Research Paper Abstract - Investor Protection and Investor Awareness

Abstracts - The Risk Averse Indian Investor

The objective of this Research Paper is identifying hurdles that keep potential investors away from investing in financial instruments and suggestive measures. A recent survey sponsored by SEBI in studying households saving pattern of ‘aam junta’ of the country threw some startling facts. The study estimated that out of approximately 227million households only 11% i.e.  24.5million invest in financial instruments.  This research paper aims at addressing ‘Why is this so?’ Further through this paper we make an attempt to address current issues pertaining capital markets- overexposure of Indian equity markets to ‘hot money’, the Sinister Power of Rating Agencies, the aggressive marketing of IPOs by merchant bankers etc. affecting ignorant small retail investor in India.

The Indian securities markets have undergone remarkable changes and have grown exponentially. It is regulated in a coordinated manner by Department of Economic Affairs (DEA), Ministry of Company Affairs (MCA), SEBI and RBI.

Investor protection is an effort to make sure those who invest their money in regulated financial products are not defrauded by brokers or other parties. Despite stringent disclosure norms various stock market scams- Harshad Mehta, Ketan Parekh securities, the IPO scam, the Satyam, the famous insider trading case in India of Hindustan Unilever’s (then HLL) and internationally the Rajat Gupta accused of insider trading and LIBOR scandal proves mettle of various regulatory bodies in controlling scams beyond a point.

Through primary research aimed at- Retail investors (aggrieved and non-aggrieved), Non-investors in financial markets, brokerage firms and executives of exchanges we attempt to address issues of market participants and suggest measures in enhancing protection and adequate compensation to retail investors.

-Tejas Somaiya
 (B.E-Telecom | MBA-Finance)