Retail investors miss out even as Index tops

With the BSE Sensex touching a new lifetime high, market intermediaries are introspecting as to why retail investors had missed out on the current market rally. Since it was a liquidity-fuelled rally riding on FII inflows, any sign of reversal of the US Fed’s bond-buying programme will mean large-scale selling by FIIs, hurting retail investors.

Speaking to Business Line , K. Annamalai, Managing Director, Annamalai Capital Services, said the was skewed in favour of select sectors such as pharma, IT and consumer durables.

It has skipped core sectors such as capital goods, steel and power. Infrastructure players hit badly in the past few years see no sign of early revival. A large number of investors have not benefited from the market recovery.

He wondered how long could the rally last when there was no strong economic performance to support. He said it was `tough to find a new client’.

Giving an insight into retail investors’ behaviour, he said nearly one third of his members’ accounts has remained dormant while an equal number witnessed trading only twice or thrice in a full year. He said his company has seen a 50 per cent drop in daily business volume and retail investor participation is down to a trickle and it was ‘tough to find a new client’.

Annamalai said retail participation in the market was dwindling. As stocks that are commonly owned by them have not touched their purchase price and saddled with losses, retail investors do not have the heart to put fresh money into the markets. Even in cases where investors have opted to get professional advice they have burnt their fingers. Generally 40-45 per cent of retail investors have acted on their own while picking stocks and those who had invested in stocks in the energy sector have lost money, he said.

Investors are also unable to come to grips with the changing dynamics of the market. Stocks that were earlier considered sure fire winners have been beaten down and the market rally now is largely confined to a few large cap counters. There could be PSU stocks categorised as Maharatnas/Navaratnas but that did not shield them from value erosion, he said.

Investors have not been able to take a long term bet as stocks considered market favourites suddenly lose favour and new hot bets emerge. It is the buy-and-hold strategy that has become a casualty in the process.