Why not…?

1. Lack of trust

        The Indian stock market has had its share of past financial scams such as those involving Harshad Mehta and Ketan Parekh that resulted in many stock market investors losing their money. Some of the recent scams include the Nirav Modi scam and the Satyam Computers scam.

        First and foremost thing which we hear from most of the people is hear of loss. We heard about people’s loosing stories only and due to that most of the surrounding people try to avoid investing in stock market. People invest in stock market without having proper knowledge, guidance or skill and they loose their entire capital which leads them to make others negative stating that stock market gives losses only. Though, with the establishment of the Securities Exchange Board of India (SEBI), stock market trading is much more regularized without any major market mayhems.

        Hence, due to the general lack of guarantees or securities along with the probability of getting duped of their hard-earned money, most common Indians stay away from the stock market.

2. Lack of knowledge in INDIA

        Most Indian investors lack a basic knowledge about the way stocks markets function. Despite extensive information on fundamentally strong stocks and companies, investors are reluctant to invest their hard-earned money into these companies. Educated and qualified people start investing in stock market but they don’t have sufficient skill or knowledge so they but some random stocks at very high point by listening through TV shows or reading newspaper which gives them initial losses and they don't have patience to hold so they book losses and quit stock market and tell others about their loss stories. We are aware about our literacy rate which is also a major reason why people are not investing in stock market. We have farmers, labours, workers in major percentage who are totally unaware about investment in stock market. They just know only hard work. Countries like Singapore, US, Canada, Japan have more percentages of investors because they have educated and migrated people which are skilled and talented.

        Other investors believe that the stock market is an avenue for turning “quick profits.” As a result, they lack the necessary patience and end up buying – or even selling – stocks in quick time. The reality is that the stock prices of even good companies take time (even years) to grow and stabilize – to provide good returns to its shareholders.

3. Availability of other financial instruments

        Simply ask your friends or family members about where they usually invest their money. Most would answer – gold, fixed deposits & bonds, or even real estate. That is the reality – other financial assets (including gold) account for 30% of investments in India – while being just 10% around the world. Everyone knows our 60% to 70% population is in villages and small towns only who don't know anything about stock market and others are judgemental who thinks that they are not qualified or capable enough to understand this. So major investments in stock market coming through metros and other cities only.

        Comparatively, equities account for just 12.9% of investments in India – compared to 26.1% in the rest of the world.

        

        This is primarily because most Indians prefer to invest into “safer” instruments that provide low to modest returns – as compared to stock markets that are deemed as “risky” and considered suitable only for wealthy investors. This brings us to our next reason – that is the lack of capital.

4. Lack of capital

        Take a look at the “top guns” or success stories of the stock market – the likes of your Rakesh Jhunjhunwala or Vijay Kedia. This has created a perception that you need to invest loads of capital or money into stocks – in order to earn healthy returns. But that is far from the truth – many successful investors have started small during their early days, working slowly and steadily towards sustainable profits.

        Similarly, if you want to trade in stocks directly, you can invest a small amount consistently in purchasing stocks of the right companies. Despite these facilities, lack of capital is often cited as a leading reason why most Indians do not invest in the equity market.

5. No appetite for risk

        When it is a matter of investing their money, most Indians do not have the appetite to take risks. That is the reason why Indians invest in financial instruments like fixed deposits and gold – that are regarded safer in the long run.

        Despite their higher returns, equity investments – along with mutual funds do have an inherent element of risk that keeps most investors away. An additional risk factor is that common and small-time investors need to depend on the financial advice of “friends” or “experts” – as most don’t have the time to track or understand the equity market themselves.

6. Poor service from Advisories and brokers

        We are well aware about advisory scams, frauds and online cheating while taking services from different advisory companies or so called Facebook pages, whatsapp services and telegram channels. Due to their cheats and frauds, many people have to leave this stock market. Sometimes brokers are also trap innocent investors to generate their brokerage.

#Conclusion

        Indian investors often cite a lack of understanding, financial risk, or other reasons for not investing their money in the stock market. Other short term investors enter stock trading to earn a “quick buck” and also exit the market forever after a bad experience. We have looked at five top reasons why there are so fewer active investors in the Indian equity market.