Acknowledging that financial awareness is only a first step could herald multi-dimensional policy-regulatory initiatives

Rachana Baid & CKG Nair[1]

The Investor Survey 2025, released by the Securities and Exchange Board of India (SEBI) in mid-January 2026, offers crucial insights into the investment behaviour of Indian households. Following a similar 2015 Survey by SEBI, it analyses the transformational changes that happened in Indian securities markets in a decade in terms of market size, product diversification, tech innovations and investor participation.  Thereafter, it raises a core question why despite growing financial strengths and rising awareness investor participation is lagging behind? Such acknowledgement and introspection are refreshing as they could help anchor fresh/modified policy –regulatory initiatives.

The Survey, with information from over 90,000 households across diverse Indian geographies, is rich in data and analytical results. It reveals the stark contrast between awareness and active participation in the securities market. While approximately 63% of households recognise at least one securities market product, only 9.5%, engage in actual investments.

It’s reassuring that SEBI is committed to bridging the gap between awareness and participation, as noted by the Chairman in his Survey foreword. However, the investment ecosystem is shaped by forces that fall outside any single regulator’s mandate.

Complex milieu facing investors

The dominant sentiment among Indian households revolves around the preference for capital preservation over high returns. With nearly 80% of households categorised as low-risk, the overall penetration of the securities market remains low. Traditionally, Indian investors have relied heavily on fixed deposits, life insurance, real estate, and gold. This conservative financial posture is often attributed to a lack of product understanding, prompting calls for improved investor education to bolster confidence. However, as revealed by the Survey, the reality is far more intricate and multifaceted; the mere presence of knowledge does not guarantee active participation.

Securities markets do not operate in isolation. Investment decisions are influenced by numerous factors beyond financial literacy and capability. The holistic financial system, its relationship with the securities market, the philosophical orientation of competing financial products, surrounding ecosystems like tax policies, fraud prevention mechanisms, and grievance redressal processes etc. play crucial roles. The existence and functionality of all financial markets are intertwined in operation as well as with various laws and regulations that govern them. A robust framework of all the other institutions and infrastructure is necessary to foster trust.

Behavioural barriers

While knowledge and financial literacy are important, behavioural finance suggests that investors often make decisions influenced by psychological barriers. The overwhelming nature of complex investment choices can deter even informed investors from participating in the market. Consumer Finance Risk Monitor (02 March, 2026) by the OECD, underlines such behavioural aspects and consequent distrust with ever-changing technology and fear of scams and frauds as major barriers on financial participation and investment decisions by people in multiple jurisdictions, including India.

Digitalization in finance brings both opportunities and challenges. While technology has improved ease of access to investment products, it also seem to have complicated decision-making processes. Increasing reliance on digital offerings can further entrench financial exclusion for individuals lacking digital skills. Low digital capability ranks as one of the most significant risks among those surveyed by financial jurisdictions, indicating a substantial gap in the ability of potential investors to engage meaningfully with modern financial systems. Recent trends also indicate that as technology shapes investment avenues, it also brings fears concerning digital safety. High risk of data breaches and complex digital products reinforce preference for traditional investments perceived as more secure.

Digital scams, frauds

The growth of digital financial services introduces new risks. Opaque algorithms and manipulative nudges intensify the vulnerability among potential investors Scams, such as phishing, vishing, smishing, and impersonation schemes, are becoming increasingly sophisticated, threatening consumer trust in digital financial systems. One scam can scar many and deter many more from joining the investing mainstream.

SEBI has launched a nationwide campaign “Jagruk Niveshak Surakshit Niveshak” (Aware Investor, Secure Investor) to educate investors against rising digital and social media investment frauds. It promotes awareness focusing on safe investing and verifying  SEBI-registered intermediaries. Very recently SEBI Chairman has launched a Verified App Label initiative on Google Play to help investors distinguish genuine platforms from fraudulent mobile app. While SEBI’s efforts in investor education, and its application of tech tools like Validated UPI Handles, “SEBI Check” for secured payments by investors to enhance investor protection and combat fraud, and the Saa₹thi app etc. are reassuring steps in mitigating these problems, they must be complemented by broader initiatives that involve other institutions and investor friendly operational and digital frameworks.

Addressing the root causes

Underwhelming investor participation in India’s securities markets is not only due to lack of awareness. Instead, it is mainly the result of complex interrelationship between financial markets, regulators and other institutions, behavioural barriers, traditional and emergent risks in a rapidly digitizing financial landscape. A multi-pronged approach is necessary to effectively tackle the challenges of raising investor participation on a sustainable basis. All stakeholders need to invest in comprehensive, regularly updated financial and tech literacy programs that reach various demographics, particularly focusing on those in rural/underserved areas. Digital skills training can empower individuals fostering confidence that can translate into active market participation. Collaboration between regulatory authorities, cybersecurity agencies, and financial bodies is crucial to building a safer digital environment. Investor protection frameworks needs to be updated continuously to reflect the risks associated with emerging challenges and practices. Addressing these challenges will require strategic, coordinated efforts from multiple stakeholders. Only then can we hope to see a significant uptick in investor participation, supporting the overall growth of India’s financial markets.