Mumbai, June 15: The recent rally in the stock markets has seen the return of retail investors, who were missing from action for over six years.
Data available from the stock exchanges suggest retail investors, though cautious, are showing an increased interest in equities, reflected in the rising turnover of clients (that excludes FIIs, mutual funds, banks and insurance companies), particularly from April (see chart). This was the time when expectations firmed up about an NDA government, led by Narendra Modi, coming to power.
With the BJP forming the government at the Centre with a comfortable majority and the stock markets scaling fresh peaks, optimists believe the participation of retail investors is set to increase.
Paras Bothra, vice-president of equity research at Ashika Stock Broking, said, “Yes, the retail investors are now in the market. They have not been participating as they suffered huge losses in 2006 and 2008. But now these investors seem to have made up their mind and they have come back to the market.”
A key indicator of enhanced retail participation, according to Bothra, is the rally in mid-cap stocks. The S&P BSE mid-cap index has risen nearly 33 per cent this calendar year, with most of the gains being recent. On the other hand, the benchmark BSE Sensex has appreciated 19 per cent.
Bothra, however, said investors should have an idea of where to put their money. “The investor should not invest merely on hearsay or tips that he receives from friends. He should do his research properly and invest in companies that have good dividend history and quality promoters,” he said.
Interestingly, retail investors continue to be net sellers. For instance, NSE data for June 12 show them selling stocks worth Rs 9,486 crore, while buying Rs 9,440 crore of shares.
Arun Kejriwal, director at Kejriwal Research and Investment Service (KRIS), explains: “Retail investors have come back to the market after a gap of over five years on the hope that the current rally is sustainable. But they are selling more than buying. These investors are churning their portfolio and selling stocks which they have been holding for a long and then purchasing shares. So, they are not investing fresh money. For this to happen, it will still take some time.”
Some analysts say it is too early to ascertain whether the pure retail investor has returned to the market.
According to Sudip Bandyopadhyay, president, Destimoney Securities, the rise in non-institutional and non-proprietary trades may be on account of high networth individuals, using the rally to exit from stocks they have been holding for some time now.
“The pure retail investor seem to have not entered the markets as yet. For him, the share prices have moved too soon and, therefore, he is not jumping in the fray,” he added.