With the markets touching a new high on Monday on hopes of a growth-oriented Budget, retail trading on the Street seems to be picking up as the share of retail turnover to total cash turnover (NSE and BSE) rose to a two-and-a-half year high of 51.79% in June.
Experts say retail investors are taking speculative betting over sectors and stocks that may gain from the government decisions. “After Modi’s victory, market participants are taking speculative trading on sectors that could possibly be in line for reforms,” said Raamdeo Agrawal, the MD and co-founder at Motilal Oswal Financial Services.
The markets have been driven by foreign institutional investors (FIIs) that have run a tab of $10.69 billion in CY14. However, it’s only now that the participation from retail investors is picking up. At the end of February, the average retail cash turnover was at a six-month low of R5,708 crore, which has now risen to a three-and-a-half year high of R12,475 crore. This is the first time in 2014 that the share of retail turnover in the total cash segment has crossed 50% mark.
On Monday, markets scaled new highs; Sensex closed 138.02 points, or 0.5%, higher at 26,100.08 points and Nifty ended the session 35.55 points higher at 7,787.15 points.
Experts say rise in equity returns, when other asset classes like gold are seeing a downtick, is another factor that has turned up retail interest. “The mix of equities in financial savings is driven by trailing real equity returns. Trailing returns are rising and this is good for equity flows,” Morgan Stanley said in a recent report.
Sensex gained 23.28% in YTD, while the MCX spot gold has shed 4.43% in the same period.
Market observers say retail participants are booking profits and churning their portfolio, which is leading to the rise in retail volumes. “Mid caps have outperformed the markets, giving retail investors opportunities to exit and take fresh positions,” said Rikesh Parikh, the vice-president, equities, at Motilal Oswal Securities. The BSE mid-cap has gained 42.53% in CY14.