Invest in Credit Risk Mutual Fund or not?

Amid the crippling coronavirus, here comes a sparkle. The country’s leading stock exchange BSE crossed a milestone of $3 trillion market capitalisation for the first time amid the ongoing bull run on Dalal Street since March 2020 lows. Retail investors who, in large numbers, kept their tail up even amid the gloom deserve praise. Going with estimates, the total number of demat accounts opened in the last financial year is more than the cumulative accounts opened in the previous 3 years.

Why retail investors are on the rise? It seems that the lack of investment options amid falling interest rates has attracted a huge number of retail investors to equity markets amid the ongoing uncertainty over Covid-19. Many of them have come for the first time. There is also the push from technology that has brought the market at the fingertips of the people.

Data available with NSE showed that retail participation through direct investing has surged steadily over the last six years. The market share of individual investors increased sharply by 12 percentage points to 45% in FY21 from 33% in FY16, offsetting the decline in the share of FIIs and public and private corporates during the same period. Their share stood at 39% in FY20.

The benchmark BSE Sensex has soared nearly 90% to 50,651 since March 24 last year, while the NSE Nifty index rallied 95% to 15,198 during the same period.

In short, we can say that the TINA factor is aiding inflows from retailers to equity markets. There are chances that we may see some ‘revenge spending’ towards other sectors including tour and travel as well as leisure activities once restrictions ease and vaccinations increase. This may turn the direction of disposable income from equities to other sectors.