A New Beginning - An Investor Renaissance
Published: Wed, 03/23/22
I was not born yesterday. That might have something to do with my hindsight bias that goes all the way to 1990. Having witnessed 3 bubbles pop in my lifetime I concluded that the top in Oct 2021 is not a bubble. There is no change in my thesis. If you have not lived through a bubble you do not have any idea what it feels like. If you have not lived through an investor renaissance you have no memory of what it might feel like. When investors at large poured into Indian equities resulting in a jump in new NSDL accounts people were concerned but I was happy. This is a new beginning after over 20 years.
The first investor renaissance in India followed the 1980s bull market and the UTI64 scheme that attracted investors to safe equity market returns. Harshad Mehta's role as Pied-Piper was only a function of the sentiment of the times. Most investors at the time thanked him in their minds for making stock markets mainstream and breaking the Indian system that was mostly a Club run by the BSE where small investors had no entry. A lot of time has passed. The first investor renaissance was not bungled by Harshad Mehta but the Free For all Policy in raising Investor equity Via IPOs that came with the 1991 reforms. Fly-by-night operators flourished as SEBI was still demanding enough teeth to take any action. The second investor renaissance has already started.
A completely new generation of investors is willing to invest for the long term and build wealth. How this new adventure ends depends a lot on how we manage securities markets and investor expectations. Indian markets have matured and the burden of truth lies in the hands of those that have chosen to publicly manage money. Mutual fund managers and PMS heads share the greatest responsibility in a privatized industry. Investment bankers willing to rip investors with overpriced IPOs are already being questioned by all after the recent fiasco. Regulators need to take note of this new form of fly-by-night operation. Removing CCI in 1991, or the capital controller of issues [IPOs], was meant to allow good Promotors to get a fair price in the market. But now we face the opposite end of the problem. Over charging investors for a business model that has not proven itself outside the accounting gimmicks of investment banking.
Corrective action in this space may be more important than the imposition of endless margin guidelines on brokers that slow down business and finance. It is also important to allow this second investor renaissance to flourish and allow equities to become a mainstream investment vehicle for savers at large. The ratio of savings going into equities has remained in the single digits since the 1990s fiasco and I believe it has changed already but should not be short-circuited by our own greed and shortsightedness.
Yes, this bull market has started, backed by real investors and real savings of the young and foolhardy. This wave is far from over Ride it
Rohit Srivastava
The Truth About The Markets