Why do they want us to gamble?

Gambling is illegal in India. There are no betting shops in India unlike in the west where punters can bet on anything from greyhound racing to the gender of the next royal baby. Betting is called satta in India and since it is not legal it is controlled by crime gangs, as the recent spot fixing scandal in cricket showed. Why then do politicians, business fellows and obliging journalists want to get Indians to invest in the stock market, either directly by buying shares in companies or through mutual funds? The Congress tried to entice middle class people with tax incentives but these were so miserly that few would have availed of the offers. They say that equities provide the best prospects for savings over the medium to long term, the returns are higher than the rate of inflation and they are highly liquid. They advise people not to buy gold to hedge against inflation because that is wholly imported, has a negative impact on our trade balance and the Current Account Deficit and is totally non productive. Invest in the stock market through Systematic Investment Plans, they say, and we will make you rich. But will they? The Indian stock market is a big gamble because it is manipulated by a few big speculators. The market is manipulated by criminals who are seldom caught and then allowed to continue with their activities. Investors lost Rs 56 billion in the recent collapse of the National Spot Exchange because of fraudulent trading based on fake warehouse receipts. People read of such scams but they do not see the guilty receiving stiff sentences as Mathew Martoma did in New York yesterday. Insider trading and front running are rampant without anyone ever being arrested. That is why retail investors own just 18% of shares of all listed companies, down from 31% in 2002. Retail investment in stocks is just $17 billion compared with $166 billion in gold and $284 billion in bank deposits. Price volatility in our stock markets is heavily influenced by speculation. The top 25 of the 1000 registered trading members in the National Stock Exchange bet $3 trillion on derivatives trading, $60 billion on futures and $2.3 billion on options. Speculation in India is second only to that in Korea, which has introduced curbs on speculative trading. Derivatives trades are dangerous as shown by the collapse of Barings Bank in 1995 and Bruno Iksil, known as the London Whale, lost $6.2 billion for JP Morga Chase in 2012. And yet they want retail investors to put their hard earned money in stocks. Maybe because they know that retail investors are easy to con, because they make irrational decisions and stay invested in losing shares allowing the speculators to sell out. In local lingo we are murgas or chickens, which are easily sacrificed. Despicable.