Tuesday, November 07, 2006

Stress on need for more investor education in State

The average Kerala investor is hardly moved by the buoyant stock market phase though the broking community is going gaga over the recent behaviour of the stocks. One reason may be the lack of confidence of the typical investor who prefers the relatively safer mutual funds and term deposits.

As per statistics available, Kerala has only three to four million equity investors which has the potential to go up by ten to twelve times. Naturally, after the series of scams investors are apprehensive of investing in equity market. But the fact is that the stock markets have emerged stronger and stable after the scandals. There is stricter monitoring by the regulatory authorities. Buoyed by the massive investment proposed by French major BNP Paribas in Geojit, managing director of Geojit Financial Services C.J. George is upbeat about the stock markets. He is an advocate of mid term course correction so that the average Keralite investor turns from unproductive investment to the equity market with some prudent planning and long term goals. He says that an intelligent assessment of how to invest is crucial if one is to succeed in the stock market. The stress should be on financial education so that the investor community would become more aware of the inherent risks in the equity market and the potential for market capitalisation.

Geojit has started tapping the hitherto neglected segments like head-load workers. The biggest chunk of investment comes from non-resident Keralites whose priorities sometimes get skewed because of a variety of reasons. Ninety-five per cent of the NRK remittances are small ones, naturally sent to the dependents back home for monthly household expenses. After fulfilling these commitments, the rest of the remittances find their way to banks in term deposits.
The boom in the retail sector and Kerala having emerged as a consumerist society has cast a shadow on the equity markets. Despite the unhealthy trend of conspicuous consumption, the State, of late has a better investment scenario though not keeping in line with the high physical quality of life index.

As per the latest Economic Review statistics, twenty-two per cent of Kerala's gross domestic product comes from the commercial sector, a major portion of which is the retail industry. Kerala tops the nation in per capita consumption. Real estate is another boom field where the annual business has crossed Rs.1000 crore. Much of the credit given by financial institutions like banks goes to the real estate sector.

Gold and textiles retail are the major segments where the retail has got itself well entrenched. As per estimates, there is twenty-five per cent increase annually in retail gold business and Kerala accounts for fifteen per cent of the 800 tonnes of gold traded in the country. Mr. George says that liquidity is the driving force behind any investment decision. Fixed deposits are popular since the investors believe that they are safer. But with falling interest rates, a large number of investors, especially senior citizens, are forced to look for better options including the stock markets.

It is in this context that experts are talking of a need for more financial literacy in Kerala. Knowledge about potential of avenues like Portfolio Management and Mutual Funds should be imparted to the investors.

Financial education should start early and untapped segments like women investors should be properly guided to strengthen the equity markets in the State.


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