Domestic market sees strong influx of new investors in June: Report

As the domestic market sentiment remain positive despite weak global cues, the Indian market witnessed a strong influx of new investors in June 2023.

As per a Moneycontrol report, quoting CDSL data, "the number of demat accounts opened in June totalled over 2.36 million, marking the highest account opening rate since May 2022, compared to 2.1 million additions a month ago and 2.3 million a year ago. The total demat tally crossed 120.51 million, up 2 per cent from a month ago and 24.41 per cent from a year ago."

The domestic market benchmarks are at record highs thanks to robust capital inflow by overseas investors due to the robust economic outlook of the country. While major economies in the world, including the US, UK, China and many European countries, are struggling on the macroeconomic front, India's macro situation is in much better shape. This is giving confidence to investors that the Indian market will give them healthy returns in comparison to its major global peers.

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services pointed out that a surge in new demat account openings happens during market rallies.

"This direct correlation between new demat account openings and market rallies holds good during the ongoing rally, too. The sharp 15 per cent rise in the Nifty from the March lows and the news and stories surrounding the consequent wealth creation are attracting new investors. This trend will continue as long as the market remains resilient," said Vijayakumar.

"There is a negative dimension to this retail exuberance. The new investors normally chase low-grade small-caps which slowly run into bubble territory. There are signs of this happening now. Seasoned investors normally take this as a sign of caution," Vijayakumar said.

Retail investors have been bullish on the domestic market. Data from BSE shows the number of registered investors on BSE has jumped nearly 24 per cent year-on-year.

Brokerage firms and analysts are positive about the Indian market.

In a report on July 6, global brokerage firm CLSA pointed out that the Nifty was the fourth best-performing market in the world during the April-June quarter, notably outperforming the EM (emerging markets) and AxJ (Asia Ex-Japan) benchmarks.

"Nifty FY24 and FY25 EPS (earnings per share) was cut by one per cent and 1.4 per cent, respectively, during the quarter but India is still expected to be the highest earnings growth market. Limiting further cuts in the upcoming earnings season will be important," CLSA said.

"Investor sentiment as measured by our proprietary India Bull-Bear Index has swung from an extreme-bearish reading of 8.2 per cent in mid-March 2023 (contra buy time) to an extreme-bullish 95.9 per cent reading, after a 14.5 per cent rally in the Nifty in about three months," said CLSA.

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