The report stated there’s a want for market regulators to make sure that the participation is knowledgeable and educated. (Representative picture)
The report highlighted that it was in FY ’21 that the inventory market witnessed growing curiosity from the retail traders.
With retail participation assuming a large weightage within the Indian inventory market, the regulator SEBI ought to make sure that particular person traders are always saved knowledgeable and educated in regards to the market dynamics, since this phase of traders are ‘highly sentimental driven’, an ASSOCHAM-CareEdge Ratings report has stated.
The report stated that retail participation contributes to bettering liquidity of markets and depth of the order guide.
A diversified investor base, comprising each retail and institutional traders is essential for market resilience in rising markets in periods of risky worldwide flows. However, it might additionally add to higher market volatility, it added.
Retail traders are extremely sentiment pushed and have a tendency to have interaction in additional speculative buying and selling reasonably than in long-run buy-and-hold funding methods. This might amplify market downturns and upturns. Therefore, there’s a want for market regulators to make sure that the participation is knowledgeable and educated, the report emphasised.
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Deepak Sood, secretary common, ASSOCHAM, stated, “Easy and improved entry to digital monetary companies has resulted in elevated retail participation of traders within the capital market, which additionally requires a strong framework for investor safety, training, and consciousness, given the numerous technological developments.”
The report highlighted that it was in FY ’21 that the stock market witnessed increasing interest from the retail investors.
Retail participation in the equity market witnessed a sharp jump in FY21 with greater involvement of tier 2 and tier-3 cities. The trend was driven by search of avenues for high returns by the investors in a low-interest rate environment and availability of high liquidity domestically and globally, the report noted.
The trend also continued in FY ’22 and is clearly reflected in the number of demat accounts which scaled up significantly in that year.
Indian investors opened a whopping 34.6 million demat accounts in FY22. This is nearly twice the number of accounts opened in the previous fiscal, the report added.
Also, a shift has been witnessed in terms of distribution of turnover across different client categories.
The report added that the market share of individual investors rose to 45% in FY21, making up for nearly half of the market turnover at NSE. This was accompanied by a decline in the shares of corporates, domestic and foreign institutional investors.
In FY22, the share of individual investors at 41% was above the pre-pandemic 5-year average of 37% but it declined from the peak of FY21.
However, there has been a decline in retail interest this year as well. One explanation could be heightened selling by foreign portfolio investors which caused their overall turnover and share to rise, the report said.
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