What is Core & Satellite strategy?

An unrivalled recovery in the equity market from the lows of the pandemic last year brought retail investors in hordes on Dalal Street. The question is, how many of them would stay put with the market in case of any correction?

Undoubtedly, there is a long way to go for equity investors. Take this: the share of savings in equities and debentures to total household financial savings at 3.4% in FY20 is likely to increase in FY21 to 4.8%-5% of total household financial saving, (or 0.7% of GDP from 0.4% of GDP in FY20), which is still way lower than 36.50% of the US, indicating significant headroom for growth in household participation in the equity market.

Of late, the number of individual investors in the market has increased by a whopping 142 lakh in FY21. Furthermore, another 44.70 lakh retail investor accounts have been added during April and May 2021.

As a result, NSE data showed that the percentage of individual investors in total turnover on the stock exchange has risen to 45% from 39% in March 2020.

There are chances that lower returns in other saving instruments have led to greater interest by individuals in the stock market. Additionally, the ongoing pandemic which has resulted in people spending more time in their homes might also be another reason for individual tilt towards the stock market. These investors have seen the benchmark BSE Sensex moving from the lows of 28,265 in March last year to an all-time high of over 53,000.

The new investors must be among the happiest lots on Dalal Street as they have seen one of the fastest rallies in the equity market in just 15 months. It is yet to be seen if this increasing retail participation is transitory or the beginning of long-term behavioural change.

“Increasing retail participation if it becomes the norm could enable a larger resource pool for financing India’s infrastructural requirement,” SBI Ecowrap said in a note.

However, as big bull Rakesh Jhunjhunwala said, “All bull markets cannot be linear, there have to be corrections. That shouldn’t make one fearful of the market as a whole merely because of small corrections.” The long-term story of India looks intact considering a couple of reforms including GST, RERA, farm laws, and mining laws, among others.