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Stung by fall, retail investor keeps away

The Money Bureau

Retail investors who came to the market in droves during the last six months have deserted it following last fortnight's panic. Volumes have started declining, and during the last two days market volumes were at the lowest in the recent past.

Historically, the retail investors enter the market in a big way only when it is at its peak, and get out when the market is at its bottom.

In February, when the market was extremely bullish, the volumes used to be as high as Rs 120 billion, both, on BSE and NSE combined. In the last two weeks, the volumes have been slowly dropping and have halved from the peak of Rs 60 billion.

Is this yet another instance of history repeating itself? Retail investors entered the market during the euphoric bull run, this time too.

Retail broker K R Choksey agrees. He says, "This is another classic case of history repeating itself: retail guys entering in a big way while the operators slowly exit the market, making their money."

Again it is the retail investor who has been the loser. He came in a big way into the markets in the months of January and February and invested heavily in information technology, communications and entertainment stocks.

"This time, too, they burned their fingers in the recent ICE sector fall," says Ajit Ambani. He adds, "As usual he will nurse his wounds for a couple of months by staying away from the markets, only to return when it turns bullish."

Ketan Gandhi of Gandhi Securities says, "The retail volume has dropped significantly: by more than 60 per cent, and the retail investor will not be back until a clear trend emerges. At present, no one knows which way the market is headed."

Even if the market gets a clear direction in the coming weeks, it will be quite some time before the retail investor decides to come back.

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