SEBI needs to rethink its investor friendly policies !

SEBI has just proposed to double what it defines as a retail investor …

It plans to define a person investing under 2 lakh instead of the current 1 Lakh,  a Retail investor (getting the 5% discount benefit). Read Livemint

Wonder why the sudden need to change the definition? The whole logic is that this will ensure a larger participation of the small investors in IPO markets.

The real reason is simple, our govt is quite in need of cash that it is rapidly guzzling in its misguided but vote bank loving political schemes like the Minimum food guarantee bill and its complex subsidy regime. It wants to disinvest chunks of large PSU companies to fund its excesses.

Take for example  Coal India whose size is  Rs 15000 crores  which it fears that the public wont be able to absorb … remember the IPOs of NHPC (6000 cr) , REC (1600 cr)and likes ? which saw measly public response and large allotments to LIC an d  PSU entities. Compare the size and you will get the bigger picture.

So the easier lollypop would be to push SEBI to look like a hero by making it propose such a move , simply to increase the pie of investors it defines as small investors , by allowing some low end HNIs to fit into that slab.

However  SEBI does not want to understand that it is not upping the upper limit but giving a larger allotment to small investors that will guarantee greater small investor participation as they would make better profits on listing.

Small investors are hardly rewarded for a high risk investment and get very poor allotments that range between nil and 33% of the investment, forcing them to take larger risk by applying  for a larger chunk of shares, that too  sometimes on borrowed money.

What is most needed is to change the allotment pattern so that at least half the issue is left for them or better still all small investors get full /pro-rata allotment, forcing the larger guys like fiis/diis etc to buy from the markets.

Lastly the real aam admi / retail guy doesnt know what shares are , and finds the paperwork cumbersome and system intricate, most folks don’t even own a bank account, let alone a demat and securities a/c.

If it wants to be truly investor friendly it is time SEBI focuses on getting such guys to participate in the markets.

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3 thoughts on “SEBI needs to rethink its investor friendly policies !

  1. share market is not for the aam admi and it never should be……
    it is and should be a forte of people who understand the risk they are taking and have an appetite for it.

    infact for the past 20 years the time tested warning of boom and irrationality is that your paanwala, doodhwala are both talking about their stock market investments

  2. ok
    ur right about it being for a few well informed risk takers
    hell world over , IPOS r mainly a medium for institutions…
    tell me dont the panwalas and doodhwalas have the right to take risk??
    or is he stuck with tucking his money in his trunk and under his pillow
    and frankly if a person does some basic analysis and has some fundamental understanding and greed control, he sure can beat the mkts , and panwala and doodhwala (small businessmen) know more about risk return thn u or me

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