Hope rally brings small investors back to D-Street

Tags: News

Data from bourses shows retail participation doubles in a year

Growth hope is not the only reason why stockbrokers are cheering for Narendra Modi. The euphoria around his arrival has brought back many of the retail investors who had gone missing from the market after the 2008 crash.

Stockbrokers in Mumbai claim retail participation in equities doubled fr­o­m a ye­ar ago as the domestic equity indices rose to new pe­aks. Yet, the retail investor number would be a small share of what it was during the 2006-07 bull run.

The ongoing stocks rally has been attributed largely to fresh inflows from foreign institutional investors on expectation of economic revival. But brokers say an increasing number of retail investors have participated in this rally.

Data from the bourses indicates higher retail participation in the market. On the National Stock Exchange, the turnover in non-institutional non-proprietary trade in the cash market has risen by 60 per cent to a daily average of Rs 14,465 crore in April from Rs 9,008 crore a year ago.

In equity exchange-traded funds, NSE saw 63 per cent spurt in non-institutional non-proprietary participation in April compared with last year. The daily average turnover in non-institutional non-proprietary trading in equity ETFs has gone up by 407 per cent to Rs 23.94 crore from Rs 4.72 crore.

Many retail investors, whose investments had got stuck in stocks that crawled over the past five years, used this rally to cash out. Some booked profit while others made fresh allocation to equities expecting better times ahead.

C J George, managing director of Geojit BNP Paribas Financial Services, said, “There has been a 100 per cent rise in retail participation in the market compared with the last year. Unfortunately, a large number of them are booking profit. After waiting for 4-5 years, they want to sell even if they have regained the capital invested.”

BSE client data shows retail investors have been net sellers in the market. On May 16, when the Sensex touched a record high of 25,375.63, retail investors were net sellers of stocks worth Rs 739.93 crore, BSE’s client data They have been net sellers of equities worth Rs 11,849.87 crore this year.

“I am positive about the market. It’s the beginning of a long bull market,” George said when asked about his outlook for the equity market.

Rajesh Iyer, executive vice-president and head of investments and family office at Kotak Wealth Management, said HNIs were building equity portfolios in the current rally. “They have got constructive ideas on equities.”

Suresh Sadagopan, founder and chief financial planner of Ladder7 Financial Advisories, said: “Some people have booked profit, but most investors want to stay invested for the long term. Some are asking for additional allocation to equities.” Sadagopan has been advising his clients to wait and watch and continue with SIPs.

Brokerages say retail participation is far short of what it should be.

Nitin Jain, CEO of capital markets at Edelweiss, said retail investor participation in equities was not substantial. “Many investors are still digesting the sudden rise in the market. If the current trend continues, participation will grow.”

Data from the two national depositories, NSDL and CDSL, shows the number of demat account holders in the country has gone up by 7.66 lakh in the last one year to 2.18 crore as of April 30.

“Considering that the equity market has not moved significantly from their highs while earnings buckets have almost doubled in the last six years, there is considerable valuation comfort, especially when the economy is expected to pick up pace under the new dispensation,” Jain said.

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