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India's superrich get even richer

Since February 2007, the value of India's stock market has doubled to 20000 points, and the biggest winners have been India's richest. Based on these gains, India's four wealthiest men are now worth more than China's 40 wealthiest combined.

from the December 18, 2007 edition

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News reports published in June suggest that at that time, company owners held 57 percent of the shares in India's largest stock market, the Bombay Stock Exchange, known as Sensex. Domestic and foreign companies accounted for a further 30 percent, leaving the remaining scraps for small, retail investors. That, in turn, has stunted the growth of the stock market among India's middle classes, says Mr. Haldea.

Only 2 percent of Indians own stocks

It is a blow to attempts to spread the wealth being generated by India's economic boom more equitably. Shares for the top 30 companies listed on Sensex gained $219 billion from January through November. By contrast, shares for the top 30 companies listed on Wall Street accumulated only $84 billion.

Yet only 3 million Indians – from a working-age population of 321 million – hold stocks. A further 3.5 million hold stocks through mutual funds. The numbers are small, and the money invested is also modest, says Mr. Butel of IIMS.

Nevertheless, there is evidence of a gradual expansion. The growth of the Indian economy is pushing more households past the threshold where they have enough cash to invest. And the stories of Sensex riches are overcoming Indians' traditional fiscal caution. Sensex is a notoriously volatile index. Despite its upward trend, there have been dips, including Monday's 4 percent dip – the largest in four months.

"This is the heart of the Indian story," says Anu Madgazkar, an economic analyst in the Mumbai office of McKinsey and Company, a global consulting firm. "We do see this trend line going up dramatically."

There are currently 4 million households that make more than $10,000 a year – one marker of fitness for investing, she says. In the next five years, that number is expected to more than triple. IPO expert Haldea sees pent-up demand in the fact that the listing of Reliance Petroleum elicited 1.9 million applications for shares – the highest number in five years.

Such interest is no surprise to Pradeep Moule, office manager for the Vijay Kumar Stock Market Classes in Pune. "The share market used to be back page news until a few years ago," he says, sipping ginger tea in his office. "Now, it's front page news."

He offers a two-week training program to make people Sensex-literate and he is seeing new interest in new places. Statistics suggest that investors are predominately from India's six largest cities; growing numbers of people from smaller cities now have the money but are ignorant of the way the market works.

"A few years ago, the popular perception was that this was only for the highly educated, financially savvy, English-speaking elite," says Mr. Moule. "That perception is now rapidly changing."

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