With Stocks at Record, Indian Bourse Targets Savings

As India’s benchmark index hit record after record this week, the head of the nation’s largest stock exchange had this message for savers: put your cash into equities.

“The amount of household savings that come to the markets is very small in India,” National Stock Exchange of India Ltd. Chief Executive Officer Chitra Ramkrishna said in an interview. “Most developed nations have been able to channelize their savings into productive risk capital. That is our aspiration.”

Ramkrishna’s challenge is significant. The number of individual investors holding Indian equities fell 50 percent to 10 million in the six years through 2014, according to a stock brokers’ association. Investment from individuals in India is falling as foreigners step up purchases. Overseas funds bought a net $16 billion of local shares in 2014, double the inflow into mutual funds from domestic investors.

Tapping individual savings is a centerpiece of Prime Minister Narendra Modi’s plan to boost wealth in a nation, where the World Bank estimates 65 percent of adults don’t have access to a bank account. The CNX Nifty and the S&P BSE Sensex climbed to records today on optimism the 64-year-old premier will step up efforts to boost growth as falling oil prices ease inflation and allow the central bank to cut borrowing costs.

The NSE plans to use its network of brokers and clients to sell an exchange-traded fund that tracks state-run companies to lure household savings to equities, Ramkrishna said. The bourse runs as many as 800 investor-awareness campaigns a year, she said.

Big Focus

Equity mutual funds in India took in a net 490 billion rupees ($8 billion) in 2014, compared with an outflow of 87 billion rupees the previous year, according to data provided by the Association of Mutual Funds of India.

“Bringing direct retail participation or indirect retiral money is our big focus in broad basing and deepening the markets,” Ramkrishna, 51, said.

Her comments also echo those of Finance Minister Arun Jaitley, who urged the Securities and Exchange Board of India, the regulator, in August to take immediate measures to boost retail interest in stocks.

The ETF offered on the NSE is run by a local unit of Goldman Sachs Group Inc. and plans to raise 50 billion rupees from investors, mostly retail, in March this year.

“Over the last three to four years, we’ve made several efforts, even when the markets were not exactly vibrant, to introduce mass products like ETFs,” Ramkrishna said.

Purchases by foreign funds last year were the second highest among eight Asian markets tracked by Bloomberg.

India is an attractive investment destination for foreigners and “the more we get the better it is,” she said. “We must find more proxies for Indian assets, which can be traded and invested by international investors.”

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