The financial year that’s gone by has been an eventful one for equities, with the benchmark indices soaring to lifetime highs in October, as a record number of retail investors flocked to the markets. Thanks to the run-up, India’s equity market is the fifth-largest in the world. Even as foreign portfolio investors stayed away for the most part of the year, the Nifty50 has managed to return 18.9% in FY22 — its second-best show over the last seven years.
With addition of 34.5 million accounts in FY22 alone, the total number of demat accounts surged almost 2.5 times over the last four years.
The combined (CDSL+NSDL) investor accounts at the end of FY22 stood at 89.6 million, show data provided by depositories. This further underscores the fact that FY22 belonged to local investors rather than foreign portfolio investors, who own nearly 20% of the listed companies. At $29.8 billion, domestic institutional investors made their high- est-ever purchase, whereas foreign portfolio investors sold $17.1 billion worth of shares, marking their highest selling since the global financial crisis in 2008.
Foreign portfolio investors have been selling risky emerging-market assets — thanks to actions by their central banks back home, while retail investors have been picking up stocks every time the markets corrected.“We suspect return expectations of retail investors are shaped by returns of the past one-two years. It would be interesting to see retail behaviour if the market was to stay flat for another six months, resulting in low returns for a 12-month period,”says Kotak Institutional Equities in a note.