Mumbai: With capital markets seeking to attract new investors, regulator Sebi's proposal to ban competition or leagues related to stock trading could defeat this very purpose, experts say, adding that such initiatives are training ground for investments.
In a recent set of proposed regulations, the Securities and Exchange Board of India (Sebi) is planning a blanket ban on practice of offering schemes, competitions, games or leagues to protect investors from being misled.
Pointing out that various countries like the US and Australia have been holding market competitions for many years without major restrictions from their respective regulators, analysts feel Sebi should reconsider the move to ban stock market competitions/leagues as it is one of the alternatives to expand the investor base.
"The number of investors as a percentage of total population is very low (2 per cent) and among those who invest in the equity markets, the percentage allocation too is low. Thus, it is pertinent to find ways and means of improving participation," market expert Ambareesh Baliga told PTI.
According to Baliga, a certain amount of excitement is necessary to attract investors to the markets which can be provided by competitions or leagues.
"To draw a corollary, the number of dance and talent competitions in the last decade and a half have brought out the best talents in the country which otherwise wouldn't have been possible through the traditional approach," he said.
Echoing the sentiment, Kejriwal Research and Investment Services founder Arun Kejriwal said "markets itself have to do certain things to bring in new investors and improve retail participation".
"The world over, trading competitions and games have proved to be successful in bringing in new retail investors and ultimately healthy growth," Kejriwal said.
"Educating the masses and making investing fun is how this market will grow. These are also the natural evolution of the market. Banning competitions and games is ill advised and regressive," he noted.
Suggesting that there is need to distinguish between gambling dens from competitions that provide skill-based training albeit with some money involved, Finsec Law Advisor founder and Sebi's former executive director Sandeep Parekh added that many business schools run competitions where portfolios are made as a game.