Indian retail interest in stock markets may be faltering: UBS

Says 1-year returns are negative for last 3 months and 2-year returns may turn negative by mid-2016 if markets don't rally

Retail investor interest in domestic stock markets may be faltering as one-year returns have turned negative, global financial services major UBS said in a report.

According to the report by UBS India research head Gautam Chhaochharia, retail investor interest in stock markets may be faltering and the past returns from investment in securities are significant for retail inflows.

"Past returns matter more for retail inflows. One year returns are negative for last 3 months and 2-year returns may turn negative by mid-2016 if markets don't rally," Chhaochharia said.

He also noted that there has been moderation in net inflows into equity mutual funds.

"In December 2015, net inflows were $0.8 billion, and while that is a positive number, it is the lowest level in 18 months," he said.

"Muted returns on other asset classes like gold and property is not enough to induce local retail investors to allocate more to equities, in our view," Chhaochharia added.

He also observed that term deposits offered by banks -- which are arguably risk-free -- give retail investors about 8% annual returns while ten-year government bonds currently offer a 7.8% return.