Retail investors have recently emerged as a formidable force in the stock market, presenting a compelling counterbalance to institutional selling during volatile trading periods. This newfound strength was vividly demonstrated in the week of June 3rd, marked by dramatic market swings.
Initially, on June 3rd, amidst optimistic market sentiment fueled by exit poll projections, retail investors surprised by selling shares worth Rs 8,588 crore to capitalize on gains. Meanwhile, foreign investors and mutual funds were actively buying.
However, the following day, as reality dawned with the announcement of actual election results, the market plummeted, presenting an opportunity for retail investors to swoop in. They seized the moment, becoming net buyers and acquiring shares valued at Rs 21,000 crore. In contrast, foreign investors and mutual funds turned into net sellers, offloading shares worth Rs 19,000 crore.
This trend persisted on June 5th, with retail investors again emerging as net buyers, purchasing equities worth Rs 3,000 crore. Meanwhile, foreign institutional investors (FIIs) continued their selling spree, disposing of shares worth Rs 6,500 crore. Mutual funds, however, shifted to being net buyers, adding Rs 2,700 crore worth of equities.
Market observers attribute this phenomenon to the increasing confidence of Indian retail investors in the stock market, particularly bolstered by the post-pandemic resilience of markets. This newfound faith is evident in their “buy on dips, sell on rallies” approach, as highlighted by Kranthi Bathini, Director of Equity Strategy at WealthMills Securities.
Ajay Bodke, an independent market analyst, underscores this growing retail participation, pointing to the surge in demat accounts from 40.80 million to 158.05 million since March 2020. Moreover, the burgeoning pool of mutual fund assets, along with the average monthly SIP inflows of Rs 20,000 crore, further amplifies the retail investors’ impact.
Many market participants now perceive the Indian stock market as standing on three sturdy pillars — FIIs, retail investors, and domestic institutional investors (DIIs). This diversified foundation is believed to fortify the domestic market against global uncertainties and economic slowdowns, enhancing its resilience.