Retail investors seem to have been making a tentative re-entry into the stock market in the last couple of months, after having cut back on their trading activity as the indices fell sharply in 2011.

At the National Stock Exchange (NSE), turnover in the cash segment has risen to 10.3 per cent of the overall turnover this month. Cash volumes, which made up 25-30 per cent of the turnover a few years ago, had fallen to a low of 6.7 per cent of overall volumes in December 2011. They have rebounded sharply in the first two months of 2012.

Pointing out that higher cash volumes usually signal retail interest, Mr Motilal Oswal, Chairman and Managing Director, Motilal Oswal Securities, says: “There is a new set of investors coming into the markets. Systematic Investment Plans are bringing in first-time investors. More investors are taking the mutual fund route. Stock SIPs too are picking up, especially in the past six months.”

Category-wise turnover data from the BSE also suggest a pick-up in retail trading. Retail investors accounted for 29.5 per cent of gross turnover in January, up from 27 per cent in December 2011. Mr Oswal also believes that with events like the Budget round the corner, retail investing activity will remain high as trading opportunities will be aplenty.

Small-cap action

The kind of stocks that have registered big gains also point to retail activity. Mr Sandip Sabharwal, CEO-Portfolio Management Service, Prabhudas Lilladher, who also agrees that retail participation has increased, said: “The sharp rise in prices of small-cap and mid-cap stocks over the last two months has stoked a lot of speculative interest in the market”.

Some of the big gainers of 2012 are stocks such as Firstsource Solutions, Orbit Corporation, JSW Holdings, Parekh Aluminex, Den Networks, Kalyani Steels and IVRCL. All these stocks saw a steady increase in retail shareholding in the four quarters ending December 2011. The most visible sign of reviving retail interest in equities, however, comes from the MCX IPO, which saw its retail portion subscribed 24 times.

In the past, it was big-ticket IPOs that marked inflexion points in the market, drawing in a number of retail investors. The Reliance Power IPO marked the month when the maximum number of new demat accounts were opened.

Trading more

While retail interest may be on the uptrend, are investors coming in for the long term or are they looking to make a quick buck from speculation? The proportion of investors who are taking delivery of their shares against trades points to the latter.

In January, the deliverable volume to overall trades stood at 26.2 per cent, down from 27.9 per cent in December and below the high of 29.57 per cent last April.

craji@thehindu.co.in

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