The category net purchased shares worth ₹21,178.94 crore on 4 June when the Nifty tanked 8.5% to 21884.50 points from the previous session after the BJP failed to secure a majority on its own – winning 240 seats against an anticipated 330 – in the Lok Sabha polls.
The purchase on that single day accounts for almost 46% of the total purchase of ₹46,383.8 crore in the fiscal year through 14 June, as per NSE data. In comparison, their net purchase stood at ₹47,180 crore in FY24 and ₹49,206 crore in FY23.
FII selling
FIIs net sold shares worth ₹12,511.07 crore and mutual funds offloaded equities worth ₹6,249.12 crore on 4 June. The Nifty has since then rallied 7.6% to Monday’s closing of a record high 23557.9 points.
NSE enjoys a 93% market share in the capital market segment , clocking an average daily turnover of ₹1.18 trillion against BSE’s ₹8,494 crore average daily turnover so far this fiscal year.
Behavioural shift
Market mavens see retail interest as a behavioural shift from being ‘last in-first out’ prior to the pandemic to ‘buying the dip and selling the rally,” post the event. They caveat though that the post-pandemic retail entrant hasn’t seen a 20% plus drawdown and should be cautious.
“It seems they have been buying the dips and selling the rallies , against typically being last in-first out prior to the pandemic,” said Siddhartha Khemka , head of retail research at Motilal Oswal Financial Services. Khemka adds that in the absence of a serious market correction post the March 2020 Pandemic, when markets tanked 38% in little over a month to a low of 7511.10 on 24 March , there haven’t been any serious long-lasting market corrections and warns that this should act as a “leash ” on “greed.”
Ashish Nanda, president & head – digital business, Kotak Securities, agreed, but warned against irrational exuberance .
“Prima facie, the numbers suggest that individual investors have turned smarter, in terms of buying dips and selling rallies. But having said that, they haven’t been privy to continuous drawdowns that happen day after day and make the previous day’s dip seem like the tip of the iceberg. It goes without saying that caution should be the buzzword.”
Data from NSE shows that the highest quantum of retail direct buying of ₹1.64 trillion was in FY22 . The subsequent years witnessed substantially reduced buying but the tempo of purchases so far this fiscal, particularly post the elections, shows that retail investor interest has been rekindled, especially in mid- and small-caps .
Thanks to relentless MF inflows and direct retail investments, broader market indices have outperformed the large caps. While Nifty has returned 25% to 23465.60 over the past year through 14 June, Nifty Smallcap 250 has generated a 63% return to 16845.55 while the Nifty Midcap 150 has given a 58.25% return at 20698.25 through 14 June.
However, Sharad Shah, a well-known stock market trader, is unremitting on the retail frenzy. He believes that the current lot of retail investors are chasing profits without paying heed to market fundamentals .
“These people will be running helter-skelter once the party stops. I think the imminent Budget session could act as a spoiler to the unbridled run seen thus far. Turbulence lies ahead,” warned Shah.
Indeed, from a historical perspective, the market, especially the broader market, seems richly valued. Bloomberg data shows the one-year forward price to earnings multiple of Nifty at 18.85 versus a 10 year average of 17.11 times as of 14 June . The Nifty Midcap 150 one-year forward PE is at 28.26 times (22.22) while that of the Nifty Smallcap 250 is 20.94 (15.6).
The rising retail interest in the share market is reflected by demat accounts on NSDL and CDSL growing almost fourfold, from 40.8 million in March 2020 at the start of the pandemic to 158.05 million at the end of May this year .
“In the last one year, we have seen addition of about 4 crore demat accounts in India, reflecting the growing retail interest in the market,” said Mohit Mehra, vice president-primary markets & payments at Zerodha.
“This has been coupled with increased interest in equity mutual funds inflows which hit a record high of 34.7 thousand crore ( ₹34,700 crore) in May 2024,” he said.
