Retail investors now controlling the markets !!!

MUMBAI: The small investor is back on the bus. Setting aside the constant refrain that the small investor has missed the bus in a bull run, data shows that during the latest 1,000 points rally, they remained net buyers every month starting October 2007. October was when the Sensex breached the 20,000 mark for the first- time ever.

As per BSE data, retail investors have bought equities worth more than Rs 1,700 crore since October 29, when the Sensex touched the 20,000 mark for the first time. What is interesting is that it comes at a time when foreign investors, often looked up to as the drivers of the bull run, have been reducing their India exposure. FIIs have sold stocks worth more than Rs 21,000 crore in the past couple of months.

Since October 29, 2007, the Sensex has gained around 4.50% to breach the 21,000 mark on Tuesday. However, market participants say that even as the benchmark index gave marginal returns in the past two months, small investors have remained bullish due to the surge in the second-rung counters.

This is clearly evident from the impressive rise registered by the BSE Midcap and the BSE Smallcap indices. “Small investors have more appetite for lesser-known stocks,” said a senior dealer with a domestic broking house. “The broader indices were gaining ground even as the Sensex moved in a range-bound manner and this attracted more retail money. Just take a look at the rise in the number of brokerage reports covering such stocks. Those reports are here because there are many takers”, he added.

While the midcap and smallcap indices lost heavy ground on Tuesday, the recent past has seen the two broader indices reflect robust returns. Since October 29, the BSE midcap index has gained more than 21%, while the BSE smallcap has appreciated by nearly 40%. These two indices together account for more than 750 stocks. As mentioned earlier, the Sensex has gained only 4.50% in the same period.

Stocks like EIH, Ispat Industries, Educomp Solutions, Exide Industries, CESC, Welspun Gujarat, Andhra Bank, Allahabad Bank and Usha Martin have all gained ground in the recent past.

Some of the second-rung stocks have also been on an acquisition and expansion spree, thereby making them prominent on the investment radar. Some analysts are of the view that retail investors remained bullish even while FIIs were selling, as reports clearly indicated that domestic financial institutions have been buying stocks.

According to BSE, domestic institutional investors have been net buyers at Rs 16,600 crore since October 29. The fact that institutions like LIC, along with major banks, are buying creates a lot of confidence in the minds of investors, they added.