Nris In UAE: Domestic Investors Continue To Fuel Surge In India Stocks

Question: With the Indian capital market on a roller coaster ride at present, are small investors still interested in putting their savings in mutual funds?

ANSWER: While foreign portfolio investors have pulled out funds in recent days due to uncertain geopolitical factors, the Indian investing public is bullish on Indian stocks, which is apparent from the fact that the assets under management by mutual funds in India are to the tune of 21 per cent of GDP. The mutual fund industry is growing steadily and 45 per cent of the investments are now coming from the smaller towns in the country. Further, the number of distributors of mutual fund products is growing annually at around 30,000. According to the Association of Mutual Funds of India (AMFI), there is a sizable increase in the number of folios from 21 million in 2019 to 56 million as of today.

The media campaign of AMFI has raised awareness, which is responsible for the massive growth based on the fact that citizens have around 800 million bank accounts across the country. AMFI is also tying up with leading academic institutions to train college students who can supplement their income after graduation by acting as distributors in order to expand the footprint in Tier-2 and Tier-3 cities. Steps are now being taken by AMFI to train 100,000 postmen as mutual fund distributors who will act like relationship managers of banks to promote mutual fund products in the rural areas. Moreover, online platforms have seen a surge in new investors especially through Systematic Investment Plans.

Question: My friends in India have complained about frauds committed by manipulators on social media who influence gullible investors to buy certain stocks. Are any efforts being made to control this menace?

ANSWER: Online scams have been triggered by the sharp increase in frauds which are linked to the securities market, misusing several well-known social media platforms. Registered intermediaries are being impersonated by creating fake profiles as experts in the securities market. These fraudsters are giving recommendations to buy, sell, or hold certain securities. The fake entities masquerade as educational groups and invite innocent investors to join these groups, according to the Chairman of the Securities and Exchange Board of India (Sebi). He has therefore written to the chief secretaries of state governments asking them to intensify their fight against cyber fraud and prevent misuse of popular social media platforms by spreading awareness against rising cyber frauds which have caused huge losses to gullible investors.

Sebi has further stepped up its monitoring of misleading, manipulative, unlawful and illegal content on social media platforms. Measures have been taken against unregistered entities which claim to provide services as investment advisers or research analysts. The regulator is keeping a close watch on manipulation of penny stocks where investors are promised astronomical returns. Stock exchanges have also been directed to clamp down on frauds linked to the securities market and take strict action against unauthorised schemes and market practices.

Question: With India betting big on the electronics industry, its dependence on imported semiconductor chips and wafers will prove to be a bottleneck. Is the scenario likely to change in the near future?

ANSWER: Substantial progress has been made to set up the semiconductor ecosystem. This will comprise of design, fabrication, equipment, chemicals and packaging. A commercial scale silicon-based fabrication facility with an above-average capacity of 50,000 wafer-starts per month is being set up. Semiconductor manufacturing requires silicon-fabs which usually operate at 20,000 to 40,000 wafer-starts per month. A wafer is a thin, circular slice of crystalline semiconductor material, most commonly silicon, upon which integrated circuits are fabricated.

Major global equipment manufacturers are setting up their design, production and validation facilities. One of India's largest industrial groups is in the process of setting up a Rs910 billion silicon-fab which is expected to start production next year. Six semi-conductor units, one fab and five assembly, testing, marking and packaging (ATMP) units are at different stages of construction and execution. Last month, four more, one silicon carbide fab and three ATMP units were approved. Thus, the whole ecosystem is ready to start by the end of 2027.

The writer is a practising lawyer, specialising in corporate and fiscal laws of India.

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