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Women In Equity Markets: Unlocking Financial Potential

A simple search on internet for India’s top investment managers, yields a overwhelmingly male list. This is not because women lack the capability or discipline—quite the opposite

By Dr. Shalu Kalra,

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A group of accomplished women—PhDs from leading global institutions—were gathered at an event where they candidly acknowledging that they were uncomfortable about investing, and in fact, several had never invested a single rupee. Even someone, a seasoned professional with extensive experience at the World Bank, and who works for gender parity, admitted she was equally uninformed when it came to managing her personal finances. These are not isolated instances. Investment is perceived to be a man’s job and women are often kept out of it within families. To invest women, have to overcome the extra hurdle of this societal bias in addition to acquiring the required information and knowledge about investing. This has led to many women internalising the belief that investing is not meant for them.

The consequences of this is visible across the financial landscape. Only a small proportion of women invest. And, a simple search on internet for India’s top investment managers, yields a overwhelmingly male list. This is not because women lack the capability or discipline—quite the opposite. For generations, Indian women have displayed remarkable financial acumen in managing household budgets, often with no formal financial training. Yet, when it comes to investing those savings, it is still largely men who take charge. Despite growing conversations around women entering the workforce, a similar shift in financial decision-making—especially in investing—has been far slower.

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As of August 2024, according to the Chief Economist of the National Stock Exchange (NSE), women constitute 22 per cent of registered retail investors in India. Although this figure has increased 6.8-fold since 2015, it remains substantially lower compared to the United States. A report released in October 2024 by Fidelity says 71 per cent of women in America invest in securities. Even though awareness regarding financial literacy and empowerment is increasing, the speed is slow—and the price of this disparity is not only paid by women, but also by the economy as a whole.

Women usually have a different attitude toward money which leads to a different approach to financial decision-making. Increase in number of women investors will not only increase the capital available to companies but also change the capital market structure. While women tend to save a higher percentage of their income, they invest significantly less in capital markets. A 2022 McKinsey report revealed that just 32 per cent of the portfolios of women who do invest are in equities—versus 45 per cent for men. If more women became active investors and also expanded their holdings of equities, the amount of capital available to companies would increase, and the number of individual investors in the market would increase significantly.

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A study of 5 million Fidelity investors over ten years (2012–2021) revealed that, on average, women beat their male counterparts by 40 basis points, or 0.4 per cent. Other research has identified even larger gaps, with women beating by up to 1.8 per cent, research demonstrates that women are more risk-averse than men and that this determines how and where they invest. In addition, women tend to stay invested for the long term and frequency of trading is less as compared to men—qualities that can have a stabilizing influence on markets. According to an article published by Nasdaq, women are more likely to remain clam during market volatility. Greater female participation in investing wouldn’t just bring more capital and more investors; it could also reshape how markets behave. A larger base of long-term investors would improve market liquidity and depth, leading to better price discovery.

Research by New York University Professor, Wurgler, shows that the elasticity of industry investment to value added is several times higher in Germany, Japan, U.S. than in India. Relative to countries with large financial markets, Indian investors overinvest in their declining industries and underinvest in their growing industries. More women participation will lead to less speculative activity and reduced volatility which would result in more efficient capital allocation, allowing fundamentally strong companies to access funds at a lower cost, while weaker ones face market discipline. The ripple effects of this shift would benefit the entire financial ecosystem.

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If more women participate in the markets and maintain these investing patterns, it could result in more efficient capital distribution, stronger market fundamentals, and, ultimately, a faster path to economic development.

The responsibility of increasing women’s participation in financial markets must be collectively undertaken by government agencies and educational institutions. Efforts need to be made not just to increase financial literacy at the school level but also change the attitude of society towards women. Solutions have to be in the Indian context, and one needs to know what works for a country like India. Often, the approaches effective in developing economies differ from those in developed markets. For instance, while formal banking has traditionally been considered the primary driver of financial inclusion, empirical research by the IMF shows that in developing countries, informal savings groups and mobile money solutions have delivered more effective results. Along similar lines, introducing smaller, more accessible SIPs and simplifying financial products—both in terms of understanding and access—could be key strategies to increase the participation of women investors.

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The author is Associate Professor of Finance, School of Management and Entrepreneurship, Shiv Nadar University, Delhi – NCR

(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)

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