In India, many retail investors aspire to own shares in esteemed companies like MRF, Page Industries, Honeywell Automation India, Shree Cement, Abbott India, and Nestle India.
However, the high costs associated with purchasing a whole share, especially of companies like MRF, trading at approximately ₹1,08,500, pose a significant financial barrier for most investors.
The Securities and Exchange Board of India (SEBI) is contemplating fractional ownership of shares to address this challenge and democratise investing.
Unlocking Affordable Investments with Fractional Ownership
Fractional share ownership allows retail investors to purchase a portion of a company’s stock with predetermined, budget-friendly amounts.
For instance, an investor could invest ₹25,000 and acquire one-fourth or even smaller fractions of a high-priced share, investing in prominent companies accessible and affordable.
This transformative approach facilitates the diversification of portfolios, enabling investors to spread their financial resources across multiple companies and minimise the risk associated with concentrating all assets in a single entity.
The Global Precedent and Potential in India
Fractional share ownership has already gained traction in countries like the United States, where various platforms facilitate fractional share trading. This has empowered investors to invest in renowned companies like Apple without requiring substantial capital.
Extending this opportunity to Indian companies could revolutionise the investment landscape, enabling retail investors to make informed choices and diversify their portfolios effectively.
Encouraging the New Generation of Investors
Fractional share ownership offers an exciting opportunity for younger investors familiar with systematic investment plans (SIPs) in mutual funds. It transforms investing in significant shares into a gradual and manageable journey.
Instead of accumulating substantial savings to purchase a total share, fractional ownership permits investors to start their investment journey with a small yet meaningful amount.
Fostering Financial Inclusivity and Empowerment
In essence, fractional share ownership could catalyse financial empowerment and inclusivity. Lowering financial barriers and enabling ownership in esteemed companies encourages a sense of shared achievement and communal progress.
This change could significantly contribute to building a more informed and engaged investment community in India.
The potential introduction of fractional share ownership in India represents a progressive step towards levelling the playing field in the investment landscape.
By making high-value shares more accessible and affordable, retail investors can diversify their portfolios and actively participate in the exciting investment journey. Embracing this innovation is a crucial stride towards a more inclusive and empowered financial future.
Shruti Jain is Chief Strategy Officer (CSO) at Arihant Capital Markets Limited. She is passionate about investor education and sustainability.