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Will the sustained rise in market indices encourage retail investors to come back?

Created by : Prakash Khairnar, Sr. Associate, DSP Merrill Lynch  | 11 23 2009 08:25:37 +0000
Industry : Equity Research/AnalyticsFunctional Area : India(Markets)
Keywords : retail investors encourage rise in market
Activity:  123 views;  last activity : 07 06 2010 20:18:09 +0000

In todays news, I read that the cash segment of Indian retail investors feels retail investors are not going in a right direction of the Indian stock market. As we all know, in the midst of this year, it dropped to Rs 6000 Cr turnover. But, in the past 4 months, the derivatives segment has shown a groth of about 10% because of rising interest which means the market movement can be very sharp on either side and the approach towards the market which is becoming more and more short-term in nature. Investors are reluctant these days to participate in the cash market which is a relatively longer term commitment. Overall participation has increased in benchmark indices like Nifty or Bankex where retail participation is moving up.

In this case, do you think the sustained rise in market indices will encourage retail investors to come back?

  
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Seeing the global recovery in the emerging and the developed markets, mainly the drastic recovery in the domestic market.. i personally feel the Indian economy has great potential to grow at most competative rate when compared to other markets. And also the pace at which the domestic companies are entering into M & A's is not hidden from anybody. Also the rate at which the inflation rate is moving around, says lot of liquidity is available in the retail market to follow. Therefore, feel there is great potential for the retail customers to enter the domestic market... Thank you, Manish N Chugh!!
By Manish N Chugh, Officer Trainee, Stock Holding Corporation of India ltd.,  | 11 23 2009 14:30:20 +0000
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I think, this rise will help traders to make substantial profits enabling them to appreciate the potential of these products. With increasing adaptability towards options trade, more number of stocks getting added to the list of futures trade, the derivatives segment can grow at a faster rate.
By Prakash Khairnar, Sr. Associate, DSP Merrill Lynch  | 11 23 2009 08:25:37 +0000
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Globally, index and stock derivative volumes are dominated by options contracts, unlike India, they are not dictated by index and stock derivative volumes but by futures contracts. Due to the economic developments in recent times, investors don't have conviction about the long term direction of the economy. Increased global investor participation (more hedge funds coming in), product innovations involving the derivatives segment (structured products) and introduction of derivatives in different asset classes (interest rate futures) should lead to the derivative segment commanding a larger share in the overall turnover.While the index has doubled from its bottom, retail confidence has been more muted this time around. Indian capital markets are still at a nascent stage. So, I doubt whether retail investors will come back or not.
By Esha Johar, Risk Analyst, Irevna  | 11 23 2009 08:27:27 +0000
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