Shareholding Pattern in India

Venkateswaran R of SEBI has this nice note on the topic:

The shareholding pattern in India is indeed broadbased. The promoter shareholding in India is higher than that in many other countries. Consequently, the public shareholding is lower, though it is more than 41%. With soaring equity share prices, compliance with the Securities Contracts (Regulation) (Amendment) Rules, 2010 (providing for uniform requirement of 25% public shareholding for initial and continuous listing), disinvestments announced by the Government of India and implementation of the recommendations of SEBI’s Takeover Regulations Advisory Committee (TRAC), the promoter shareholding is expected to decline.

The institutions have been the predominant among the non-promoters. The foreign institutional investors have demonstrated to the institutional investors at home and to the world at large what an emerging economic power house called India, with robust regulatory environment, more favourable regulatory regime and fewer investment restrictions, can offer to institutional investors and, thereby, to their constituents.

As household participation remains low, we need fin literacy programs:

There is an urgent need to make an all-out effort to create investor awareness and to promote financial literacy and financial inclusion, side by side. Of late, SEBI has been following a two-pronged strategy in this regard. On the one hand, SEBI has been emphasizing the different risks inherent in many of the securities (which call for different levels of risk tolerance among the investors) and advising the investors to make informed (long term) investment decisions. On the other hand, SEBI is leading the initiatives to promote financial inclusion in the Indian securities market (for instance, the call to the depositories to introduce ‘no-frills’ demat accounts). The business potential, if the investor population in India grows to the levels seen in developed markets as well as comparable emerging markets, should prompt every other person in the Indian economy to more than match the SEBI’s move.

Hmmm. No frills demat account is a nice idea based on no frills bank accounts, But then people hardly used these bank accounts after enrolling into it. So more is needed than just these accounts. And if we keep having these scams, households will only remain away from the markets..

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