Sebi tells small investors to invest via institutions

Mr Sinha said institutional investors would be able to take well-informed decisions on behalf of small investors

Sebi chairman U.K Sinha on Wednesday said that it is better for small investors to enter the equity market through the mutual fund and pension fund route and that the regulator is not worried if retail investors do not participate directly in initial public offers (IPOs).

“I don’t mind if retail investors don’t participate in the IPOs because I would rather like them to participate through institutional investors. All over the world, including in India, retail participation historically has been primarily for getting in early. If retail investors are not participating, we shouldn’t worry about it as long as people come into the market (through other routes) and long-term interests are protected,” Mr Sinha said while speaking at an event organised by investment planning platform 5nance.com.

According to him, institutional investors like mutual funds and pension fund with professional investment managers would be able to take a well-informed investment decision on behalf of a large number of uninformed small investors.

“They should not enter the primary or the secondary markets on their own and they should only enter, in my understanding, through an informed investor or through an agency which is knowledgeable about the market as mutual funds and pension funds,” he said.

Stating that the regulator has put in place various measures to check any manipulations in the primary market, Mr Sinha further added that Sebi has an integrated surveillance department, which is now one of the best in the world. Sebi’s surveillance system generates about 100 alerts every day.

With the help of this mechanism, Mr Sinha said that the regulator has banned over 900 entities for misusing stock market platform for the purpose of tax avoidance.