 of Indian Equity Investors Survey 2010% of Corporate investing
CORPORATE INVESTORS
Introduction2010
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INVESTORSSURVEY Survey Report
2010
INDIAN EQUITY
INVESTORSSURVEY
www.m x-sx.comc1
Growth over last decade
GDP
314%
Market Capital788%
Population117%
Exchange turnover
1488%
INTRODUCTION TO INDIAN EQUITY INVESTORS SURVEY 20101 2India's GDP in 2001 was US$ 414 Billion with a population of 1 Billion . Over this decade, as at 3 42010, the GDP stands at US$ 1.3 Trillion and India's estimated population is 1.173 Billion . This
dramatic growth has reflected itself in the Indian equity market, whose market capitalization 5 6stood at about US$ 165 billion in 2001 and has increased to over US$ 1.3 Trillion in 2010.
Note that in 2001-02, there were 21 regional stock exchanges across India in addition to 2 national exchanges. Of these 23 exchanges, 16 exchanges conducted active transactions. In 2008-09, the active exchanges had been reduced to 4.
Turnover Velocity as a measure of market liquidity shows turnover as a percentage to market capitalization. The following table highlights the comparative lack of liquidity in the Indian equity market.
Table 1: Total Turnover (Cash & Derivatives Segments) across stock exchanges: 2001-09
Stock Exchange
Ahmedabad Bangalore Bhubaneshwar Calcutta Cochin Coimbatore Delhi Gauhati Hyderabad ISE Jaipur Ludhiana Madhya Pradesh Madras Magadh (Patna) Mangalore Mumbai NSE OTCEI Pune SKSE Uttar Pradesh Vadodara
2001-02
14,844 70 -
27,075 27 -
5,828 -
41 55 -
857 16 24 - -
309,314 615,092
4 1,171
- 25,237
10
2004-05
- - -
2,715 - - - -
14 - - - -
27 - -
534,8293,687,125
---
5,343 -
2008-09
- - -
393 - - - - - - - - - - - -
1,112,343 13,762,505
- - -
89 -
1.48 0.007
- 2.71
0.0027 -
0.58-
0.004 0.01
- 0.09
0.0016 0.0024
- -
30.94 61.53 0.0004
0.12 -
2.52 0.001
` Crores % Share ` Crores % Share ` Crores % Share- - -
0.064 - - - -
0.0003 - - - -
0.0006 - -
12.6487.16
- - -
0.13 -
- - -
0.0026 - - - -- - - - - - - -
7.4892.52
- - -
0.0006 -
This dramatic increase in market value ought to have been consistent with increase in market development and penetration. However, we observe that this is not the case.
If we examine the distribution of turnover from 2001 to the present, we in fact see evidence of concentration across regions and cities with turnover being consolidated across two exchanges in Mumbai.
The following tables provide evidence.
Source: SEBI Handbook 2009, Table 18 & 26
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13. Corporate Investors: Barriers to Investing in Stock Market
Refer Table 41 of Indian Equity Investors Survey 2010
47Too much price fluctuation
32Lack of information about investment in equity
26Investing in equity (shares) is very risky
26It does not give guaranteed returns
21I would not get loan against a equity (shares) investment
16I have had a bad experience in equity (shares) in the past
11There are too many products that confuse me
11I don't know where to buy equity (shares) from
11Never approached by a broker/investment advisor
11Lack of access to trading on the stock exchange
0 5025
14. Corporate Investors: Scope for Improvement in Indian Equity Market
5 (Maximum scope of improvement) 1 (Least scope of improvement) 2 3 4
Innovations 2 2 20 41 34
Bureaucracy among exchange personnel 5 20 61 15
Technology 5 12 51 32
Accounting standard 2 27 39 32
Exchange as facilitator 32 46 22
Transperancy 5 24 41 29
5 2 22 44 27Transaction cost
2 5 20 41 29Financial intermediaries
2 2 32 41 22Risk management
7 17 49 27Market penetration
5 27 41 27Clearing services
24 51 24Banking services
0% 20% 40% 60% 80% 100%
Refer Table 45 of Indian Equity Investors Survey 2010
Survey Report2010
INDIAN EQUITY
INVESTORSSURVEY Introduction
2010
INDIAN EQUITY
INVESTORSSURVEY
About MCX Stock Exchange
MCX Stock Exchange (MCX-SX), India’s new stock exchange, commenced operations in
the Currency Derivatives Segment on October 7, 2008 under the regulatory framework
of Securities & Exchange Board of India (SEBI) and Reserve Bank of India (RBI).
A new generation stock exchange, MCX-SX offers a world-class electronic platform for
trading in currency futures contracts and is currently the market leader in this segment.
Clearing and settlement is conducted through the MCX-SX Clearing Corporation Ltd.
(MCX-SX CCL).
Since inception, MCX-SX has been spearheading financial literacy and financial
inclusion in India, as is envisaged by the Govt of India. The Exchange has been the first
in India to unveil various revolutionary practices for currency price dissemination and in
spreading financial literacy in India. MCX-SX, till now, has conducted more than 400
investor education programmes across the country, averaging at least one per working
day, and has roped in a wide array of partners like the media, educational institutions,
trade bodies and international organisations to jointly promote financial literacy and
introduce global best practices in India.
