The Hindu Business Line : Is the retail investor always on the losing side?

But what is perhaps not being said is that it is the retail investor, along with the domestic public financial institutions, who is ranged on the ‘buy’ side.

What is more remarkable is that he may be otherwise be unwinding positions in the market, but on a day when the market crashes, he is always the ‘bull’ building up positions.

Consider the evidence. According to BSE provisional data, the fall is always triggered by mass exodus of FII investments.

Despite being net buyers to the tune of $6.8 billion (the BSE provisional data may not match with that of the SEBI, because the latter includes IPO investments), they engaged in heavy selling.

Brokers who do proprietary trading constitute the other category of investors who also side with the FIIs.

Is the retail investor being intrepid or quite simply, playing with fire? It is neither. The system is loaded against the retail investors, according to pundits.

Explaining the phenomenon, Mr Arun Kejriwal of KRIS Securities said that FIIs, who have deep pockets and are in a position to drive the market in either direction, trigger the initial movement.

When FIIs start selling, the retail segment sees that as a value buying opportunity. But the prices continue to fall.

At that point, the retail investor reasons that he needs to continue buying so that he can average of the cost of initial acquisition with subsequent purchases at lower prices. But the fall appears relentless. The average retail investor’s nerve deserts him; he can no longer sustain his position in the market and resorts to panic selling.

And this time, the smart FII money re-enters the market.

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