Larger margin funding shows high participation
With markets close to their previous highs, retail investors seem to have woken up to the fact that they have been missing out on the rally since the equity markets started strengthening after the collapse of 2008.
Experts say retail investors generally come in when the markets near their peak, before a correction. It may be the same this time too.
Mohan Natarajan, executive vice president at Edelweiss Capital, said, "Retail investors have started coming back to the equity markets. They completely missed the rally between 8,000 and 17,000. But recent signals suggest they are finding the markets attractive at current levels."
He added the increasing margin funding by brokers was a good indication of retail investors’ participation.
Sanjay Sinha, chief executive officer, L&T Mutual Fund, said, "The 2008 market collapse kept retail investors away for over a year. The markets have been rallying fast since May.” The sharp rally is attracting them, but it is also making them apprehensive, he says. “They are again getting attracted but the scale of participation is low," said Sinha.
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According to market observers, the chances of a repeat of 2008 seem unlikely but there could be a marginal pullback. A relatively less fall would be a relief for retail investors, who always get their hands burnt by entering late, they said.
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"Though signs of the start of retail investors' interest is a pre-cursor to the market fall, nevertheless, unless there is a catastrophe in the global financial world, the markets may not see very large corrections," added Natarajan.
Jagannadham Thunuguntla, equity head at SMC Capitals, however, cautioned that retail investments might be out of the worry among investors due to the swift market rally. "Retail investors have a sense of being left out, as they did not participate in the rally for long. There could be a risk of taking a wrong decision in such a situation."
Experts said retail investors needed to come out of their obsession with the short term and look at investment in equities from a long-term perspective at a time the markets were not behaving in an orderly fashion. They said retail investors should be stock-specific and avoid penny stocks.