Retail investors shying away from equity markets

July 7th, 2008 - 8:32 pm ICT by IANS  

A file-photo of Sensex

Mumbai July 7 (IANS) The downslide trend of the Indian equity market for the last two months has forced retail investors in equity markets to look for alternative mode of investment. The stock market which just a few months ago was considered as a most lucrative investment proposition has suddenly turned a monster for the common investors, many of whom put their hard-earned money and suffered losses.

“I don’t see any future for middle class in equity markets. It is better to go for a traditional system of savings like buying gold, bank deposits which can fetch better and assured returns”, K. H Bhatt, a diamond dealer form Mumbai, told IANS. Bhatt says he has suffered losses to the tune of Rs.700,000 in the last two months due to the fall in markets.

Echoing the same sentiment, Vasant Kulkarni, a human resource consultant with a leading firm in Mumbai, said: “Just a few months back equity market seem to be the most viable option for investment, but within the last few weeks it has changed completely. And now it seems traditional system of savings is the best option - at least your returns are assured.”

The mayhem in equity markets has broken the back of many investors. What started as a mere correction is now being termed as a bear market.

From a record high of 21,206.77 hit on January 10 2008, Sensex has lost 7752.77 points or 36.55 percent. It has shed 6832.99 points or 33.68 percent in calendar year 2008 thus far, from its close of 20286.99 on December 31 2007.

According to a market analyst, the market has depreciated more than 40 percent in the last eight weeks and the common investors are in a kind of dejection.

Sudip Bandyopadhyay, director & CEO of Reliance Money, said: “Retail investors are looking for alternative option. In fact, in the first quarter of the current fiscal we have seen a significant growth in Fixed Maturity Plan (FMP) schemes, which indicates that people are now preferring schemes which give them assurance of fixed returns”.

“Common investors are confused. They have been putting a lot of money through Systematic Investment Plan (SIP) in equity markets and suddenly the market has changed its course,” said Asish Poddar, research analyst of Almondz Global Securties Limited.

However, many market analysts feel that inflation and crude oil prices have become informal standards for stock traders instead of the earnings rate, their consistency and sustainability, and the retail investors should not panic.

“New anchors, such as eye-balls in the dot com era and foot-falls in the retail boom are now history; the oil standard too will soon fade as long-term investors will be coming into the market,” Ashok Jainai, head of research of Khandwala Securities, told IANS.

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