Sunday, July 14, 2002		Books

Anatomy of capital markets
B.S. Thaur

Indian Households’ Investment Preferences
by L.C. Gupta, C.P. Gupta, Naveen Jain Pages 154, Rs. 360

IN India people used to keep their savings or funds in gold and silver. With the spread of banking, the savings went to banks for safekeeping and growth. The share market also caught the fancy of the investors when economic development gained momentum.

The book under for review throws light on the capital market conditions prevailing in the country and their inadequacies and infirmities.

A few things can be immediately said about the book. One, considering the chaotic conditions prevailing due to inadequate regulatory measures and the resultant lack of confidence in shareholders, bondholders and investors, the book should have been brought out much earlier. The contribution which the book intends to make to the Indian financial arena would have been much greater in that case. Nevertheless, the book is still timely.

Second, the book is a storehouse of facts and figures exhibiting a sound financial knowledge. The figures used have been collected from the grassroots level by the Society for Capital Market Research and Development, Delhi, for the Third All-India Investers’ Survey report.

Third, the book is based on a survey of Indian households’ investment preferences.

Fourth, the book is a must-read for anyone interested in the capital market.

A word about the Society for Capital Market Research and Development which has published this book. Dr Abid Hussain, a former member of the Planning Commission is the chairman of the society. The society launched a survey focussing on the household investors’ preferences for corporate bonds. This book mainly deals with the various aspects of the bond market.

The authors of the book have found that banks’ fixed deposit schemes, government saving schemes and, to certain extent, mutual funds vie with each other for being the most preferred investment option among retail investors. This observation may not be, at present, true in the case of mutual funds as this survey was conducted before the Unit Trust of India (UTI) fiasco of 1998.

The reader comes across interesting bits of information, for instance:

The total number of individual share owners in India increased from 1 crore in 1990 to 2 crore in 1997. This increase mostly came about during the boom period of capital markets from 1991-1994. Out of a total population of 100 crore only 2 crore are share owners.

Ninety per cent of the Indian share owners and bond holders reside in urban areas which are home to only 1/4th of India’s population.

This book is divided into 10 chapters. Illustrations make the book comprehensive and informative. Apart from a foreword and a preface, the book begins with an eight-page executive summary, which gives a bird’s eye view of each chapter. Similarly, the 10th chapter, while dealing with the socio-economic angle of the study, also gives major conclusions commenting on the inadequacies, infirmities and weaknesses in the regulatory systems in the capital market and suggests remedies to restore investor confidence.