NEW DELHI: Pitching for new products to attract more investors to stock markets, leading exchange NSE has said there is a need for tailor-made instruments for different kinds of people and 'one vanila' cannot serve all.
Bullish on different kinds of ETFs (Exchange Traded Funds), as also on products like REITs (Real Estate Investment Trusts), National Stock Exchange's MD and CEO Chitra Ramkrishna said that the country has a huge pool of untapped savings and the market needs right investment vehicles to tap the same.
NSE, which Ramkrishna said itself is on its path to get listed, is one of the two major stock exchanges in the country and was incorporated in 1992 -- the other being over 140-year-old BSE.
Besides trading in shares of listed firms, two exchanges offer a host of other products including various derivatives. However, just about 3 per cent of population is estimated to be present in equity markets and a need is being felt including by the regulators, policymakers and market players, for newer product classes.
"Efforts have been always made for how to take the equity markets to retail savers. We have always believed that passive investment vehicles like ETFs are the right way to do it," Ramkrishna told PTI in an interview here.
Terming the government decision to allow EPFO (Employees Provident Fund Organisation) money in the stock market as a 'game-changer initiative' in this regard, she said, "You will find that over the medium-term, the people's awareness of putting some portion of savings in equities will increase.
"Then you will see the positive side effect of the people putting in parts of savings into mutual funds and ETFs. Then over a curve, you will see people putting money in IPOs and then coming to the secondary markets."
She also pitched for a greater push towards the habit of SIPs (Systematic Investment Plans) in broad-based products like ETFs and mutual funds.
"If we parallely proceed on these two tracks, definitely our coverage will improve," said Ramkrishna who has been with NSE since its inception.
Ramkrishna further said, "Savings is never a constraint in this country. With the right product vehicles, we will be able to tap that."
Terming REITs as promising products, she said there is need to experiment with different kinds of structures to tap the savings pool.
"One vanilla will never be able to serve the purpose. So what we are going to see in the next few years is different product structures -- one which will catch institutional interest, one which will catch retail interest, so you tailor the product right and you will get the money from the market from the different parties."
Ramkrishna further said that NSE's experience with ETFs has been very satisfactory and even when markets were not doing very well, it has been seeing accretive investor accounts being opened for ETFs.
"The beauty of ETFs is that when there is commodity upturn, people will invest in products linked to gold, and then they can go to equities or a bit of both."
Stating that "more and more ETFs will continue to come", the NSE chief said the exchange has also introduced ETFs based on government securities.
"SIP, ETFs and broad-based is really the way we can penetrate. Now some of the large intermediaries are doing aggressive account openings on ETFs and mobile trading is picking up too. There are multiple channels through which we are going to reach more and more of the population."
Asked whether the stock markets can take a cue from the boom in online retail market and tap mobile platforms more to attract investors, she said that right kind of technology is definitely available in India.
"There are a lot of mobile front-ends which have been developed and a lot of brokers have deployed that. It is very much easy on front-end and complex at back-end kind of thing," she said, but added that the technology can only be an enabler and it cannot be a reason for people to come to the market.
"Somebody comes to the equity market, then you can use technology as an enabler to keep him engaged in the market, to keep the costs low, to keep it efficient, to keep it transparent, all of that you can do," she added.
At the same time, she said, technology is being used to expand penetration and improve connectivity, while the adoption of mobile trading platforms has also gone up sharply.