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Last Updated: Friday, 10 February 2006, 23:19 GMT
The small investors fuelling boom

By Monica Chadha
BBC News, Mumbai

Bombay Stock Exchange on Dalal Street
Reaching for the sky in Bombay's Wall Street
With the Bombay Stock Exchange index crossing 10,000 points everything is looking up on Dalal (Broker) Street, India's Wall Street.

All forecasts point to India's economy doing well and investors are happy with the stock markets soaring to record levels.

The reasons for the benchmark Sensex (sensitive index) of the Bombay Stock Exchange leaping upwards have been consistent - a booming economy and massive flows of foreign and domestic funds.

Foreign institutional funds pumped in $10.7bn in the stock market last year and have already bought shares worth $1.4bn this year.

But one group that is rarely mentioned in its contribution to the market's strong performance is the small Indian investor.

Ordinary investors

For years ordinary Indians poured their life savings into property or bank-fixed deposits.

What the investor would possibly make in three years from bank savings, he can probably make in a year or even in months from the markets
Madhavi Vora
Managing Director, ULJK Securities
It is now becoming clear that many of them are willing to stake a part of their hard-earned money on the markets.

Indian mutual funds have already raised almost two billion dollars since the start of 2006, an indication of the kind of money domestic investors are willing to put in the markets over a long period of time.

Homemaker Anita Shenoy left her job to look after her children and not having that extra income began to pinch.

"So I took a chunk of my savings and invested in the markets," she says.

Ms Shenoy certainly does not regret it as she has already made about 20% over her initial investment.

"I was getting next to nothing on my bank savings and fixed bonds.

"Then about three to four years ago, when the markets began to move upwards, everyone was talking a lot about gains and money to be made through equities. I could see signs of growth all over and decided to take the plunge."

She intends to use all the money she makes for her daughter's marriage and son's higher education.

Big gains

Madhavi Vora is the Managing Director of stock broking firm ULJK Securities.

She told the BBC News website that at the moment, capital markets are the only investment option with fantastic returns and this is the reason for domestic investors parting freely with their money.

"Our (bank) interest rates have gone down drastically and no longer provide with sufficient returns on savings.

"People see that Indian markets are giving about 15% appreciation on their investments so what the investor would possibly make in three years from bank savings, he can probably make in a year or even in months from the markets if he is investing with the right guidance."

I thought of investing money in the markets because it is giving good returns these days
Daksesh Shah
Small investor
Another important reason for investors showing faith in the market is the belief that it is fundamentally strong and not being manipulated.

"Most of the shares are doing well across the board and in all sectors such as technology, automobiles, engineering, consumer durables and pharmaceutical companies. This means there is definite growth potential in the country."

While more investors are entering the markets, they still comprise a meagre two per cent of the Indian population.

Most of them usually prefer to put their money in government bonds, insurance schemes or some other financial plan that gives them assured returns.

Playing it safe

Ms Vora says this will change as people's attitude and approach towards the share market are changing as well.

"Investors move in a herd mentality when it comes to the stock markets. The Indian investor as such has been sitting on the sidelines and watched the index go from 2,700 levels right up to 10,000.

"Now some of them have entered the markets. Other investors will soon follow."

Despite the great returns and stock market euphoria, a number of investors are fearful of losing their hard-earned money and are prudent in their choices.

Insurance agent and small-time investor Daksesh Shah says he invested a small percentage of his money in the markets because he wanted to put his savings in different baskets.

"I usually prefer guaranteed returns but I thought of investing money in the markets because it is giving good returns these days."

He says he will not continue with it for much longer even though he is very happy with his investments and returns.

"Investing in stock markets is always risky and you are constantly worried about losing all your money. I will not continue with it because in the end, I want peace of mind."


SEE ALSO:
Indian shares hit historic high
06 Feb 06 |  Business
Strong growth for Indian economy
30 Nov 05 |  Business
Sharp rise in India's growth rate
30 Sep 05 |  Business


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