Empowering the Retail Investor

Ajit Dayal

Chairman,

Quantum Information Services Limited

July 7, 2003 The Investor Empowerment Programme, GIWA

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Your money matters!

• Household savings, +23% of GDP, Rs 5,533 bn (US$ 118 bn)

• Corporate savings, +4% of GDP, Rs 895 bn (US$ 19 bn)

• Government savings, - 1.1% of GDP, minus Rs 253 bn (minus US$ 5 bn)

-20%

0%

20%

40%

60%

80%

100%

Households Corporates PSUs

July 7, 2003 The Investor Empowerment Programme, GIWA

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Money flows into shares and debentures declining.

• Household sector put less money in financial assets

• Within financial sector the household sector put less money in shares and debentures

5.0%

10.0%

15.0%

20.0%

1982-86 1987-91 1992-96 1997-01

July 7, 2003 The Investor Empowerment Programme, GIWA

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New products and channels for your investment flows

• Directly into stock markets

• Mutual funds: equity, debt, balanced

• Insurance policies: new companies, some product changes

• Bank deposits: new banks, new products

July 7, 2003 The Investor Empowerment Programme, GIWA

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You make people rich!

• Mutual funds control approx Rs. 1,034 bn, (Rs 103,400 crores) a 1% average fee to the fund manager gives the AMC revenues of Rs. 10 bn (Rs 1,000 crores) every year!

• Trading volumes of avg Rs. 40 bn (Rs 4,000 crores) per day generate broking commissions of approx Rs. 26 bn (Rs 2,600 crores) every year!

July 7, 2003 The Investor Empowerment Programme, GIWA

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Do they make you rich?

2,000

3,000

4,000

5,000

6,000

Jul-93 Mar-95 Oct-96 Jun-98 Feb-00 Oct-01 Jun-03

(Sensex)

July 7, 2003 The Investor Empowerment Programme, GIWA

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At the very least, do they provide you with a service?

• Educate – help make an informed decision

• Discuss alternatives that benefit you

• Advise, based on your situation, not theirs

July 7, 2003 The Investor Empowerment Programme, GIWA

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Scams, scams, and more scams….

• Murarka Finance, 1987• Mazda Leasing and Mehta, April 1992• Morgan Stanley Mutual Fund, April 1994• tMt = TNT, 1999 – 2000• Mastershare and UTI 1988 – 2002• ??• You choose the alphabet, there is a

“scam” around it…..

July 7, 2003 The Investor Empowerment Programme, GIWA

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Greed: Two hands to clap!

• The financial “services” industry wishes to make quick money,

• Investors wish to make “quick” profits,

• Greed on both sides

• Invest, do not speculate!

• The regulator will try to help you but will fail! – by definition has to fail (SEC in USA, SIB in UK, SEBI in India)

July 7, 2003 The Investor Empowerment Programme, GIWA

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Therefore…

• Keep your money at home, under a mattress?

• Step out into the world with realistic expectations – don’t be greedy

• Select a product or advisor that works for your long term benefit, not for a short term return or fee

• Buyer beware!

July 7, 2003 The Investor Empowerment Programme, GIWA

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“Tip” of the day…

Information => Power

+

Discipline

+

Patience

=

Returns