India Worst 20

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When it comes to investing, there is no doubt that India is more active than passive. Ofcourse the new money, the news channels and internet has taken trading home to my aunt and other South Delhi modern influential decision making house wives. This is all good; the problem is about giving up before you even started. Just because there is no formal induction to stock markets, Reliance does not go up or futures turned out sharper than the kitchen knife should not be the reasons to give up. What if you were using the wrong investing style?

Anything which could be reviewed quarterly and more could be considered passive. This could be academically debated, but we are talking about an investing style evolution and taking investors and investing in India to the next stage. Regarding, what is better “passive” or “active”? Actually it’s more about your risk profile (you are either active or passive, not both). However, historically short term traders are known to underperform intermediate and longer term investors.

In any case with nearly a million Indices globally and more than 30,000 ETF’s worldwide, India’s passive scene is dismally underplayed. We need more passive instruments, if we have to increase market sophistication, liquidity, choices and investor awareness. The new 25 NSE Sector indices was a much awaited initiative. Thinking sectorally is a first step towards passive style investing. More benchmarks could mean more ETFs, which would then become a virtuous cycle. We won’t trade ETFs like we trade NIFTY futures, hence a key passive step.

Why did we not think of passive earlier?…

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Mukul Pal, is a Chartered Market Technician, MBA Finance and a member of the reputed Market Technicians Association (MTA). He has more than a decade of Capital Market experience dealing with derivatives and global assets. He has worked for Bombay Stock  Exchange, multinational Banks and brokerage houses in leading research positions before starting on his own in 2005. He is the President of the MTA Central and Eastern European Chapter.


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