The Hindu Business Line : Will the real Indian investor stand up?

SOUTH Indians, normally considered to be risk averse when it comes to investing, have thrown a surprise by piping the people of Western region to emerge as the largest investing group in capital market related investments.

But the people of Gujarat, as a State, have retained their numero uno position in investing directly in shares and the bond market, followed by the people of Andhra Pradesh.

A SEBI study, conducted in association with National Council of Applied Economic Research (NCAER), has thrown up these and several other interesting facts on people's investment preferences.

The Survey of Indian Investors is SEBI's second effort after the one in 1998-99, since when the investment climate and rules of the game have changed considerably.

With the objectives of sketch the investor profile and investment preferences and to estimate State-wise distribution of investor households and investors, the survey was conducted from a stratified sample of 2,88,081 households from across the country. The reference period for the survey was from April 1,1999 to March 31, 2001.

The sample was classified on demographic and non-demographic parameters of income, education, occupation, and so on.

The survey estimated that 7.4 per cent Indian households totalling 21 million individual investors had invested in equity or debentures or both in 2000-01. There were 19 million mutual fund unit holders in 2000-01 against 23 million as per the 1998-99 survey.

A greater percentage of urban households invested in equity and debt. There had been a definite migration of investors from equity to bond market between the two surveys. Rural households appear to have preferred bonds to equity.

The southern region accounted for 45 per cent of the total investor households followed by the western region (33 per cent) and northern region and eastern region (11 per cent each). Gujarat had the highest number of equity investor households accounting for 25 per cent of all equity investors.

Gujarat and Andhra Pradesh lead in bond investment activity.

The bond owning households in Gujarat were 26 per cent of all households in the State followed by Andhra Pradesh at 18 per cent and Chandigarh at about 14 per cent.

In Himachal Pradesh, Madhya Pradesh, Uttar Pradesh and Bihar, bond owning households were 2 per cent or less. The number of debenture owning households and debenture holders far exceeded equity investing households and equity investors.

Of the total 13.1million investor households, 9.6 million owned bonds or debentures whereas only 6.5 million investor households owned equity shares. The urban-rural division of the equity households was 70 per cent and 30 per cent and 55 per cent of the sample urban households and 45 per cent of the rural households owned debentures or bonds.

The number of investor households owning equity shares declined to 6.6 million in 2000-01 from 12.1 million in 1998-99 while the number of households owning debentures shot up to 9.6 million in 2000-2001 from 3.7 million households in 1998-1999.

The percentage of households investing in equity or debentures was more in the urban areas. This divergence was pronounced in equities compared to debentures.

Of the 51 million urban households 7.8 million households (15.29 per cent), representing more than 12 million urban individual investors, owned equity shares or debentures or both.

Whereas, of the 125 million rural households, only 5.3 million households (4.24 per cent), representing more than 8 million individual investors, owned equity or bonds or both.

The number of non-investor households increased from about 156 million in 1998-99 to nearly 164 million in 2001-02 constituting nearly 92.6 per cent of all households. This percentage was 92 in 1998-99. Several of the other interesting facts include:

Investor population and town size are directly proportional. Cities with more than 50 lakh population accounted for a lion's share of investor households and the next highest segment was in the towns with population between 10 and 50 lakh.

Towns with population less than 20,000 accounted for only 5 per cent of the total investors.

Professional investors formed 20.7 per cent of all professional households in the country followed by salary earner investor households at 14.1 per cent and business class investor households (12.4 per cent).

The cultivators were at the bottom constituting nearly 4.4 per cent of all cultivator households.

The level of education had a direct bearing on the investment pattern. The higher the education, the higher the level of understanding of investment complexities. As such graduates and others were found in large number to have invested in equities and debentures.

The investor households in this category form more than 17 per cent of all graduate households and 5 per cent of investors were found to have higher- secondary education. Less than 1 per cent of the investors had no formal education. The one exception to this trend, though, seems to be Kerala, which despite having the highest literacy level, figures among the States having the lowest share of total investor households.

Analysis of data shows that 71 per cent of non-investor rural households fall in the low-income group compared to 40 per cent of total non-investor urban households. Non-investing households in the total households were 92.6 per cent of which 73 per cent were in the rural areas. Around 30 per cent of non-investor households had no education or had primary education and another 45 per cent possessed higher-secondary education.

Mutual fund unit owning households formed 13.7 per cent of all urban households. The respective percentage was 3.8 per cent for rural households. Of the total mutual fund investor households, 60 per cent were urban households and 40 per cent rural.

The mutual funds investor households by and large were from middle- and high-income groups. Mutual funds units owning households in the low- income group with income up to Rs 2500 constituted only 4 per cent of total mutual funds investor households.

Gujarat had the largest number of equity investor households. Of all the equity investor households in the country, 25 per cent was in Gujarat.

On the other hand Uttar Pradesh, Kerala, Bihar, Orissa and Rajasthan had a very low share (less than 2 per cent) in total investor households.

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