Direct retail inflows hit a three-year high at nearly ₹1 trillion
National Stock Exchange data show that around a third of the direct retail flows in the fiscal year through November— ₹29,594 crore out of ₹95,876 crore—were during the dip in October, indicating that retail investors are becoming savvier and comfortable with market volatility.
The gambit has paid off to an extent, with the stock markets rebounding in recent weeks, but analysts caution the volatility may not be over yet.
Retail investors are better informed today than they were before the pandemic struck, said market analysts. Individuals with little else to do during the covid curfews flocked to the stock markets, which has seen a stellar rally since the first pandemic lockdown in March 2020, with returns compounding at 26%.
“There is definitely more awareness among direct retail, and buying the dip seems to have worked for now,” said Ambareesh Baliga, an independent market analyst.
But he warned that high valuations and slower earnings growth could hit returns. “After a 3,000-point fall, a 1,000-odd point rally is par for the course. What’s important is to see whether earnings justify the current valuations,” Baliga said. “If Q3 turns out to be as tepid as the Q2 (earnings), a sharper correction could be in store…”
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As of Monday, the Nifty traded at a price-to-earnings multiple of 22.7 times against the two-year average of 22.2 times, per Fisdom Research.
However, the aggregate net profit of over 4,000 companies grew by just 5.86% year-on-year to ₹3.82 trillion in the September quarter. In the corresponding year-ago second quarter, net profit had grown 37.64% on-year to ₹3.61 trillion.
A three-year high
Retail investors bought shares worth a net ₹29,594 crore in October, followed by direct retail purchases of ₹9,192.72 crore in November, as per the daily data submitted by NSE to the Securities and Exchange Board of India. As per NSE’s monthly publication Market Pulse, cumulative net retail buying for this fiscal year through October was ₹86,683 crore.
Adding the November data, retail investors net purchased shares worth ₹95,875.72 crore from April through November, second only to the ₹1.65 trillion they bought in all of 2021-22.
However, this is likely to be higher as Market Pulse defines the retail investor category as individuals, proprietorship firms, Hindu Undivided Family, and non-resident Indians, and doesn’t include partnership firms and limited liability partnership firms. The daily data NSE submits to Sebi, however, includes partnership and limited liability partnership firms in the retail category.
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Choppy markets
The Nifty 50 fell 11.5% from a record high of 26,277.35 points on 27 September to a low of 23,263.15 on 21 November. The benchmark index has since bounced back 6%, ending Monday at 24,668.25 points.
The bounce back in the Nifty Midcap 150, a favourite of retail investors, has been sharper. The index fell around 11.4% from a record high of 22,515.4 on 25 September to a low of 19,937 on 18 November, but has since rallied by almost 10% to end Monday at 21,890.15.
On Tuesday afternoon, however, the Nifty 50 and the BSE’s Sensex were down by more than 1%. NSE had a 94% market share in November with a turnover of ₹19.16 trillion, with BSE accounting for the rest.
“Markets are likely to remain choppy with a slight bearish bias, so investors ought to remain cautious,” said S.K. Joshi, a consultant at Khambatta Securities. “I don’t see the market making a fresh high in the immediate future and expect high single-digit returns in the next 8-10 months on account of likely slower corporate earnings.”
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