Small investors dive into equity markets even as institutions dither

While institutional investors read the charts, watched the news and debated on whether or not to invest, the small Indian investor pumped large amounts of money into equities in the third quarter of 2021-22 (FY22). This came in spite of a 1.5% slide in the Nifty index during the period.

Not ones to be deterred by the third wave of COVID, a tightening of the monetary policy by central banks across the world, or a bearish trend in the markets, retail investors invested huge sums in stocks on the National Stock Exchange (NSE), data reveal. In Q3 FY22, the share of individual investors in NSE-listed companies was at a record 7.32%, media reports said, citing data from PRIME Infobase. In Q2 FY22, the figure was 7.13% and in Q3 FY21, 6.9%.

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Traditionally, Indian retail investors have been more traditional, opting for small savings schemes, band deposits, real estate, or safe haven options such as gold.

Net buyers of stocks

For all of 2021, retail investors were net buyers of stocks worth $19 billion, said NSE data. Institutional investors, meanwhile, were net sellers of stocks worth $7 billion. There was a net inflow of $12 billion into the bourse in 2021, thanks entirely to small investors.

These investors are also seen to be behind a 24% surge in the domestic benchmark indices last year. While the Nifty Midcap 100 rose 46%, the Nifty Smallcap 100 surged 60%.

Per NSE definition, ‘retail investors’ refers to individual investors, sole proprietors, Hindu Undivided Families (HUFs) and non-resident Indians (NRIs).

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In tandem with the high level of investing in stocks, there was a jump in the number of dematerialised (demat) accounts opened with depositories CDSL and NSDL. Last month, the number of demat accounts across the two depositories was 8.1 crore; this was more than twice the 3.6 crore demat accounts recorded as of March 2019.

Behind the surge

Media reports noted retail investors’ keenness to buy smallcap and midcap stocks, and stay put even during bearish phases. This could be attributed to increased investor education, as well as tips from finance professional available on YouTube, Twitter and other social media platforms.

The COVID pandemic is also seen to have supported the trend, as people used the lockdowns to learn how to invest online and later went on to do it.