The sharp swings in equities and the revival of fixed income in the wake of rising interest rates have discouraged individual investors from participating in the equity market.
The daily market average volumes of non-institutional investors, mainly retail investors and high-net-worth individuals, stood at ₹22,829 crore in January 2023, the lowest since March 2020 and 61% below the peak of ₹58,409 crore in February 2021, ET reported, quoting exchange data.
In addition, the number of active clients on the NSE also declined, with the active accounts coming in at 3.4 crore in January, down from 3% from the previous month, making it the eighth consecutive monthly decline. It has been declining since June 2022, when the number of active accounts on the NSE was 3.8 crore, according to the report.
The performance of benchmark indices is masking the deeper losses in several mid- and small-cap stocks, especially the ones popular among momentum traders. Many of these stocks are down 20–40% on average. Retail investors typically invest in small-cap, mid-cap, and penny stocks for quick returns, the report said.
In the last few months, retail investors have not made much money in the stock market due to high volatility and a decline in mid- and small-cap stocks, said B. Gopkumar, MD, of Axis Securities to ET. Retail investors have recently shifted some of their money to fixed deposits as interest rates have risen sharply since May 2022, he added.
Most brokers have stopped giving free trade on account opening since April last year, and the acquisition of new clients has slowed down for the entire industry since January 2022, said Prakarsh Gagdani of 5paisa Capital. "Also, the market was so volatile globally in the last few months that investors, especially from the delivery side, did not make money as expected."
Meanwhile, in January 2023, the number of demat accounts rose to 11 crore from 8.4 crore in January 2022, registering a growth of 31 percent, PTI reported.
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