Retail investors pump ₹5,607 cr in June after 3-month equity exit

After sitting on the sidelines for three months, retail investors jumped into the equity fray in June amid a sustained rally in stock prices.

 

So far this month, they have invested ₹5,607 crore in the cash market.

 

In the previous three months, they had yanked out close to ₹20,000 crore. The retail buying comes as benchmark Nifty is poised to log its fourth straight month of gain. The index had posted losses during the preceding five months.

 

Analysts said retail investors were waiting for markets to stabilise.

 

“A sense of stability returns when bad news is no longer impacting the price. When you see 15-30 days of markets moving up or even on days when the market is down, but the breadth of the market is stable, that is the time when sentiment changes, and that's what happened,” said Amar Ambani, executive director of Yes Securities.

 

Ambani added that foreign portfolio investors (FPIs), who have been net buyers since April, have also been a morale booster for retail flows.

 

FPIs turned net buyers of Indian equities from April onwards after being net sellers in five out of the six preceding months.

 

Interestingly, June has seen buying from FPIs, domestic institutions as well as retail buyers.

 

The three months of continuous selling by retail investors were attributed to tax harvesting and concerns about market stability. This stemmed from negative news flows ranging from US tariff policy to geopolitical tensions globally.

 

Individual investors withdrew ₹14,325 crore from domestic equities in March, their largest monthly outflow since 2016. This came as market rout in the preceding months prompted them to engage in “tax-loss harvesting.” 

 

Tax-loss harvesting is a strategy where investors sell loss-making investments to offset taxable gains from other investments, thereby reducing their overall tax liability.

 

The selling continued in April and May with reduced intensity.

 

In April, retail investors were net sellers to the tune of ₹2,720 crore, and in May, worth ₹2,572 crore.

 

Chokkalingam. G, founder of Equinomics, said a steep correction in mid and smallcap stocks during the post-September selloff pushed many retail investors to hit the exit button.

 

“There was a huge market capitalisation erosion in the months after indices hit their September peak. In the process, many small and midcap stocks fell 30-50 per cent in the March quarter, including quality ones. A rout of this scale was unprecedented,” said Chokkalingam.

 

He attributed profit booking as the reason for selling by retail investors in April and May when both benchmark and broader indices posted gains.

 

“Many people who started investing in February and March made quick gains. And, because of volatility due to tariff war and geopolitical tensions, they were tempted to take out profits,” added Chokkalingam.

 

Some experts said that although markets made gains from March onwards, investors were not convinced that this would sustain.

 

“The typical psychology of a retail investor is to hold when the market is going down. If they have money, they will average out at lower levels, but as the market rises and the stock approaches the purchase price, they sell. Most retail investors don't ride the rally; they exit at a loss. Moreover, the evidence of recovery is right now, but you put yourself in April and May. There was uncertainty, so they exited. In June, post the de-escalation of the Indo-Pak conflict, there was a feeling that it couldn't get worse,” said Ambareesh Baliga, an independent equity analyst.

 

The trajectory of retail flows will hinge on whether market gains are sustained or not.

 

“Real investors will come back if the markets consistently hold on and move up just like what you saw post-Covid. They need to be convinced that it is easy to make money in the markets,” said Baliga.