The sentiment of retail investors tends to engage in speculative trading, the report said

The report states that market regulators are needed to ensure that participation is informed and educated. (Representative picture)

The report noted that the stock market in FY21 has increased the interest of retail investors.

With retail participation gaining significant weight in the Indian stock market, regulator SEBI needs to ensure that individual investors are constantly informed and educated about market dynamics, as this segment of investors is “highly sentimental,” according to an ASSOCHAM-CareEdge Ratings report. said.

The report says that retail participation will help improve the liquidity of the markets and the depth of the order book.

A diversified investor base that includes both retail and institutional investors is important for market stability in emerging markets during periods of volatile international flows. However, this could increase market volatility, he added.

Retail investors are highly sentiment-driven and tend to engage in speculative trading rather than long-term buy-and-hold investment strategies. This can amplify the ups and downs of the market. Market regulators therefore need to ensure that participation is informed and educated, the report said.

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Deepak Sood, Secretary General, ASSOCHAM, said, “Easier and improved access to digital financial services has led to increased retail participation of investors in the capital market, which also requires a robust framework for investor protection, education and awareness. important technological advances”.

The report noted that the stock market in FY21 has increased the interest of retail investors.

Retail participation in the capital market witnessed a sharp jump in FY21, attracting more Tier 21 and Tier 3 cities. This trend was driven by investors looking for ways to earn higher returns in a low interest rate environment and high liquidity both domestically and globally, the report said.

The trend continued in FY ’22 as well and is evident in the number of demat accounts that grew significantly that year.

Indian investors opened 34.6 million demat accounts in FY22. This is nearly double the number of accounts opened in the previous fiscal, the report added.

Also, changes were observed in terms of distribution of goods turnover by different categories of clients.

According to the report, the market share of private investors increased to 45% in FY21, accounting for almost half of the NSE’s market turnover. This was accompanied by a decrease in the share of corporate, domestic and foreign institutional investors.

Private investors’ share of 41% in FY22 was higher than the 5-year pre-pandemic average of 37%, but it was down from the peak in FY21.

However, interest in retail sales has also declined this year. One explanation could be stronger sales by foreign portfolio investors, which led to an increase in their total turnover and share, the report said.

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