There is a need to incentivise and encourage more participation of retail investors into the debt and equity markets, said HDFC Bank chairman Deepak Parekh.
Speaking at a BFSI conference organised by SBI Capital Markets, Parekh highlighted that foreign institutional investors (FIIs) have invested nearly $16 billion in India’s equity and debt in the calendar year so far.
Parekh said that retail investors were absent and tend to enter the market only when the market is at an all-time high instead of investing on the lows.
Stating that capital markets cannot be dominated by FIIs, Parekh said that this could be counter balanced by domestic institutions like insurance companies, mutual funds and development of a retail market.
Given the current sentiment, one should expect IPOs and FPOs (initial public offers and follow-on public offers) to hit the markets shortly, he added.
Parekh warned against the domination of FIIs in Indian capital markets and has forecast higher volatility in capital flows in the bond and foreign exchange as central banks worldwide are taking divergent view on monetary policy.
“We are still riding the wave of euphoria, many would have seen their report stating that 'besides Rio, India is the only party in town'. But FIIs are big party-hoppers. If they don't like your music and if they don't like the drinks being served, they'll find another party to hop on to really quickly,” Parekh added.