The new don of Dalal Street gets 3 times more powerful in just 2 years!

The retail investor community has emerged as the new don on Dalal Street, as evident in the value of their holdings in National Stock Exchange-listed companies. It has gone up by nearly three times since March 2020, when COVID-19 pandemic had paralysed the economy.

The total value of retail holdings touched Rs 19.5 lakh crore at the end of September quarter, data released by primeinfobase.com showed. It was Rs 7.2 lakh crore at the end of the March quarter of 2020.

On the contrary, the value of foreign portfolio investors’ holdings has doubled in the same period, and that of domestic institutional investors by about two-fold.

What’s noteworthy is that retail investors have increased their bets significantly in smallcap stocks in a quarter that was marked by high volatility due to the hawkish rhetoric by central banks, including the US Federal Reserve, higher bond yields and firm dollar.

In at least 10 smallcap stocks, retail investors’ stake has increased multifold during the September quarter from the June quarter.


If one looks at the performance of the stocks mentioned in the table above, the majority of them have given negative returns year-to-date. However, they have made investors richer by several crores of rupees in the last three years.

Stocks like Ajooni Biotech, Godha Cabcon, and Nandani Creation have risen 315-1,440% in three years. Some of the stocks like Nureca, Jet Freight Logistics, and Marshall Machines made their debut on the exchanges last year.

“Retail investors’ participation into these sectors (midcaps and smallcaps) have largely been aided through the IPOs which are back on track, as also with the basket-based portfolio opportunities that are provided by various platforms,” said Anand Varadarajan, director at Asit C. Mehta Financial Services.

“We could see this trend continuing, especially due to the interesting line up of IPOs again,” he added.

That the retail appetite is not limited to only the meaty mid- and smallcap segments is evident from their increase in holdings in largecap stocks such as Hindustan Unilever, Larsen & Toubro, Asian Paints, Adani Enterprises, among others.



“Retail investors are bullish on the overall market sentiment and are taking active part across all segments,” said Nirvi Ashar, analyst at Religare Broking. “Going ahead, investors will remain invested, but in selective small-cap companies,” Ashar said, but added that investors should keep a close track on the financials as well as the debt profile of smallcap companies while putting money into them.

CONTRARIAN MOVE
Retail investors were not only buyers of stocks in the last quarter, but they also booked profits in many of the smallcap and largecap stocks. Their holdings in stocks like Imagicaaworld Entertainment, Voltamp Transformers, PC Jeweller, UFO Moviez, and Himadri Speciality Chemical reduced significantly quarter-on-quarter in Q2, data showed.



Similarly, they booked profits in largecap stocks like Reliance Industries, Tata Consultancy Services, Bajaj Auto, Life Insurance Corp of India and One97 Communications.

WORD OF CAUTION
While the increasing participation of retail investors in the stock market is a good sign and is set to continue in the near term, market experts sounded a word of caution on investing particularly in the smallcap segment. Experts believe parameters like earnings, corporate disclosures, sound management, and valuation need to be closely gauged before investing in smallcap stocks.

“Any scientific investor would invest in a business only if they can value it and find that the market price is at a significant discount to this estimated value. So, the first word of caution is about information scarcity,” said Vikas V Gupta, CEO and chief investment strategist at OmniScience Capital.

Be cautious and be disciplined about how much to pay for the hidden gems in the smallcap segment is the advice by Gupta for the common man out on the Street.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)