The Securities and Exchange Board of India published one of the most comprehensive investor surveys last week. They interviewed 90,000 households across India. That is a significant number of people, assuming at least 3-4 people per household. The idea of the survey was to demonstrate that India is moving from a nation of savers to one of investors. About 63% households are aware of at least one securities market product, but only 9.5% participate. That means awareness is no longer an issue. It is the ability to have that confidence in securities investing. People are in a learning stage and need to build that confidence.
The lack of confidence stems from the predominant risk aversion among Indian savers. In the survey, most people described themselves as that.
A primary reason is the perception that securities market products are complex. Most respondents have serious concerns about risk and return, and over half have trust and transparency issues.
The beeline people make for housing projects in key urban areas shows that real estate remains an ultimate goal of savings and investments. The appetite for gold in Indian households remains relentless. Morgan Stanley, a global bank, estimated that Indians hold over 34,000 tons of gold. At current prices, it is worth more than the country's GDP.
The surge in gold prices roughly matches the Sensex's returns over the past 20 years. The base return is the one guaranteed by the public provident fund, and the highest return on the household wealth is the return on gold. The comparison between Sensex and gold returns is unfair. Securities, such as equity shares and bonds, are issued for trading at regular intervals. Gold is bought for religious reasons, and most of it is held in the form of jewellery. Unless you are pushed against the wall, you do not sell gold like a paper-based security. There is an increase in the amount of money flowing into gold exchange-traded funds. That appreciation for tradeable gold was only after gold prices were already high and rising.
Gold is not as liquid an investment as shares or mutual funds. Empirical records show that equity returns benefit from the power of compounding. Businesses continue to create profits by selling goods and services to an ever-growing, high-consuming population in rural and urban India. Some businesses feed into the global demand and focus on exports. Businesses can innovate, focus on improving efficiency, and expand profits regularly. Stock market prices are linked to businesses' profit growth.
The investment survey indicates that a significant number of people intend to enter the capital market in the next 12 months. Half of that cohort is in rural India, the Sebi survey finds. Gen Z and Millennials dominate the intender base, and the new wave of potential investors is digitally savvy and aspirational. access. They rely on social media financial influencers.
The survey warns everyone that it's a double-edged sword. “While digital platforms have democratized access to financial concepts, they also increase the need for digital literacy and vigilance against misinformation,” the survey said. SEBI's own Investor Education Programs (IEPs) have a high satisfaction rate (91%), but their reach is currently under 1% nationally, suggesting a need to meet investors where they already are: on YouTube and Instagram.
Your lack of confidence in securities markets can be tackled only with knowledge. This column has consistently highlighted the importance of regularly learning about financial concepts. It does not have to be reading up only. You may want to listen to a podcast, watch videos or Instagram reels. The only thing that matters is that you are consuming the right information from a credible source. Even better is to engage with a professional financial advisor who can help you make an appropriate asset allocation based on your financial goals and income.