The proportion of retail participation in the average daily turnover in the National Stock Exchange’s (NSE’s) cash segment has come down to 40.8 per cent in February 2023, from 52 per cent a year ago, reported Business Standard.
In July 2020, retail investors accounted for nearly two-thirds of cash market volumes.
The average retail share in cash market volumes has seen consistent fall — from 56.1 per cent in 2020-21 (FY21) to 51.4 per cent in 2021-22 and 47.1 per cent so far in 2022-23 (FY23) — reveals data provided by 5paisa.com, a leading retail brokerage.
The retail share in February is said to be the lowest in nearly three years.
Industry players said several small investors have lost interest in the market due to poor returns and intense volatility. The increasing share of retail in FY21 was underpinned by a secular up-move in the markets and low volatility, they observe.
“The market has been lacklustre for the past 14 months. Earlier, the market was giving 50-100 per cent returns. That, along with other factors, had fuelled retail investor growth. With 110 million dematerialised accounts, there has to be some fatigue,” says Prakarsh Gagdani, chief executive officer (CEO), 5Paisa Capital.
The broader benchmark indices Sensex and Nifty indices are currently below their October 2021 levels, indicating poor returns over 15 months. In the past three months, the Nifty and the mid- and small-cap indices have come off between 8 per cent and 10 per cent.
Some believe that looking purely at retail participation in the cash segment may not offer a true picture. The drop in retail share in the cash segment coincided with their increased participation in the derivatives options segment.
According to NSE data, the share of individual investors in index options increased from 28.8 per cent in 2019-20 to nearly 36 per cent in FY23.
Industry players say the shift from cash to options is driven by regulatory changes and increased margins.
“The jump in options over the past two years is mostly due to intraday stock traders switching to options after intraday leverage restrictions in early 2021,” tweeted Nithin Kamath, CEO, Zerodha, India’s largest brokerage.