CEA: Retail investors playing risky F&0 game, losing focus on capital formation

Mumbai, March 13: Chief economic advisor V Anantha Nageswaran on Wednesday said he is “worried” over retail investors’ play in risky futures and options (F&O) segment in search of instant profits.

Speaking at a conference organised by capital markets regulator Sebi and NISM, Nageswaran said the biggest threat to sustainable capital formation and also sustainable economic growth is the “short-termism” in attitudes that the country is afflicted with.

Bemoaning the “furore” caused every time there is a discussion on allowing corporate groups to promote banks despite the need for capital in a growing economy, Nageswaran said India Inc needs to reflect on the state of corporate governance practices and analyse its own conduct. “The biggest risk for sustained capital formation and sustained economic growth is in our short-termism,” he said.

He added that it is “puzzling” to see that a country otherwise blessed with a “deep spiritual heritage and wisdom” is actually interpreting mindfulness and living in the present in the wrong ways.

Nageswaran rued that even now, people are mentioning handsome growth in F&O volumes, despite Sebi’s own studies suggesting that 90 per cent of trades in the riskier segment leading to losses for investors.

“Our actions make me worry that we may be interpreting mindfulness and living in the present as being myopic,” he said, making it clear that those two concepts stress on performing one’s duty and obligations without thinking about the fruits of the actions.

He said there is a need to change the outlook from a behavioural perspective to achieve goals like longterm capital formation and growth.

Nageswaran rued that there is an “adversarial” attitude among stakeholders when it comes to regulators, wherein people overlook the fact a regulator’s job is to have a longterm view of things and “providing counterbalance for instant gratification or myopia”.

“The focus that the regulators have is to ensure that we stay stronger for longer rather than get caught up in the euphoria of our growth rates, market valuations,” he said.

He said the economy is likely to grow 7 per cent in FY25, third year in a row when the GDP has grown at over 7 per cent.