The Hindu Business Line : Cautious retail investors stay away from the party

Mumbai, Sept. 30 The Sensex may have zoomed 112 per cent since March, but retail investors have by and large been watching the show from the sidelines.

The Sensex crossed the 17000-mark on the same day the Met Department said that it was the worst monsoon since 1972, observes Mr Jagdish R., a media consultant who no longer invests in stocks and now calls himself a keen observer of the markets. “Have we grown so much that the monsoon does not matter?”

His cynicism marks the attitude of many retail investors who burnt their fingers in the previous rally.

Staying aloof

Mr C.J. George, Managing Director of Geojit BNP Paribas Financial Services, has always held the opinion that retail investors never enter or exit the market at the right time. They are always followers rather than be leaders, losing precious entry and exit opportunities.

“Retail investors usually come in at the fag end of a rally,” he observes.

However, this time, they seem to be studiously staying aloof.

“I stopped investing in the markets once it crossed the 13000-mark. After what happened in the markets last year I do not want to take another chance this time around. The markets have rallied to such dizzying heights so fast,” said Mr Ashok Kumar, a retail investor in Mumbai.

Last year’s lesson

In September so far, though the Sensex has risen close to eight per cent, the retail investors have been net sellers of equity for close to Rs 4,000 crore on the BSE.

“Retail participation has been low due to the hit retail investors took in the crash last year. The markets sank so low that it created quite a bit of fear in their minds,” said Mr G. Chokkalingam, Director and Head of Equity Research at Barclays Wealth.

They are usually the last set of investors to enter the markets during a rally, said Mr Varun Goel, Assistant Vice-President, Fund Management, KC Securities.

Sign of maturity

But this could also indicate that they sold as the markets rose, presumably booking profits, said a broker.

It is a sign of maturity, said Mr Devan Choksey, Managing Director at KR Choksey.

“Though the retail investors have not joined in the euphoria, they are very carefully selecting stocks and booking profits wisely. They are shifting their portfolios to include good quality stocks.”

Mr Christopher George, another investor, said: “Right now I am fully invested and I am looking to sell those stocks which gave me good returns over the last one year. This will give me the much needed liquidity to buy some of the scrips that I have been looking to buy.”

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