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Retail Investment in Corporate

Securities-B.V.Raghunandan, SVS College, Bantwal

National Conference on Indian Retail Industry,

Nehru Memorial College, Sullia.

September 16, 2011

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Corporate Securities: A Unique Investment

• Regular Income by way of

Annual Dividend, Interim

Dividend, Special

Dividend, Surplus Dividend

• Capital Appreciation by way

of Bonus Shares

• Capital Appreciation by way

of Increase in market value

• Benefits from Corporate

Action like share

splitting, sponsored

ADR, M&A

• Real Time knowledge of

prices

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Significance of Retail Industry

• Managerial Stability due to wide-spread customers

• Requisite to move towards a perfect market

• Contrarian opinions needed for a well functioning market

• Independent opinions will dilute the broker domination

• Availability of a huge size of funds

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Retail Industry: A Fair Weather

Concept• Fluctuations in prices due to speculative activities

• Speculation is needed in any organised market

• Lack of stability in prices make the life of the investors a hell

• Untrained Investors with short-term perspective

• Emotional decisions: frenzy of the movement

• The market sensitivity to every major event terrorises the investors

• Buffoons in the form of experts giving misjudged opinions

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Investor Education: The Most Difficult Exercise

• Converting emotional decisions into rational decisions

• Convincing them about long-term investment

• Exposure to analysis of financial information

• Wisdom not to be moved by the vested opinions

• ignore the concept of loss of profit

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Traditional Retailers• Geographic

concentration: Gujarat,

Rajastan, and West

Bengal

• Community Biased:

Parsis, Marwadis,

Chettiars, GSBs and

Brahmins

• Urban Concentration

• Broker Dominated with

broker participating in

the sale and purchase

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Change Agents• Dhirubhai Ambani of

Reliance Industries70s

• IT Companies of the 80s

• Media Companies of the 90s

• Establishment of SEBI in 1988

• Establishment of NSE in 1994

• Entry of FIIs

• Dematerialisation

• Corporate Brokerage

• Shorter Period of Allotment in Book-Building

• Shorter Settlement Cycle

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Primary market• CCI assured a stable

market

• SEBI introduced free

pricing

• Corporates found it

highly profitable

• Follow on Issues

brought in huge

premium

• Investors incurred a

huge loss

• Less Credibility

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Challenges

• Bringing back credibility to primary market

• Free pricing to be done away with in IPOs

• SEBI should develop a formula for fixing

the price or price band on the conservative

model of CCI

• More stringent implementation of SEBI

regulation on recommendations

• Risk Factors must be more clearly

highlighted

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Opportunities

• Infrastructure projects

• Commercial Agriculture

• Bio-Technology

• Pharma Research and Pharmaceuticals

• Power Sector Development

• Indigenisation of Defence Armaments

• Aircraft Manufacturing

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Strategies

• Better Investor Education

• Screening the activities of institutions in

IPOs

• Avoiding the doomsday opinions

• More slick prospectus accompanying the

application forms rather than a part of it

• Better screening of the SEBI approval for

an IPO

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Stock Exchange: Challenges

• Curbing speculative transactions

• Avoiding technical analysis

• Value investment strategies

• Prohibiting cross-holding in the companies

• Screening the activities of the promoters

• Restricting managerial remuneration in

Companies

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Opportunities

• More Inflow of FII money

• Better public finance through

disinvestment

• Gains for the Government through

recapitalisation of banks

• More Venture Capital Participation

• Larger body of retailers

• More stable operations

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THANK YOU