Share of retail investors in NSE companies at record high

Retail investors have gained significant heft in the past year amid a sustained uptick in Indian equities.

The share of retail investors in companies listed on the NSE reached an all-time high of 7.32 per cent in the quarter ended December 31, 2021, up from 7.13 per cent in the previous quarter and 6.9 per cent a year ago, the data from PRIME Infobase shows.

This was despite the Nifty’s 1.5 per cent decline during the quarter.

The share of high net-worth individuals, or HNIs, in the NSE companies also rose to a lifetime high of 2.26 per cent during the quarter, taking the combined share of retail and HNI investors to 9.58 per cent.

The latter, in particular, took a fancy to the deluge of initial public offerings that raised Rs 1.2 trillion from the market last year.

During the pandemic, individual investors have had more time and disposable income to dabble in stocks.

The sustained uptick in share prices, a low interest rate environment, ease of opening a demat account, and the availability of stock- and sector-specific information on mobile apps have spurred their participation.

Often believed to be late to the party, retail participants are known to get the jitters during a steep market decline.

But this time around they appear to have stayed put during corrections and employed a buy-on-dips strategy, which is a sign of growing maturity, said experts.

“Individual investors have emerged as a major force to reckon with in the market, which historically has been driven by institutional players, especially foreign investors,” said Pranav Haldea, managing director, PRIME Database.

The value of retail holding in the NSE firms stood at about Rs 19 trillion at the end of Q3, up nearly 50 per cent from Rs 12.7 trillion a year ago and nearly double the figure at the end of 2019.

Holdings of foreign portfolio investors, on the other hand, slid 1.67 per cent quarter-on-quarter to Rs 53.78 trillion as they were net sellers of shares worth over Rs 38,000 crore in Q3.

Their share in the NSE-listed firms stood at 20.74 per cent -- a nine-year low.

“Interest rates have been trending lower over the past year and investors have flocked to equities in search of better returns,” said B Gopkumar, CEO, Axis Securities.

“Mature investors have moved from mutual funds to direct equities, with products, such as smallcases, gaining traction.

"The informed investing theme is playing out well although a number of investors continue to speculate through options trades.”

A recent report by State Bank of India economists highlighted that physical assets as a means of saving and investing had become less popular among Indians.

According to this year’s Economic Survey, the share of individual investors in total turnover at the NSE increased from 38.8 per cent in 2019-20 to 44.7 per cent in April-October 2021.

In the eight months to FY22, nearly 2.2 crore demat accounts were added.

Apart from direct investing, retail investors have also upped their equity exposure through mutual funds.

Share of domestic MFs in companies listed on the NSE rose for the second straight quarter to 7.47 per cent in Q3 after five consecutive quarters of decline to 7.25 per cent, until the quarter ended June last year.

“Retail investors have been buyers during recent falls and have added a lot of large-cap names from a long-term perspective, a far cry from the investment behaviour seen in the past when small- and mid-caps stocks were the preferred choice for these investors,” said Gopkumar.

Companies with the highest increase in the number of retail investors during Q3 included the likes of Tata Power, IRCTC, Tata Motors, Tata Steel, TCS, ITC, and HUL.

The top five companies with the highest retail holding by value were RIL, HDFC Bank, HUL, L&T and Infosys, the data shows.

These investors, however, continue to hold a significant chunk of their holdings in mid- and small-cap names.

They owned 16.01 per cent of the NSE-listed companies at the end of Q3 by way of number of shares held.

But their ownership dipped to 6.68 per cent when only the top 100 companies were considered.

Meanwhile, LIC’s share declined marginally to an all-time low of 3.67 per cent in Q3 from 3.69 per cent in the previous quarter.

In value terms, though, its holdings touched an all-time high of Rs 9.53 trillion.

The share of insurance companies as a whole declined to a six-year low of 4.79 per cent in Q3 from 4.81 per cent in the September quarter.

Photograph: Danish Siddiqui/Reuters