Share of non-institutional investors in cash volumes climbs to 11-year high

Experts attribute the development to rising interest for direct equity among retail investors

The share of non-institutional investors in the markets, in terms of cash volumes, surged to 72 per cent in July. This has been the highest level seen since August 2009, according to an analysis by Motilal Oswal Financial Services.

In July, the average monthly cash volumes stood at Rs 62,200 crore, of which non-institutional investors accounted for Rs 44,784 crore. “The number of active clients has gone up tremendously. We have seen a rise in the number of opening of new accounts. These data points suggest that the retail participation has picked up in the markets,” said Satish Menon, executive director at Geojit Financial Services.
 

“Some investors seem to have also taken value call following the sharp correction seen in March,” he noted. 

In March, the benchmark Sensex had corrected over 32 per cent amid a surge in Covid-19 cases and economic uncertainty. Experts said the sharp run-up in the markets since March lows has revived retail participation. “With the Covid-19 pandemic forcing people to stay home, they are looking at generating some income through stock market investment. The recent run-up in the markets has led retail investors to believe that quick gains can be made in the markets," said G Chokkalingam, founder and managing director of Equin­omics Research and Advisory. 
 

Since March 23 lows, the frontline indices, Sensex and Nifty, have rallied about 45 per cent each. According to analysts, while several investors have been quick to enter the markets amid the run-up, it would be interesting to see how these investors behave if market volatility intensifies again.

The heightened interest in direct equities among retail investors has led to an improvement in broking incomes, but, analysts said, a shift in investor sentiment could put this income stream under pressure.

“The key risk to our positive view would arise from weaknesses in the capital markets that can impact investor participation," CLSA said in a note on ICICI Securities.

Institutional investors are still showing caution despite the market run-up. Domestic mutual funds have been net sellers of Rs 9,639 crore worth of equities between April and July.