Why stock Market penitration is less in India?
Stock Market penitration in India is very less compared to other developed country. In india gold investment is the still biggest investment tool. The investment in gold is a dead investment, its freezed and is not useful for any purpose.
Stock markets are not yet able to pool the public money. The reason for less people participating in stock markets could be:
- People think its a lottery, stock markets are considered highly risky investments.
- Investment requires a certain amount of analysing qualification and people are not yet financial literates.
- Scams - Indian stock markets have seen some of the biggest scams in world.
- Regulations- Though SEBI regulates the stock markets, but yet many paper companies have sunk the money of investors.
- Taxation- Cost of transacting in shares is still very costly in India. Tax rates are very high (30% incase of short term capital gains)
- Brokerage- Brokerage rates in India are very high compated to developed countries.
Stock markets are yet to see full penetration and involvement of public. Currently only less than 2% of total public trades or participate in stock markets, which is very less compared to developed countries (In some developed countries penetration is more than 30%).
Rural participation is negligible, and urban population is also not much comfortable in stock markets.
Statistical Data of Stock Market penitration and How many people invest in Stock Markets in India
How many people have Demat Accounts in India - The numbers are not available but in india around 2.5 Crore demat accounts are active. The numbers are segregated among people having multiple demat accounts.
FII have more money invested in Indian stock markets than the Mutual Funds.
Which are the Major Stock Exchanges in India - Two Bombay Stock Exchange and National Stock exchange are the major Stock Exchanges in India.
For a detailed statistical report on Indian Stock Markets published by SEbi in 2010 refer here.
I have written a post about how to open a demat account and trade in stock markets
Really the penetration in stock markets in India is negligible and much of the public either not aware of the benefits they can get or they have wrong information aobut the stock markets.
Stock Markets are not lottery counters, trades with a systematic and professional approach can make anyone rich.
Rakesh Jhunjhunwala is the best example of professionalism and patience among Indian Investors.
Rakesh Jhunjhanwala started with Rs. 5000 and today his networth is far more than Rs.5000 Crore.
He have built his wealth by carefully and professionaly investing in Stock Markets.
Yes Rakesh Jhunjhunwala is the finest example that Indians can look upon to get some proftis from stock markets.
His principles and methods are really difficult to follow but can assure a good profit. He concentrated on creating the wealth instead of treating the stock markets as lottery counters to generate cash.
Simple yet major reason is i feel large majority of indian households dont have money to invest. Rich People feel their private business earn a better returns than stock markets.
I feel that another big reason for less penetration is because youth is not participating much in the investing.They have the youth mindset and many of them dont want to come out of it. In addition to that reasons like high level of unemployment, Increased cost of living, marriage , purchase of homes, etc ., youngsters are not left with much to invest in stock markets. There is also a set of generation which saw recession eating up their parent's hard-earned money. Ofcourse, Ignorance about stock market is also another reason for lesser penetration of stock marrket.
Agreed the nightmare of 2007-09 recession will demotivate many. Generation that started earning in past decade will hesitate to invest because they saw one of the worst performance in past 7 years.
But the recession was due to some economic conditions that went wrong. Economy of whole world including India is recovering from the crises and this could be a good time to invest.