Way the crore flies

They, so some politicians tell us, are the victims of economic reforms, citizens of Bharat, of hundreds of small towns, eking out a living, while the minuscule elite of India lives it up on liberalisation. Small Town India begs to differ. The latest demonstration of its antithesis: a record breaking Rs 5,750 crore invested in just one mutual fund scheme, Reliance Capital Asset Management8217;s RCAM newest equity fund. More than 930,000 investors from 400 cities and town invested an average of Rs 60,000. Institutional investors accounted for only Rs 150-200 crore of the total intake.

Of course, the RCAM8217;s recent performance 8212; its Reliance Vision Fund has a compounded average growth of 43 per cent, outperforming Sensex by 26 percentage points 8212; was a great pull factor. But who responded to those earnings numbers? Who have mostly ensured that new mutual fund offers since April 2005 have netted almost Rs 40,000 crore? Not Page 3 people who buy super-luxury brands. Not Page 1 people who get six-figure dollar salaries on graduation from B-school. These people are the salaried, the self-employed, the small traders from non-metros dotted around the country. Their disposable income has changed, their attitude to savings and investment is changing. They are still apprehensive of the markets, of direct retail participation. Rightly so since the stock market regulator 8212; unlike, say, the election regulator 8212; hasn8217;t yet established a reputation for slaying systemic satans.

Till that happens, market participation through third party collectives will be especially important. But look at our politics. So what if Small Town India has in one investment rush made Anil Ambani8217;s fund India8217;s second largest, after UTI, thereby signalling a possible paradigm shift in the supply of investment instruments? Parliament still sits on the pension reform bill, simply because it proposes an option that an employee, of his own free will, can ask for a certain proportion of his contribution to be invested in stock markets; market participation is not mandatory, there is a default 8220;totally safe8221; option. The hundreds of thousands putting their money in mutual funds would like to mull over whether markets should warm a part of their nest egg. To deny them that in the name of ordinary people8217;s welfare is illogical. It is also, politicians please note, insensitive.