Days after Nifty, Sensex touch highs, investors leave in droves

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Indian retail investors are getting increasingly wary of stock markets, thereby exiting in flocks. According to data from National Stock Exchange (NSE), between March and May, 2023, regular investors continued to retreat from the share market, withdrawing funds worth Rs 19,600 crore during this period. 

While investor participation in the market has been sobering since July 2022, there has been a significant uptick in investment via systematic investment plans (SIPs). Notably, between April 2022 and March 2023, mutual funds had around 6.36 crore SIP accounts. This figure rose to 6.42 crores in April, 23 and further still, to 6.5 crores last month. 

Vikas Singhania, CEO, TradeSmart, agrees with this approach, “When we look at today’s market highs, risk management becomes important. Single stocks are riskier for beginners unless they diversify. Mutual funds serve as a good platform for those who lack the know-how and the time required to do a proper analysis before investing”. 

What is causing the outflow? 

In FY 2023, net retail investments in the stock market sharply fell to Rs 49,200 crore, from a Rs 16 lakh crore high during FY 22. Participation went further south in FY24, with Rs 15,000 crores flowing out of stock markets till May 31st, 2023. 

One of the major reasons for this nosedive is the tapering interest of young retail investors, who made their way in the markets during the Covid-19 lockdown. Additionally, people moving to fixed deposits and other debt instruments have also taken some heat away from the market. And even though market indices Nifty and Sensex recently touched their all-time highs, they were mirrored by instances of profit booking i.e. people liquidating their investments to cash in their earned profits. 

As a result, Sensex fell around 284 points today to  stand at 62,954.44. Nifty, too, was in red, falling 117 points down to 18,654.10 points. So, should investors opt out of the market? 

As SEBI-registered investment advisor Jay Thacker notes, “FY24 is likely to witness increased volatility with moderate return potential across selected sectors and broad indices. Investors are urged to consider their individual financial and life situations when making investment decisions, avoiding being solely driven by market movements”. 

“A well-planned approach, taking personal aspects into account, regular review, and seeking professional investment advice, if necessary, will serve as the foundation for successful and productive long-term investments and goal fulfillment”, he adds. 

However, staying put in the market should be seen as a habit, not an activity, notes Singhania. This is because it is very difficult to predict the tops and bottoms. Hence, “one needs to stay put and stay disciplined through various market cycles”