With volatility in the markets showing signs of easing, more than half the turnover in cash segment continues to be driven by retail activity. The share of retail turnover to the total cash turnover (NSE and BSE) remained more than 51% in July with the volatility index India (VIX) slipping to its lowest level in more than a year in July.
India VIX has fallen 22% in July. In YTD, the fear gauge has shed more than 10%.
Domestic brokerages believe reform initiatives by the new government could further improve retail participation. “A positive feature has been that the retail investors have shown initial signs of a comeback… With decision-making and policy reforms gaining steam eventually, it should bode well for capital raising and primary market activity, which could be a starting-point for new retail investors into the markets,” Motial Oswal, CMD of Motilal Oswal Financial Services said in the company’s 1QFY15 earnings press release.
The markets have been driven by foreign institutional investors (FIIs) who have run a tab of $12.36 billion in CY14. However, the participation from retail investors is now picking up. At the end of February, the average retail cash turnover was at a six-month low of R5,708 crore, which has now jumped 90% to R10,901 crore. However, the share of retail turnover to total cash turnover still remains below the 60%-mark touched in August 2010.
Experts say the rise in equity returns when other asset classes like gold are seeing a downtick is another factor contributing to the improvement in the retail participation. “The mix of equities in financial savings is driven by trailing real equity returns. Trailing returns are rising and this is good for equity flows,” Morgan Stanley said in a note.
On Monday, BSE benchmark Sesnsex closed at an all-time high of 26,390.96 points after gaining 1.1% or 287.73 points. In YTD, Sensex has gained 24.66%. Among the broader indices, the BSE mid cap and small cap have gained 36.76% and 53.37% YTD, respectively. Meanwhile, the gold spot rates on MCX has slipped 3.29% during the same period.