Brokers preach, don't practise

If Tuesday's trade is the beginning of a recovery, one is not likely to find many brokers among those who are rejoicing.

While the general assumption is that the small investor is more prone to panic-selling, data from stock exchanges points out that broking houses as a whole have been emptying their portfolios at an alarming rate as the markets nose-dived over the last eight sessions.

Contrary to general perception, retail and non-institutional investors, supposed to be more panicky, have actually used the recent decline in prices to stock up heavily on their favourite scrips.

According to data from the BSE and the NSE, small investors had consistently sold when the indices were on the upmove but have been aggressively buying once the Sensex had a free fall from its all-time high on May 11.

During the eight trading days from 11 May till yesterday, non-institutional buyers on the NSE and the BSE bought fresh equities worth a whopping Rs 2,940 crore (Rs 29.4 billion), a little less than the voracious Rs 3,600 crore (Rs 36 billion) buying by mutual funds.

However, the increased retail appetite for equities is in sharp contrast with the activity of brokers, many of whom issue daily 'guidance' to their clients on how to play the market.

During the same eight-day period, the brokers, who run their own accounts, nearly emptied out their portfolios with an unprecedented sell-off.

These accounts, mainly used for short-term trading, have always hovered around the zero mark when it came to net buying or selling.

Indeed, even after taking all the brokers on the two premier exchanges together, their accounts together accounted for a combined net 'sell' of just Rs 155 crore (Rs 1.55 billion) worth of equity between March 1 and May 10. In fact, before the all-time-high on May 10, the biggest single-day outstanding position for such accounts during the period was just Rs 196 crore) Rs 1.96 billion).

After the dip, however, it zoomed to Rs 680 crore (Rs 6.8 billion) as brokers scrambled to get out of a crashing market. Together, all broker accounts with the exchanges sold off equity worth Rs 1,580 crore (Rs 15.8 billion) in the past eight days, even as many of them urged their investors to stay calm.

Investors indeed seemed to have heeded the call, feeding voraciously on suddenly-become-cheap stocks by pumping in nearly Rs 3,000 crore (Rs 30 billion).

While the retail investors have been going against the market, buying at dips and selling at peaks, the brokers seemed to be the more sensitive of the two, with their inflows determined by the direction of the index movements.

"It is not a question of misleading anybody," said a broker with own-trade. "It is just that a trader will always react to any fluctuation in the market whereas investors are not supposed to look at daily market levels," he added.

Sensex Rise and Fall: Complete Coverage

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