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| Research >>EQUIGRADE >> Need |
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The need for an independent assessment of equity shares emanates from the following:
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- Limited retail participation: The combined market capitalisation of Indian stock exchanges exceeds our country’s GDP. However, the retail participation in the equity markets is limited for the want of in-depth analytical information and independent professional assessment of company fundamentals and its valuation. Investment in equity shares account for less than 10 per cent of the total household investments.
- Limited companies under active research coverage: There are more than 4,000 companies listed on our stock exchanges, but active research is available on not more than 200 companies. The retail investors are short of adequate information on many listed companies. Hence they restrict themselves to bigger companies and thus many smaller but fundamentally sound companies with attractive valuations are ignored on account of lack of information or visibility. To illustrate, the non-institutional investors (retail and high net-worth investors) hold around 40 – 42 per cent of the free-float of the BSE Sensex companies. However, the non-institutional ownership of the free-float of the stocks forming part of BSE-500 index, excluding the BSE Sensex companies, is merely 18 – 20 per cent.
- Shield for retail investors against speculative activities: Many companies become target of market operators that pull down the prices significantly below its fundamentally justified price or vice-versa and the management of the companies cannot do much to protect the investors or enhance their value. Retail investors are usually negatively impacted on account of the same. Knowledge of fundamental price to the market as assessed by independent and professional company like CARE could protect the retail investors to be trapped in stocks at prices exorbitantly above the fundamental prices resulting due to operator-driven activities on one hand and attract serious and significant investments in under-valued stocks.
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