The BSE S&P Sensex and the NSE Nifty might have been enjoying the party at the bourses. But retail investors are hardly in the scene.
According to brokerages, despite the strong show by the benchmarks and momentum in select mid- and small-cap stocks, response from retail investors remains lukewarm.
Decade low
Retail participation in the markets is almost at a decade low. According to SEBI data, the daily cash market average volume plunged to Rs 1,995 crore on the bourses in September 2013 from a healthy Rs 5,651 crore in 2009-10.
The lack of interest from retail investors have also forced many broking houses to shut shop. Among the biggest is the recent closure of retail broking operations by HSBC InvestDirect Securities (India).
At the end of September, the number of brokers operating in the cash segment declined to 9,606 from 10,203 in 2010-11. Similarly, the presence of sub-brokers was down 31 per cent to 57,387 (83,808).
Arun Kejriwal of KRIS Securities thus sums up the market mood – he says, even regular traffic is not plying on Dalal Street.
Retail plunges to 30%
According to broker estimates, the share of retail participation in cash turnover declined sharply to about 30 per cent compared to well over 50 per cent three-four years back.
So, have the small investors missed the bus again?
Kejriwal says retail investors are still sitting on huge losses. Some of the stocks in which they had entered are quoting below par level and some have even turned dud.
“Having burnt their fingers, now they prefer bank deposits, National Savings Certificates and tax-free bonds.” And now with this rally, they are even exiting from heavyweights, such as TCS.
Though the indices are at elevated levels, for some, the real valuation of the Sensex is only around 12,000 and the Nifty 3,500-4,000, according to some participants.
Most analysts still believe the rally may fizzle out and advice investors to book profits.
According to an ICICI Securities (October 10) note, lingering concerns over fiscal deficit overshooting the Budget estimate, hardening interest rates, elevated inflation, Current Account Deficit remaining in the discomfort zone and sluggish growth in Gross Domestic Product will limit the upside for the equity markets.
“Based on our proprietary model, we have a six-month Nifty target of 5,850 though the Nifty will continue to gyrate between 5,600 and 6,200 during the same period,” says the report.