Retail investors cash in on rally

Mumbai: While the equity markets are scaling new highs on hopes that the business friendly Narendra Modi led National Democratic Alliance (NDA) would receive a comfortable majority in the ongoing Lok Sabha elections, retail investors have taken a contrarian trading strategy by cashing out of the markets.

With even small and mid cap stocks participating in the current rally where most of the small investors are concentrated, they have offloaded shares worth Rs 8,200 crore since February 2014, according to the provisional data from stock exchanges. This is in sharp contrast to around Rs 30,000 crore investments made by foreign institutional investors, who are betting big on the future growth prospects of the Indian economy.

“Retail investors are seeing money after almost seven years. Small and mid cap stocks have rallied sharply during the current rally which we had last seen in 2007. So wherever they are able to recover their cost, they are making an exit,” said Kishore P. Ostwal, chairman and managing director, CNI Research.

“Small investors are not really convinced about the markets and are refraining  from participating in the current rally. In the last 5 years, they have only lost money and now they have got an opportunity to cash out of the market,” pointed out Arun Kejriwal, director, Kejriwal Research and Investment Service (KRIS).

However, Mr Ostwal said that the retail investors are again getting it wrong this time. Usually retail investors enter the markets when they are almost at their peak and suffer huge losses when the markets come crashing down.

“They are exiting at a time when the markets have structurally entered a bullish phase. The maximum downside that I am expecting is a 10 per cent correction even if all the opinion poll projections go wrong, as the economy is showing initial signals of recovery. So there is all likelihood that small investors would re-enter the market, when it is trading at further highs from the current levels,” he added.