Direct retail flows hit highest level in five months in April

MUMBAI : As the market recovered from the March low, direct retail investors in the capital market segment of NSE traded more in April, with their share of turnover hitting a five-month high at 34.5%. A direct retail investor is one who buys shares directly rather than through a mutual fund.

According to NSE data, their share dropped to 33.9% in January from 38.4% in December, down 430 points. It dipped to 33.6% in February and 33.1% in March as the Nifty corrected from a record high of 18887.6 on 1 December to 16828 on 20 March, a decline of almost 11%.

“Retail is a trend follower rather than trend decider,» said Siddarth Bhamre , EVP (head of research) Religare Broking. “The trend deciders are institutional investors like DIIs and FPIs. I think they could have come in from the second half of April.»

Markets recovered from the 20 March low of 16828 to close at 18065 by April end, up 7.35%, thanks to MF buying. This squares with Bhamre’s analysis of retail being trend followers of institutional players.

This is further borne out by equity inflows through MF route rising from 7303.39 crore in December to 12,547 crore in January, 15,686 crore in February and 20,534 crore in March. In April, the flows moderated sharply as on redemptions and as investors had pumped money into long-term debt funds in March to avail of the benefit of long-term capital gains, which stand withdrawn as of 1 April.

The data shows buying by DIIs carried on after the market began correcting from the all-time high of December through the low of March. From 2- March, the recovery started in April at which time the MFs booked profits.

Incidentally, as the share of retail hit a five-month high on NSE capital market segment, DII share remained relatively flat in April at 12.5%. FPIs market share shrank to 14% from 16.4%, shows NSE data. This attests to Bhamre’s analysis of retail following the DII trend. “The retail investor has become savvier and tends to slow incremental flows when markets hit highs and deploy more funds at steeper correction,» said Anthony Heredia, MD & CEO, Mahindra Manulife MF, referring to retail investors who invest through MFs.

Direct share has been moderating over the years with more retail investors using the MF route to invest in the equities markets.

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Updated: 27 May 2023, 12:55 AM IST

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