Retail comeback gives fillip to cash market

Retail comeback gives fillip to cash market

Retail participation in the National Stock Exchange’s (NSE’s) cash market has seen a revival of late, offsetting the massive sell-off witnessed in the initial months of the present financial year.

Data from the NSE shows that from April to July, the retail segment witnessed a net sell-off to the tune of Rs 21,400 crore. However, in August and September, there was a trend reversal with Rs 21,900 crore in net investments by the retail segment — bringing the net investments in the first half to a mere Rs 500 crore.

Retail participants in the NSE’s cash market segment witnessed a surge in September, crossing the 11-million mark. Investors took positive cues from the encouraging Q2 earnings season and broad macroeconomic stability.

The number marked a stark rise since the outbreak of the pandemic — jumping 4x within two years from the 3 million investors in January 2020.

“When the markets staged a recovery in April after the March lows, retail investors largely booked profits and exited. However, overall volumes were not affected because mutual funds were putting in money, and this was essentially the SIP money by retail investors,” said market analyst Ambareesh Baliga.

The number of active investors had been on a downward trend since January 2022, reaching 6.7 million in April 2023— nearly half the levels seen in January 2022. This saw a reversal after April this year, seeing new investor registrations during the same period.

Baliga added that investor behaviour has changed and they are coming into the markets via SIPs to diversify and reduce the risk element.

Interestingly, the number of retail investors had crossed 10 million in August, before rising to 11.3 million in September — the highest in 20 months.

In comparison, the count of retail investors moderated to 3.9 million in September in the equity derivatives segment, after reaching a record 4 million in August.

According to NSE’s market pulse, retail inflows surged in FY21 and FY22, fuelled by the post-pandemic liquidity. With falling interest rates making other avenues unattractive, retail investors flocked to the equity markets in a big way.

Net retail investments in those two financial years had touched Rs 2.3 trillion. However, retail flows moderated in FY23 and FY24 (so far), dropping to Rs 49,200 crore in FY23 and Rs 500 crore in H1FY24.