Renowned equity portfolio manager PorinjuVelath’s statement that majority of investors are monkeys and the general perception that the electorate are donkeys point to one fact-businesses and politicians thrive on a relative superiority they enjoy over the vast majority.
It is true that in the past during several scams the retail investors and even brokers heavily lost money and were taken for a ride. In some cases, they got peanuts while scamsters and big players exited with a big booty.
Investors have become cleverer now and they are increasingly entering the secondary market through Systematic Investment Plans (SIP) or through open ended mutual fund schemes. It is no longer in the interests of retail investors to do intra-day or daily trading with the hope of making quick moolah as the market has been cornered by algotrading where large institutional players are at an advantage.
According to PorinjuVelath, the market is constituted by 10% bulls, 10% bears and the rest are monkeys. However, a more realistic assessment would be to see stock market investing as a game where the players are unequal some with more knowledge and experience while the majority with lesser knowledge.
In politics, it is often said that the larger electorate are donkeys who are prone to believe the tall promises made at the time of elections by political parties and they are mostly not fulfilled. In some states, populist measures are taken to appease the electorate.
Consumer is King
It is often said consumer is the king. He has the power to decide what to buy and reject the ones that don’t conform to standards. With globalisation, consumers in emerging markets have more choice and most often it is disruptive market forces in the form of new technologies or systems that enable consumers to get better products as years go by.
Moreover, consumer laws are getting stronger and aggrieved consumers have remedial options if products they buy turnout to be substandard. New advertising codes also make it difficult for firms to make unfair comparisons or tall claims.
With each scam, Indian equity markets have seen more regulations being introduced by Securities and Exchange Board of India (SEBI) which also oversees the commodity futures markets and mutual funds industry. For the insurance industry, we have the Insurance Regulatory Authority of India (IRDA).
In any market, proper regulation coupled with investor awareness are important so that funds are channelized to the industries that most need them and there is enough liquidity enabled by increase in the number of investors who trade. The fact that only 3-4% of the population are involved in stock trading shows the lack of participation from the retail investors who constitute the largest number in in India.
With large number of IPOs quoted at a premium and still getting subscribed in a bull market, it is doubtful whether the offerings are properly assessed before people put in their hard-earned money especially and small and medium businesses which now have a platform in National Stock Exchange(NSE) Emerge.
Ultimately, we get a stronger economy, nation when every citizen, consumer and investor makes informed decisions and there is a regulatory mechanism in place to protect their interests.