BackRetail investors in wait and watch mode
Cash is king as even inflows into mutual funds remain muted; high turnover attributed to traders
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Mumbai: Retail investors in India are mostly sitting on cash, waiting for the current turbulence in the equity market to settle before investing their funds. Some, however, have started buying in small quantities as they hunt for value stocks.
BSE’s benchmark Sensex has declined 6.37% so far in the year. It ended trading at 24,455.04 points on Friday, the lowest close since 30 May 2014.
“Retail investors are sitting on cash. They are neither selling heavily, nether buying heavily. That said, panic hasn’t set in," said Nithin Kamath, chief executive of discount brokerage Zerodha.
“Since April onwards, there has been depletion from retail investors’ end, and their participation is down. They are not active in the market any longer. They are stuck in positions. There is no fresh money coming in," said Prasanth Prabhakaran, president, retail broking, IIFL Holdings Ltd.
Inflows into mutual funds are also muted, according to wealth managers. “We are not doing anything right now as markets are very volatile, largely due to global markets. It is static for both—inflows into mutual funds and direct investments into stocks. We are just waiting until the volatility goes away," said Raghvendra Nath, managing director, Ladderup Wealth Management Pvt. Ltd.
“If the market goes further down from here, and if there is scope for further allocation, we will do that," added Nath.
Retail investors started returning to the market in early 2014 after stocks started rallying from September the year before in anticipation that National Democratic Alliance’s Narendra Modi will become Prime Minister.
However, global factors such a slowdown in China, the devaluation of yuan, and a Fed rate hike have weighed on the global market sentiment recently.
Things aren’t in place on the domestic front, too. While quarterly corporate report cards continue to portray lacklustre earnings, things haven’t gathered pace on the reforms front either. Rural demand continues to remain tepid.
“Retail investors obviously prefer bull markets. In the market which has essentially been crashing for the last several trading sessions, they are selling," said Jayant Manglik, president, retail distribution, Religare Securities Ltd.
“They have sold, but then there are a lot more investors who are waiting for value-buying (opportunities) if the market crashes further," added Manglik
Data from Motilal Oswal Financial Services Ltd showed that turnover from retail investors since the start of January amounted to ₹ 1.02 trillion. Assuming that it continues at the same pace, the total turnover in this category for the month would end up at around ₹ 2.38 trillion.
This compares with the monthly turnover of ₹ 2.14 trillion in December and ₹ 1.76 trillion in November. To be sure, this data just indicates participation of retail and high net worth individuals, and one cannot bifurcate it into purchases and sales. This data is arrived at by deducting institutional and proprietary turnover from total turnover on BSE and National Stock Exchange.
Brokers attribute this high turnover to traders.
“Traders are very active, as they are playing on volatility, which is why turnover looks inflated. They are in trouble, with stop losses being triggered," said Bhavin Chheda, a sub-broker at Magnum Equity Broking.
While market volatility had ensured the traders were busy, some investors had started fishing for value-buying opportunities as markets crashed earlier this month, though not in a big way as yet.
“Investors are not aggressively buying, they are hunting for value in select stocks," Chheda, who is also an investor and trader. Others echoed the view.
“Investors are nibbling into equity investments either via mutual funds or equities. They are cautious about making lumpsum investments, as they fear a downside. Wait-and-watch policy is there, and people are buying in a phased manner," said investment adviser Kavitha Menon.
“While SIPs (systematic investment plans) have not stopped, big ticket investments are not around," added Menon.
Some shared a different view, and thought it was already a time to lap up stocks as prices came down.
“I don’t think this is the time to sell. It is probably the time to buy. Whatever I wanted to sell, I sold it last month. I am deploying more funds gradually in the market," said Girish Bhutra, a 50-year-old investor from Mumbai.
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