Are investors losing faith in stock market? 38 lakh clients exit equities
3 min read . Updated: 25 Feb 2023, 12:26 PM IST
Premium- Adani-Hindenburg row, third quarterly results, high valuation and slowdown in businesses are some of the reasons for correction in stock market.
- So far, in 2023, Sensex has plunged nearly 2.8%, while Nifty 50 has seen even larger decline of over 4%.
The market is facing a dilemma since it touched a lifetime high in early December last year. At first, it was a high valuation which made the Indian market expensive and other Asian peers cheaper and attractive. Then came the Q3 earnings results! Just when the street was getting comfortable with inflation below RBI's tolerance limit, the economic indicator shot up higher than expected, and once again worries about how long the rate hike cycle will continue heightened. By late January, things couldn't have gotten any worse when a US-based short seller dropped a bombshell report on Adani Group leading to one of the biggest carnage in the conglomerate's stocks.
These pressures led to a huge decline in trading volumes on exchanges. Investors are likely leaving the market. Are they losing faith in the stock market?
In a tweet, Ashish Bahety, a Sebi-registered analyst and also co-founder of NAV Investment Research, cited NSE data which showed that 38 Lakh clients have left the stock market in the last 6 months. He said, "the "lockdown traders" must have seen the reality of the stock market."
Last month, leading online-trading platform Zerodha's chief executive Nithin Kamath said, they have already seen an almost 50% fall in monthly new account openings from January this year, and this trend has been similar across the industry.
Bahety expects more drops in client base in market ahead.
According to NSE data, in the cash market, the turnover was at ₹10,20,626 crore --- down from ₹11,60,846 crore in December and ₹12,01,108 crore in November last year.
Further, the NSE data showed that the average daily turnover stood at ₹48,601 crore in January 2023, down from ₹52,766 crore in December and ₹5,71,96 crore in November 2022.
Demat securities traded in January 2023, dropped by 40.6% to ₹5,168.47 crore versus ₹8,704.49 crore in December 2022. In November last year, the Demat securities traded stood at ₹5,947.05 crore.
Also, in January 2023, the market cap of the cash market on NSE declined by nearly ₹12.17 lakh crore to ₹268.02 lakh crore compared to ₹280.19 lakh crore.
Not just that, the total turnover of equity on BSE has dropped from ₹1,18,132.64 crore in September 2022 to ₹68,103.37 crore in January, as per the data.
Explaining the dip in investors on market, Rohan Mehta, CEO & Portfolio Manager, Turtle Wealth said, "this is a clear signal of people losing hope in markets, the quote of buy-in fear and sell in greed should be tweaked to buy when people lose hope and sell when people are too optimistic."
Mehta further highlighted that this has happened across in last 20 years, after every bull run there is a huge consolidation period and before also the same happens, we are now at the 16th month of consolidation in a range of NIFTY 50 or NIFTY 500, the index remains at the same level, but the broader markets are widely wounded, on every one 52 week high stock, there is 9 stock which has shown 52 weeks low.
He pointed out four reasons for the current correction in the market. Firstly, bad quarterly numbers; secondly India is a bit overvalued so most of the money is shifted to other cheaper emerging markets; thirdly Adani's saga, has made people fear the markets; and lastly overall sign of slowdown in the core business.
However, Turtle Wealth CEO believes after big consolidation, there is as structural bull run which starts, pre covid we saw nearly 9 quarters of consolidation and after that, we had seen a major bull rally, but the question here is how many peopled stay invested?
He added, "Most people enter the markets for the money, but soon lose track of that goal and start chasing some private version of fun." He believes this is is the best time to do a portfolio review and rebuilding, removing weeds and watering flowers, the stock which price are intake, and the Quarter number has been impressive are the flowers and visa versa."
The CEO concluded, it may take 1 or 2 quarters more but a structural rally in markets is likely to happen soon.
Year-to-date, Sensex has plunged nearly 2.8%, while Nifty 50 has seen even larger decline of over 4%. Currently, Sensex is below 59,500 and Nifty 50 is under 17,500 levels.