Indian retail investors lost $15-bn opportunity: Fund manager

October 28th, 2010 - 1:39 pm ICT by IANS  

Sensex By Gyanendra Kumar Keshri
Panjim, Oct 28 (IANS) Retail investors could have gained over $15 billion by investing just 5 percent of their savings in Indian capital markets in the past 30 months — an opportunity that was tapped better by foreign funds, says a top fund manager.

“Conviction in our own economy is lacking. That is preventing people from investing in the capital markets market,” said Sunil Singhania, head of equity investments with Anil Ambani Group’s Reliance Capital Asset Management.

“Foreign institutional investors are bullish on the market and have gained nearly $6 billion from the recent rally. But retail investors failed to derive benefits from the rally because of their conservative investment approach,” Singhania told IANS here.

“Retail investors lost an opportunity to earn $15 billion. Had they invested 10 percent of their savings in equity market they would have earned $30 billion,” added Singhania, who has handled one of the largest corpus of funds in India worth $3.5 billion.

Savings rate in India at over 25 percent is one of the highest in the world and amounted to nearly $700 million in the last 30 months. Over 90 percent household savings is lying in bank deposits and only 3 percent is invested in the capital market.

“Indians have been very aggressive savers but conservative investors. Majority of money is lying in bank deposits. If you take into account inflation, return on this money is negligible,” Singhania said.

But Reliance Capital Asset Management, which manages over $32 billion assets, remain bullish on the market.

“There are opportunities in all sectors,” he said, adding the company was specifically looking at infrastructure with special interests.

Group chairman Anil Ambani said earlier this month that Reliance Capital will offer specialised financial services for infrastructure projects with a target of Rs.50,000 crore ($11.1 billion) as asset base and 18-20 percent return.

“Over the next few years, India is projected to spend over $1 trillion or Rs.50 lakh crore in infrastructure creation. As a group, we will continue to play a special role in this huge nation-building endeavour,” Ambani told investors recently.

“Reliance Capital will leverage this unmatched domain expertise of our group to offer customized financing solutions to vendors, suppliers and contractors, with targeted returns on equity of 18-20 percent,” Ambani said.

According to Singhania, the flow of foreign funds in the Indian equity market was likely to continue in the coming months as economic fundamentals remain strong.

“There will be some short-term volatility. But in the longer run FIIs will continue to invest in Indian market because it offers very attractive returns.”

Foreign institutional investors have invested nearly $25 billion in the Indian equities market this year, leading the 15-percent-plus rally in the country’s benchmark index Sensex. These funds have cumulatively pumped over $350 billion in the Indian market.

“Indian economy is likely to quadruple in the next 10-12 years. Fundamentals are strong. There is no reason why foreign funds should pull money out of Indian markets,” Singhania said, adding the Indian markets have the potential for 20-25 percebt returns

(Gyanendra Kumar Keshri can be contacted at gyanendra.k@ians.in and biz@ians.in)

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