Participation of retail and high-net worth individuals (HNIs) in the cash segment of the equity markets slumped further in calendar year 2013, with total retail volumes declining as much as 20% compared to last year.
As per data from exchanges, the retail volume in the cash market fell to R6.03 lakh crore in the current calendar year on an annualised basis, compared to R7.56 lakh crore in calendar year 2012. The average daily turnover last year was around R3,000 crore on the BSE on the retail side, which has fallen to R2,400 crore in the current calendar year.
According to market experts, retail participation has been on a decline due to the disappointing performances of small- and mid-cap stocks. “Barring a few quality stocks in the pharma, IT and FMCG sector, the broader market has seen huge destruction of value especially in the mid- and small-cap space. The retail investor has taken a huge beating,” said Sandeep Nayak, executive director & CEO, Centrum Broking.
In year-to-date period, the BSE Mid Cap Index has slipped 18%, while the BSE Small Cap Index has lost 23%. The Sensex has, meanwhile, gained over 5% over the same period.
Apart from this, retail investors are finding few opportunities to enter the market due to the lack of initial public offerings (IPOs). “Even stocks auctioned at IPOs start to trade below their issue price in the markets, negatively impacting the sentiment of retail investors,” said Alex Mathews, head (research), Geojit BNP Paribas Financial Services. IPOs have raised R1,520 crore in the current calendar year against R6,937 crore raised last year.
Market observers feel retail investors are yet to regain their confidence after burning their fingers during the market meltdown of 2008. “In 2007-08, there was huge retail participation in stock futures. However, the retail participants suffered huge losses when the market crashed in January 2008,” Nayak added.
With retail investors losing interest in the equity segment, several brokers have been forced to shut shop. According to data compiled by Sebi, the total number of registered brokers fell below 10,000 in May this year, the first time in the last four years.
Brokerages feel that retail investors would return to markets once macro-economic outlook starts looking positive. “Fall in inflation levels, along with strong economic recovery, would lead to a secular trend in markets and draw retail investors. High volatility is another factor keeping retail participants