Small investor, big risk appetite

WHILE the equity indices went on a roller-coaster ride over the past ten years, first inflated and then punctured by scams, retail investors who were badly hurt when the equity prices crashed, have emerged a chastened and more informed lot.

Market analysts feel that the Indian retail investors have learnt valuable lessons. "In the last six months my respect for the retail investors has increased substantially. One reason why they did not participate in this rally is that with every 100-point rise they kept cashing in and taking profits home," says Darshan Mehta, CEO of Mumbai-based securities company Moneypore.

"In the good old days, people got married to their stocks, saying if Satyam doesn't reach Rs 10,000 I won't sell. But this time they are enormously cautious, no longer invest on hearsay and do their homework by watching TV channels, reading up on their stocks and getting inputs from their brokers too. And they are putting a limit to their greed," he says.

Arun Kejriwal of Kris Securities agrees. "Investors today are very well informed and take better and calculated decisions, and the Internet helps by making research material available to them." But he feels that though the number of informed investors is rising, "impulse buying in the market as a habit will never change. People will still buy because the neighbour bought or they heard about a stock on the train or bus or at a party. This could explain why penny stocks move with huge volumes."

Another striking feature is their proliferation in the smallest of towns. Mr Mehta says that the watershed event in the last decade was the NSE introducing in the mid-1990s screen-based trading "ending the concept of the closed club that the BSE was." Mr Kejriwal points out that in a regime of falling interest rates, equity appears attractive. "There is an appetite for risk-taking among the new breed of investors, who have knowledge about the kind of returns equity can give and they use either professionals' service or take the mutual fund route."

But one thing is certain, says Mr Kejriwal. No longer is there a casual approach towards investment. "The most important change over the years is the feeling that `it is my money and I have to look after it'."

Mr Kejriwal recalls that in a recent TV programme an investor sought his advice on the shares of SAB TV. "He had bought at Rs 1,200 and was still holding at Rs 60. Apparently, he believed in no stop-losses of any sort. He asked me what to do and I had to tell him that having lost Rs 1,140 already, he might as well hold on as he did not have much more to lose."

With live market rates entering the home through TV channels, housewives' appetite for equity has increased tremendously. Women across regions are finding the market more exciting than either kitty parties or afternoon TV soaps.

Adds Mr Mehta, "You will be amazed at the number of housewives who trade in the market. Last week, I was at an annual Marwari fun-fare and after I had a dosa at one of the stalls, the lady refused to take money saying `we watch you on CNBC'!"

Asked if she was an investor he says: "She does not invest; she speculates. She buys and sells shares. As the stock market depends on risk-takers for liquidity, I don't use `speculate' in a negative way. These are astute and savvy women who are willing to take a risk with their money."

Mr Kejriwal finds from participation in investor meets that women investors are certainly on the rise. "I believe this is the target audience people should be looking at. The savvy women investors have arrived and their numbers are growing. She was not there five years ago. But my only worry is that equity should not become kitty party talk" But, he adds, even though the profile of the retail investor has changed into a better-informed, more cautious and knowledgeable person aware of the fundamentals of investment, the greed and fear factor will always remain the same. "Now, when most stocks have made new all-time highs, most have given investors an exit at a profit irrespective of the purchase price. But how many will exit is the moot question."

Of course, he adds, the 10 stocks patronised by Mr Ketan Parekh in 2000 are languishing. "There is a lesson to be learnt from the fact that people had came to the market in droves and were so fascinated by these stocks and their pattern of trading that they got badly trapped.

On the other hand, long-term investors have got trapped in shares of some MNCs such as Colgate or HLL. "The long-term investors failed to exit from companies that were unable to grow. The market is dynamic, it will always continue to change. Unless one changes with the changing marketplace, an investor will be left behind completely," is his advice.