How retail investors can be protected from market volatility, frauds

Retail investors have lost about ₹15 lakh crore over the last three weeks, wiping away gains seen over the past year. Much of this is due to factors as varied as commodity price rise, a slowing economy and Russia’s war in Ukraine. India’s retail investors – many of them investing their savings in the market for the first time – have seen euphoria, then worry, then dismay and even penury.

Let’s consider how India’s young investors invest. Many park their savings in mutual funds and equity assets. Others seek additional gains in ‘savings schemes’, which often can be fraudulent. Take equity, where even listed corporates have lost their sheen. New-age firms, which ideally would offer credible assets to retail investors via an initial public offering (IPO), have become notorious for overpricing their public issues.

The case of Paytm is instructional. The share price has continued its relentless decline, significantly below its IPO price, while financial results continue to showcase losses. Such promoters have typically talked about leaving value on the table for investors. Alas, it has been a loss in notional value for many.

Past exuberance has also hidden many corporate governance challenges. The irregularities witnessed at the National Stock Exchange (NSE) highlight a deeper institutional rot, while the Securities and Exchange Board of India’s (Sebi) recent retraction of its earlier mandatory stand requiring the top 500 listed firms to separate the roles of chairman and…