Poor retail participation

The Indian government has accelerated the disinvestment process after the formation of the new UPA government. There has been a lot of opposition from the left parties earlier and consensus could not be made on most of the disinvestment decisions in the earlier government. The government also failed to educate the employees (PSUs) or the general public in going for disinvestment and the fine difference between privatization and disinvestment. It was a good start with the NTPC Folllow on Public Offer, though it received a poor response from the market participants.

There were reports in the newspapers saying that the retail participation is poor and the investor did not show any interest in investing in the FPOs like NTPC and REC. It is to be understood that the retail participation itself is not significant in the Indian stock market. Going by figures, for the last 3-4 good issues, which saw a major retail participation like, Man Infra , ARSS Infra, and Infinite computer solutions, it can be shown that there are not more than 1.5 lakh investors in the retail segment of IPO. Further most of the applicants are not the true beneficiaries as it was found by the Wadhwa committee in the IPOs like Suzlon energy, Yes bank, and NTPC. Hence true retail investor participation in the Indian primary market is not significant.

This is a major concern because a true investor invests in the market whereas a trader does the gambling. Further, the hammering of stocks like REC and NMDC before their FPO is a major concern. The need of the hour is that government should probe the matter of fraudulent applications in the retail segment of IPOs and FPOs and try to instill confidence in the true investor.