True to its philosophy of ‘Systematic Development of Markets through ‘Information,
Innovation, Education and Research’, MCX-SX endeavours to ensure continuous
innovation and to introduce various new products under the extant regulatory
framework. The Exchange is poised to commence Equity segment and Equity Futures &
Options segment on receiving regulatory approvals. Besides, it is also committed to
expand its product offerings to include other asset classes such as Debt, Interest Rate
Futures, Index Funds and Exchange Traded Funds and SME segment securities, on
receiving regulatory approvals.
www.m x-sx.comc23
15. Corporate Investors: Drivers to Increase Investments in Equity Market
Notes
Refer Table 46 of Indian Equity Investors Survey 2010
0 50 7525
Improve the aspect of regulatory regime 59
Improve the trading and settlement operations 51
Develop high market volume and liquidity 49
Promote competition in exchange sector that leads to better service 44
41Improve disclosure standard 41
Emphasise on the diversity of the firms listed 39
Greater use of technology 39
Better capitalised members 29
Permission for OTC products 7
15More innovative products
Survey Report2010
INDIAN EQUITY
INVESTORSSURVEY
Project Leader: Dr. Ranjan R Chakravarty, Head, Research & Product Development, MCX Stock Exchange
Project Team:Project Coordinator: Arbind Kumar, FRM, Research & Product Development, MCX Stock ExchangeProject Associate: Sooraj Rao, Research & Product Development, MCX Stock Exchange
Research Team:Research Coordinator: DG Praveen, Research & Product Development, MCX Stock ExchangeResearch Associates: Kaveri Deshmukh and Chaitanya Wangikar, Research & Product Development, MCX Stock Exchange
Communications Team: Amrita Nanavaty, Rini Mukherjee and Mohmad Shaikh, Communications, MCX Stock Exchange
Survey Team:The Nielsen Company
Acknowledgements:We are grateful for the support of Mr. Joseph Massey, Managing Director & CEO, MCX Stock Exchange, for the entirety of this project. We also gratefully acknowledge the contribution of Dr. Bandi Ram Prasad, President, FT Knowledge Management Company, Mr. U. Venkataraman, Executive Director, MCX Stock Exchange, Mr. Sanjit Prasad, Director, Business Development, MCX Stock Exchange, Mr. G. Sankaranarayanan, Sr. Vice President, Marketing and Business Development, MCX Stock Exchange, Mr. Saji Cherian, Head, Corporate Services and Market Development, MCX Stock Exchange, Ms. Latika Kundu, Head – Market Operations, MCX Stock Exchange, Mr. Setu Shah, Sr. Vice President, Communications, MCX Stock Exchange, and Ms. Jyoti Rai, former Vice President, Marketing and Business Development, MCX Stock Exchange. We thank each one of them for their suggestions and support, which have been critical for this project.
Indian Equity Investors Survey 2010
www.m x-sx.comc 24
Board Of Directors & Advisory Board
! Mr. Ashok Jha, IAS (Retd.) Chairman, Former Finance Secretary
! Mr. Jignesh Shah, Vice Chairman, Chairman & CEO, Financial Technologies (India) Ltd.
! Mr. Joseph Massey - MD & CEO
! Mr. V Hariharan - Director
! Dr. Nitish Sengupta, IAS, (Retd.) - Director, Former Revenue Secretary and Member Secretary, Planning Commission
! Mr. Atul Rai - Director, CEO & Managing Director, IFCI Limited
! Mr. Vepa Kamesam - Director, MD, Institute of Insurance & Risk Management, Hyderabad and Former Dy. Governor, RBI
! Mr. S S Thakur - Public Interest Director, Former Chairman, Central Depository Services (India) Ltd. and Founder Chairman, HDFC Bank Ltd
! Mr. C M Maniar - Public Interest Director, Senior Partner, Crawford Bayley & Co
! Mr. B D Sumitra - Director, Former Managing Director, CCIL and Former Deputy Managing Director, SBI
! Mr. C VR Rajendran - Director, General Manager - Corporation Bank
! Mr. V K Khanna - Director, General Manager - Union Bank of India
! Mr. P K Chhokra - Director, General Manager - Punjab National Bank
! Mr. A A Badshah - Director, General Manager – Bank of India
! Mr. U Venkataraman - Executive Director
! Mr. G N Bajpai, Chairman of Advisory Board, Former Chairman, SEBI & LIC
! Mr. Venkat Chary, IAS (Retd.), Former Chairman, Forwards Markets Commission (FMC), Former Secretary to the Chief Minister of Maharashtra
! Mr. A V Rajwade, Risk Management Consultant- Forex, IRD, Derivatives; Formerly with SBI
! Mr. Ganesh Rao, CEO, IBS Forex LtdFormer Chief Trader, FX, Bank of America
! Dr. L. C. Gupta, Director, SCMRD Former Member, SEBI
! Mr. Jamal Mecklai, CEO, Mecklai Financial
! Mr. Naresh Deshpande Former Principal Legal Advisor, RBI
! Mr. Paul Joseph, IES (Retd.), Principal Advisor, Former Principal Advisor, Planning Commission
2010
INDIAN EQUITY
INVESTORSSURVEY
BOARD OF DIRECTORS
ADVISORY BOARD
INDIAN EQUITY INVESTORS SURVEY 2010
Information Innovation Education Research
- Dr. Ranjan R. Chakravarty Head, Research & Product Development, MCX Stock Exchange
Highlights:
Huge potential for market penetration, development and financial inclusion
Financial education for better awareness and Competition for greater benefits
Mobile phones are the preferred channel for equity investing
Concise Report
- Survey conducted by The Nielsen Company
MCX Stock Exchange Ltd.Exchange Square, Suren Road, Andheri (East), Mumbai 400 093, India. Tel: +91-22-6731 9000, Fax: +91-22-6731 9004.
Email: info@mcx-sx.com Website: www.mcx-sx.com MCX
-SX/
Oct
ober
201
0IE
IS-C
R/In alphabetical order
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