Mumbai: The vertiginous rise in equity prices after Saturday’s victory of the Congress-led United Progressive Alliance in the national elections, has brought retail investors back into play.
Bull run: The Bombay Stock Exchange building in Mumbai. After the UPA’s victory in the 15th Lok Sabha election, the Sensex, responded with a 17.34% gain on Monday, closing at 14,282.21 points. Punit Paranjpe / Reuters
Coming on the heels of a 49.18% gain for the bellwether Sensex of the Bombay Stock Exchange (BSE) from its March lows through last Friday, the volume of shares for delivery has picked up in the last three trading sessions, said an official at Central Depository Services (India) Ltd, one of the two leading depositories in the country. It is an indicator that retail investors have been selling, after staying locked in at prices lower than their cost for almost a year and a half, he said.
One such investor is Deepa Gupta, a homemaker in south Mumbai. As someone who never sells at a loss, most of her money had been locked up in shares she had bought at the 15,000 levels of the 30-stock Sensex in January 2008. But with whatever little she had left, Gupta continued investing even when the index went down to the 8,000 levels, and is now “euphoric”, she says, that the markets are back at the 14,000 levels.
“I had bought Bajaj Hindusthan Ltd at Rs43 a share, and IFCI Ltd at Rs18 a share. So you can imagine how gung-ho I am now,” she said. The former closed at Rs136.35 on the BSE on Wednesday, and the latter at Rs42.35. “My earlier holdings (investments made in January 2008), have now become tax-free as well,” she said. According to Indian law, there is no capital gains tax on a capital market investment held for a year or more.
On Tuesday, ICICI Direct, India’s largest online trading platform with 185,000 users recorded its highest trading volumes, much in line with the market, which witnessed a record turnover of Rs1.7 trillion.
Anup Bagchi, executive director of ICICI Securities Ltd, said these numbers included a larger number of sell orders by investors looking to take advantage of the highs after a long wait.
On the buy side, activity is yet to pick up, though hopes have been raised after the resounding victory for the Congress, the party that first initiated economic reforms in the country in 1991. “I can’t say that activity has picked up, but I can sense a lot of hope, courtesy the election results,” said R. Kalyanaraman, senior vice-president of client sales at Sharekhan Ltd, a retail broking platform promoted by Citigroup Venture Capital International. “With the positive environment that has been created (after the elections), a lot of people are willing to come back to the equity markets,” he added.
Gupta, for instance, feels the market’s in for a bull run.
Rahul Solanki, 26, is another who is upbeat about the markets now. He sold his entire portfolio when the Sensex was at the 10,000-11,000 level on its way down, suffering losses of 30-40%. But not one to give up, Solanki, a finance manager with one of the largest engineering and construction firms in the country, bought at the 8,000 levels, sending his new portfolio out of the red by 50-60%.
“Sentiment is turning positive now. So even on intra-day dips, I’ve been buying,” said Solanki.
Sentiment is what retail investors have latched on to, though the same sentiment has in the past led to portfolio losses. This time, however, investors seem to be hoping that the mandate to the Congress party will improve sentiment further.
After the alliance’s victory in the 15th Lok Sabha elections, the Sensex, responded with a 17.34% gain on Monday, closing at 14,282.21 points. This was followed up on Tuesday with a 646.33 intraday gain, though the close was just 17.82 above the previous day’s close. On Wednesday, it ended down 241.37, yet holding above the 14,000 mark.
Aakash Gupta, 28, who runs Mumbai-based Services Mart Consultants and Financial Services Pvt. Ltd, which advises about Rs40 crore of retail money, said there are no more panic calls from his clients. “And over the past couple of days, I’ve been getting a lot of calls, asking where to invest,” said Gupta.
However, there also remain investors who have stayed away from the euphoria on the grounds that it is just that and will pass soon.
Pramod Patankar, 34, a Mumbai-based chartered accountant did his last trade in October, when he sold about 50% of his portfolio, mostly at a loss.
For now, he is holding on to Rs3 lakh, which is at a 50% discount to his value at cost.
“This is no time to invest,” he said.
But overall, hope seems to be the overiding theme, though whether that can continue is an open question. “Expectations from the government are very high, and whenever expectations are high, you have to meet them,” said Bagchi of ICICI Securities. “Otherwise, the engagement level in the market comes down, and it does not get the push.”
This push, however, could also come from foreign institutional investors, who have largely been waiting on the sidelines for the election results, but on Tuesday pumped in at least $1 billion (around Rs4,770 crore), providing a larger opening to retail investors.