Retail investors key force behind market’s stellar performance: Report

The Indian stock market has achieved multiple record highs in 2024, sustaining a robust rally that began in the previous calendar year. Notably, frontline indices have maintained consistent upward momentum over the last three years, largely driven by strong participation from Indian retail investors.

Domestic brokerage firm Motilal Oswal underscores that the surge in retail investors' savings pool, particularly in equities, has been a pivotal force behind the unprecedented rise in India's equity market over the last three years.

The influx of retail investments post pandemic has significantly reshaped ownership dynamics. It highlights that the combined ownership of domestic institutional investors (DII) and retail investors in the free-float market has risen to 62.9% in March 2024, up from 55.1% in March 2014 and 58.7% in March 2019.

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Non-institutional investors now account for more than half of the cash volumes in FY24, marking a notable increase from 38% in FY14 and 49% in FY19. India's weight in the MSCI Index has also surged to 19% from 7% in FY14 and 9% in FY19.

According to Motilal Oswal, total DII inflows in the first half of CY24 amounted to $28.5 billion, surpassing the full-year CY23 inflows of $22.5 billion. Cumulatively, from CY22 to the first half of CY24, FII flows have reached $4.8 billion compared to $83 billion from DIIs. The narrative of retail investors in India, traditionally perceived as "buying at the top and selling at the bottom," has been reversed, it noted.

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The brokerage also highlighted that on June 4, 2024, retail investors capitalised on market corrections to strategically increase their equity holdings.

It underscored, the strong rise in the country's mutual fund equity assets under management (AUM), which has risen from ₹1.9 trillion in March 2014 to ₹27.7 trillion as of May 2024. Further, the number of demat accounts has surged from 36 million in March 2020 to 160 million in June 2024.

These factors, combined with robust earnings performance across India Inc., have propelled the country's market capitalisation beyond $5 trillion.

Momentum continues further

India now boasts a unique combination of ‘size and growth’. With elections behind us and the return of the same Modi-led NDA dispensation and virtually the same cabinet to power, the brokerage anticipates policy continuity to drive the overall economic momentum further.

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There will be a sustained focus on infrastructure, capex, and manufacturing, which will occupy center stage. The forthcoming Union Budget of the new government will outline the priorities for the next five years.

The much-publicised 100-day agenda will also provide a good idea about the government’s policy framework in its third term. The brokerage also expects the government to strategically utilise the extra windfall from the RBI dividend to provide relief to the poorer and middle classes and to encourage consumption ahead of the key state elections slated for October and November of 2024.

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Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.