Will retail investors band together to have their voice heard on vital issues?

KS Badri Narayanan Chennai | Updated on August 19, 2019

DIIs should emulate the strategy of FPIs

A pull-out of just ₹10,000-crore by foreign portfolio investors from Indian markets forced Finance Minister Nirmala Sitharaman, Finance Secretary Rajeev Kumar and DEA Secretary Atanu Chakraborty to meet them and address their concerns.

As the selling by FPIs triggered a sharp fall in the indices, policy-makers were forced to meet them and give them a hearing.

Foreign investors who met the officials include Morgan Stanley, Nomura, Templeton, Fidelity, GIC (Singapore), and CPDQ to express their concerns over various issues such as the crucial surcharge on FPIs, who are operating as trusts or association of persons without being registered as companies, it was reported.

We will come to know of what transpired at the meeting and the outcome in the coming days.

But the fact that FPIs were able to draw the attention of policy-makers is something that domestic institutions/mutual funds and small retail investors should think of emulating.

Is there a way in which small investors can make their voices be heard, on vital issues?

More in numbers, but...

As long as they are heterogeneous, it is very difficult for individual small investors to make their grievances heard, but as a collective force they can make a lot of difference.

According to SEBI, currently there are 24 recognised associations of investors.

They should first form an umbrella body as the one available for NSE brokers (ANMI) and BSE brokers (BSE Brokers Forum) and widen their base among retail investors.

The umbrella body should meet at regular intervals, say, at least every six months, to discuss common problems that affect their trading or investment agenda and present its case cohesively to SEBI, BSE, NSE, IRDAI, the Ministry of Corporate Affairs and even the Finance Ministry.

If need be, they can also act as a pressure group like FPIs.

On all important issues, the forum could even give feedback to institutions.

Institutions such as the Life Insurance Corporation of India and the Employees’ Provident Fund Organisation should also take a leaf out of the manner in which FPIs got policy-makers to listen to their views. According to a recent study by Prime Database, FPIs own 19.8 per cent of Indian stocks as against 13.8 per cent by the DIIs.

After all, when FPIs are in sell mode, it is the DIIs who take a contra position and help the markets stay afloat.

However, most of the time, domestic institutions, especially mutual funds, remain defensive and mute spectators, even though some of the policy decisions affect their business or result in hardships. Will they rise to the occasion?

Published on August 19, 2019

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