Retail investments surged to different new highs since the beginning of the year but in September, they turned their back on the Indian equities. Retail investors after five months, turned sellers in this stock market wiping off ₹ 7500 crore. This is one of the largest retail sell-off in recent times, especially since March 2024.
Retail investors vs. FIIs and DIIs
Interestingly enough, the foreign and domestic institutional investors invested more in September while the retail investors turned net sellers. The FIIs invested around ₹ 55855 crore in September, while DIIs put in around ₹ 17421 crore which actually shadowed the sell-off by retail investors.
It was last in March 2024, when retail investors became net sellers offloading shares worth around ₹ 8862 crore, in the past five months since March they have been putting in money into the stock market and even August witnessed the highest investment and the net buy was around ₹ 14235 crore but in September, retail investors started dumping the stocks.
Reasons for Retail Sell-off
The primary reason for the retail sell-off as per analysts is profit booking. Since the valuation of Indian stocks is quite high currently, retail investors seem to be booking profit ahead of the festive. Another reason for the sell-off could be the increasing craze for the IPOs. Retail investors are now taking part in IPO investments and for funds; they may be selling their current portfolio and putting the fund in IPOs.
However, the most interesting fact is that retail investors are also selling the IPO stocks they are buying after realizing the listing gains. This indicates that the sell-off by retail investors is not linked to market slowdown as both broad market indices Sensex and Nifty along with the small and midcap indices all are trading higher and have rallied significantly since the beginning of the year.
Another important nature of retail investors observed in the past months is that their confidence in the primary market is higher than in the secondary market and that is why while the retail participation in IPOs or primary market is increasing, the same declined this month in the secondary market. In addition, this is because of the strong primary market and successful IPOs that are pouring in. Only in September, ₹ 11890 crore was raised from IPOs of 13 companies. Out of these 13, except one, all the IPOs were successful with listing gains even up to 135%.
On the other hand, gold and other asset prices have also increased in the past month and this could be another reason for retail investors withdrawing their equity investments and going for alternative assets such as gold and real estate.
The reason for declining faith in the secondary market has a lot to do with the overvaluation of the stocks here and the market can witness a significant correction in its level. This is why the retail investors already started pulling off their money from the market, as it seems. However, the correction will not be immediate as the experts are suggesting and the market will continue to perform well however risk-reward ratios look a little off-track as of now.
September’s Sensex & Nifty Performance
In September, Sensex zoomed around 3.9% while Nifty 50 rose 3.7%, and along with them, they took MidCap indices and SmallCap indices of BSE high by 0.9% and 1.91% respectively. BSE Sensex gained around 18.5% year-to-date while Nifty 50 rose 20% during this period while mid & smallcap indices rose around 34%.
Source: MoneyControl
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