Interview | BSE chief Ashishkumar Chauhan lists do’s and don’ts for small investors

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With a majority of the population not aware about the intricacies of investing in equity products, Ashishkumar Chauhan, head of BSE, has said those looking to make a quick buck should stay away from the stock markets.

In a wide-ranging interview with Money9, he shared his views on the the stellar run of Sensex, India’s response to COVID-19 crisis, awareness levels among investors and wealth-creating ideas.

Edited excerpts:

Q: How would you draw a co-relation of Sensex’s journey with the India growth story?

Chauhan: At present, countries which have a better gross domestic product (GDP) and healthcare system are doing badly in terms of handling Covid-19. In terms of relative strength, either we are not as poor as we have been made out to be or they (Western countries) are not as rich as we thought. Despite lockdown, India managed to recover very well. Now, India is also a vaccine capital of the world. Everyone is watching the strength of India and they will continue to invest here.

Q: What are your key takeaways from the momentous journey of Sensex?

Chauhan: Sensex is India’s first real-time index whose base year is 1979. It started with a value of 100 and it is hovering at 52,000-mark at present. For instance, if you would have had invested Rs 100 in Sensex companies 40 years ago, then it would fetch around Rs 52,000 today. The top-30 companies which are the part of the benchmark index have also given regular dividends to investors. No asset class has given this kind of return, including gold and real estate. India has grown at an average of 6-6.5% in the past 40 years. If we continue to grow at 6-7% or probably around 10%, then chances are high that we may see similar kind of returns in the next 40 years.

An investor should not invest on the basis of tips. One can invest in the market through Exchange Traded Funds (ETFs), which are low in cost. One should always look at total returns rather than point-to-point comparison. No mutual fund has beaten the Sensex during the last 20-25 years. With the Sensex ETF, you can easily beat mutual funds.

Q: The vast majority is still not acquainted with equity investments. How are you planning to address this gap? 

Chauhan: At present, there are 6.15 crore investors who are registered with the exchange and out of this, 3.8 crore investors are uniquely registered on the basis of PAN numbers. This means, that every one individual from every house (assuming five members in a family) is investing in the market and we are reaching directly to 20 crore individuals. If we include EPFO, which invests in Sensex, we are connected with 35 crore investors. It means every 1 in 4 sees Sensex as the wealth barometer. However, we haven’t reached 75% of the population.

India is now the largest investing nation in the world after China. Today, the entire stock market is larger than the banking system. Stock markets are utilising capital of the nation efficiently than the banking sector. India is on a different trajectory and people are still learning to invest. Derivatives are not for smaller investors and buying in the morning and selling in the evening is not investing.

Q: What would be your message for first-time investors?

Chauhan: Don’t invest on the basis of tips available on television. Investors should do their own research or consult their financial advisors or portfolio managers while investing in the financial market. Investors should also take decisions according to risk appetite. Quick money can only be made in fiction.

Q: Is the stock market a reflection of the growth of the economy?

Chauhan: The market is a leading indicator of the economy. Earlier, some wrong predictions related to Covid-19 affected the market in March. At present, the death rate in India is not very high and the economy is doing good. As a result, money came back into the market. Investors think companies in India will continue to give profits in the long run. Government has also put liquidity into the economy, which is reflecting in various asset classes, including gold and real estate. It is wrong to say that the stock market reflects today’s economic reality. Investors are putting money looking at the growth prospects.

Q: How would you define your role?

Chauhan: My role is similar to an umpire. Our aim is to provide a robust framework which we are giving. We always tell investors to stay balanced while investing. Investors will get a robust return in the next 30-40 years considering the ongoing growth in the country. If you think you will get a good return on daily basis from the market then you are in the wrong place. Your family should stop you if you from deploying money for the short term. This is our advice. Overall, I think small investors can create wealth through SIPs.