revised version of retail investment in corporate securities b.v.raghunandan
TRANSCRIPT
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Retail Investment in Corporate
Securities-B.V.Raghunandan, SVS College, Bantwal
National Conference on Indian Retail Industry,
Nehru Memorial College, Sullia.
September 16, 2011
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Corporate Securities: A Unique Investment
• Regular Income by way of
Annual Dividend, Interim
Dividend, Special
Dividend, Surplus Dividend
• Capital Appreciation by way
of Bonus Shares
• Capital Appreciation by way
of Increase in market value
• Benefits from Corporate
Action like share
splitting, sponsored
ADR, M&A
• Real Time knowledge of
prices
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Significance of Retail Industry
• Managerial Stability due to wide-spread customers
• Requisite to move towards a perfect market
• Contrarian opinions needed for a well functioning market
• Independent opinions will dilute the broker domination
• Availability of a huge size of funds
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Retail Industry: A Fair Weather
Concept• Fluctuations in prices due to speculative activities
• Speculation is needed in any organised market
• Lack of stability in prices make the life of the investors a hell
• Untrained Investors with short-term perspective
• Emotional decisions: frenzy of the movement
• The market sensitivity to every major event terrorises the investors
• Buffoons in the form of experts giving misjudged opinions
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Investor Education: The Most Difficult Exercise
• Converting emotional decisions into rational decisions
• Convincing them about long-term investment
• Exposure to analysis of financial information
• Wisdom not to be moved by the vested opinions
• ignore the concept of loss of profit
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Traditional Retailers• Geographic
concentration: Gujarat,
Rajastan, and West
Bengal
• Community Biased:
Parsis, Marwadis,
Chettiars, GSBs and
Brahmins
• Urban Concentration
• Broker Dominated with
broker participating in
the sale and purchase
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Change Agents• Dhirubhai Ambani of
Reliance Industries70s
• IT Companies of the 80s
• Media Companies of the 90s
• Establishment of SEBI in 1988
• Establishment of NSE in 1994
• Entry of FIIs
• Dematerialisation
• Corporate Brokerage
• Shorter Period of Allotment in Book-Building
• Shorter Settlement Cycle
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Primary market• CCI assured a stable
market
• SEBI introduced free
pricing
• Corporates found it
highly profitable
• Follow on Issues
brought in huge
premium
• Investors incurred a
huge loss
• Less Credibility
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Challenges
• Bringing back credibility to primary market
• Free pricing to be done away with in IPOs
• SEBI should develop a formula for fixing
the price or price band on the conservative
model of CCI
• More stringent implementation of SEBI
regulation on recommendations
• Risk Factors must be more clearly
highlighted
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Opportunities
• Infrastructure projects
• Commercial Agriculture
• Bio-Technology
• Pharma Research and Pharmaceuticals
• Power Sector Development
• Indigenisation of Defence Armaments
• Aircraft Manufacturing
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Strategies
• Better Investor Education
• Screening the activities of institutions in
IPOs
• Avoiding the doomsday opinions
• More slick prospectus accompanying the
application forms rather than a part of it
• Better screening of the SEBI approval for
an IPO
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Stock Exchange: Challenges
• Curbing speculative transactions
• Avoiding technical analysis
• Value investment strategies
• Prohibiting cross-holding in the companies
• Screening the activities of the promoters
• Restricting managerial remuneration in
Companies
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Opportunities
• More Inflow of FII money
• Better public finance through
disinvestment
• Gains for the Government through
recapitalisation of banks
• More Venture Capital Participation
• Larger body of retailers
• More stable operations
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THANK YOU