Wednesday, December 19, 2007

Retail investors have the power

Nesil Staney has a report on "Retail Money can steer markets soon" in Mint

He reports,
Small investors could soon call the shots in India’s equity markets say some analysts, who expect up to $32 billion (Rs1.26 trillion) of household savings to have flowed into the market in the 12 months to March 2008. This could insulate India’s markets from global shocks, much like China’s and South Korea’s.
This amount is almost double the record $17 billion purchases of Indian equities by foreign institutional investors (FIIs) this year, till mid-December.
I believe in the power of retail investors and reinforces my belief that better financial decisions of individuals can impact the economy in a big way.

The asset allocation thumb rule says that the amount of your investments in equity should be 100- your age. Now the average age of Indians is believed to be around 26. So our equity investment should be 74% while it is actually 6-7%.

Can you imagine what happens if we increase it to 20%? Rs 240,000 crore ($60 billion) will flow into the stock markets!!
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