Awareness Levels of Financial and Investment
Instruments
From
SEBI INVESTOR SURVEY 2015
Nearly all the survey participants are
staggeringly aware of Bank Deposits (99.9%), Life Insurance (94.7%) and Post
Office Savings (89.4%), familiarity with Mutual Funds and Equities is just 28.4%
and 26.3%, respectively .
On the other hand, awareness of Derivatives
(10.4%) and Futures (9.5%) is even lower and surprisingly, Debentures (13.1%),
despite being higher in the capital stack and having a declared interest rate,
ranks low too.
Correspondingly, in 2003, Senetal 29 observe
that the secondary corporate bond market in India is practically non-existent
and in March 2015, Gwalani and Bharati also
find that awareness and investments in the corporate bond markets remain
abysmally low.
For derivatives, on the other hand, it
is not the market’s novelty but a 1950s government statute that rationalizes
the low level of awareness. The Bombay Cotton Traders Association started
futures trading in 1875 and by the early 1900s, India had one of the largest
futures trading markets in the world 31.
However, cash settlements and trading in options and derivatives were banned in
1952 till (acting on the recommendations of the LC Gupta Committee) SEBI
approved derivatives trading from June 2001.
In the interim half a century,
derivatives remained
restricted to the shadow ‘badla’ markets (banned by SEBI in 2001) and
definitely out of reach of retail investors.
Since 2008–09, equity derivatives at the
NSE have increased from an average daily turnover of Rs. 45,310 crore to Rs. 1,93,212
crore in 2015.
Although a relatively
smaller market, currency derivatives has seen a sharper growth, moving from Rs.1,167
crore to Rs. 18,602 crore in daily turnover in the same time period.
Furthermore, it is clear
from the SIS and RBI data that institutional investors drive almost the entire
volume and growth of this market.
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