MBA 2 ( C )
ET Weekly News
24th Oct.- 30th Oct.
Retail investors lost $15 bn
opportunity: Reliance Capital
Retail investors could have gained over $15
billion by investing just 5 percent of their savings
in Indian capital markets in the past 30 months --
an opportunity that was tapped better by foreign
funds, says a top fund manager.
Savings rate in India at over 25 percent is one of
the highest in the world and amounted to nearly
$700 million in the last 30 months. Over 90
percent household savings is lying in bank
deposits and only 3 percent is invested in the
Group chairman Anil Ambani said earlier this
month that Reliance Capital will offer specialised
financial services for infrastructure projects with a
target of Rs.50,000 crore ($11.1 billion) as asset
base and 18-20 percent return.
Foreign institutional investors have invested
nearly $25 billion in the Indian equities market
this year, leading the 15-percent-plus rally in the
country's benchmark index Sensex. These funds
have cumulatively pumped over $350 billion in
the Indian market.
200 top American CEOs coming
With trade high on his agenda, some 200 odd top
US business chiefs, including soft drink giant
Pepsico's India-born CEO Indra Nooyi , are
expected to join US President Barack Obama on
his India visit next month.
Also expected are Honeywell CEO David M Cote,
who co-chairs the India-US CEO Forum with Tata
group chairman Ratan Tata .
Terry McGraw, CEO of leading publishing house
McGraw Hill, who took over from Nooyi as the
chairman of the US Indian Business Council
Two more of 12 US forum members, Louis
Chênevert, CEO of aerospace major United
Technologies Corp, and Ellen Kullman, chief
executive of chemicals giant DuPont , may also
But there is no word yet whether Citigroup's
Indian-American CEO Vikram Pandit is going.
Retail investors to be allowed Rs 2
lakh in IPO
Retail investors will get to double their bets on
initial public offerings as the market regulator is
set to raise the limit to Rs 2 lakh, the first revision
in five years, as it attempts to keep pace with the
eroding value of the rupee.
The proposal, likely to be approved by the board
of the Securities & Exchange Board of India on
Monday, will cut the numerous applications
investors sometimes make in the name of
relatives to get more shares.
Some say the hike will enrich the wealthy more
than the middle class if it is done without an
increase in the overall allocation for the retail
segment, which is capped at 35%.
Unlike most developed markets where investment
bankers have the discretion to allot shares to their
favoured clients in an IPO, the Indian regulator
has mandated specified portions that go to funds,
wealthy individuals and retail investors.
But with the upswing in sentiment, retail investors
have demanded more of the IPO slice. The rate
of inflation has more than doubled to 12% in the
past five years.
In case of public issues done on a book-building
basis, the rules now in place mandate that 35% of
the offering should be allotted to retail investors,
15% to non-institutional investors and the
remaining 50% to institutions.