The share of non-institutional investors in cash volumes surged to 72 per cent in July, the highest level seen in nearly 11 years.
Since August 2009, these are the highest levels seen in the markets, shows an analysis by Motilal Oswal Financial Services.
In July, the average monthly cash volumes stood at Rs 62,200 crore, while average monthly volume of trading by non-institutional investors was at Rs 44,784 crore.
“The number of active clients has gone up tremendously. We have seen a rise in the number of new accounts opening.
These data points suggest that retail participation has picked up in the markets,” said Satish Menon, executive director at Geojit Financial Services.
“Some investors seem to have also taken value call following the sharp correction seen in March,” he added.
In March, the benchmark Sensex corrected over 32 per cent amid rising case of Covid-19 and economic uncertainty.
Experts say the sharp run-up in markets since March lows has revived retail participation. “With the Covid-19 pandemic forcing people into their homes, they are looking at generating some income through stock market investment. The recent run-up in markets has led retail investors to believe that quick gains can be made in the markets," said G Chokkalingam, founder and managing director of Equinomics Research and Advisory.
Since March 23 lows, the frontline indices Sensex and Nifty, each have rallied by about 45 per cent.
Market experts say that while several investors have been quick to enter markets amid the run-up, it would be interesting to see how these investors behave if market volatility intensifies again.
The heightened interest in direct equities among retail investors has led to improvement in broking incomes, but analysts say a shift in investor sentiments can again put this income stream under pressure.
“The key risk to our positive view would arise from weaknesses in capital markets that can impact investor participation, higher-than-expected price competition in broking, and adverse changes in regulations such as tightening of norms on commissions," CLSA said in a note on ICICI Securities.
Institutional investors are still showing caution despite the market run-up. Domestic mutual funds have been net sellers of Rs 9,639 crore worth of equities between April and July.