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NEW DELHI: Although growing stronger with each passing day despite inflationary pressure on household budgets, fixed deposit interest rates getting better and incessant FII outflows dragging the stock market lower, Dalal Street’s retail army is finally showing fatigue signs.

Along with the peaking of Nifty at 18,604.45 in October, the number of new investor registrations also peaked last year. NSE data shows that the number of new investors registered on the stock exchange stood at 20.41 lakh in October 2021. Since then, with each passing month new registrations are getting lower. In April 2022, the latest data of which is available, new registrations stood at 13.29 lakh after falling 10 per cent on a month-on-month basis.


(Source: NSE)

While foreign institutional investors have been largely dictating the highs and lows of Nifty due to their relative dominance in ownership pattern of listed companies in India, the hyperactiveness of retail investors in the last two years have partially offset the impact of FII outflows and thus making them the new dons on Dalal Street.

While FIIs have been selling Indian equities incessantly for the last nine months and have sold stocks worth over Rs 2 lakh crore so far in 2022, the retail investors, who were once dismissed as “dumb money” or “weak hands”, have been net buyers for eight consecutive months.

In the last seven years, retail investors have been net buyers for the last two years. During this period, they have invested nearly Rs 2.3 lakh crore in equities directly through NSE’s cash market segment, of which Rs 1.6 lakh crore were in FY22.

The ownership of FIIs in Indian stocks dipped to a nine-year low of 19.7 per cent in December 2021 while holding of retail investors in NSE-listed universe inched up to a 14-year high of 9.7 per cent.

However, the continuous dip in growth rate of new investor registrations indicates that the interest of retail investors may be on the downside.

The NSE report shows that the share of retail investors contracted by 50 bps MoM in the equity derivatives segment to touch 27.9 per cent in April.

Sandeep Bhardwaj, CEO – Retail,

, however, sees no signs of retail interest wanting. “Instead, we believe that the more the market corrects, the more new investors are likely to be added. This is because people who missed out on the post-March 2020 rally fall will look at this correction as an opportunity for the long term, “I have told ETMarkets.

Describing the current retail lot as much more mature compared to a decade ago, he said with better financial literacy and on-demand availability of financial knowledge retail investors are looking at long-term prospects of companies and are investing with a mindset of owning the businesses rather than trading them.

At this stage, if retail investors also start withdrawing funds from equities then the sustainability of any bounce in Nifty might be in danger.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)


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