The Hindu Business Line : Retail investors, FIIs walking out on markets

Chennai/Mumbai April 2 It seems the retail investor is joining the foreign institutional investor in making an exit from the market, going by BSE data on turnover under different categories of investors.

Retail investors, categorised as clients, have been net sellers to the tune of Rs 2,274 crore till date in 2007, far more than the FIIs who accounted for Rs 1,740 crore. During this period, the BSE Sensex has fallen by 10 per cent.

Broking firms confirmed the low participation of retail investors, blaming the volatility in the stock markets for decreasing business.

"Our business has been affected because there is a panic in the market, as retail investors are insecure about the future as well as the economy," said Mr Vijay Kedia, Managing Director of Kedia Securities.

"People do not know which company has the most debt and will be affected the most."

Mr Rahul Rege, Head (Non Institutional Business), BRICS Securities, said: "Retail participation is going to continue to be low, especially in the first quarter of the fiscal. It is a matter of confidence being shattered by the huge corrections that have been happening very frequently."

However, insurance companies seemed to be still betting on the India story, as they have continued their buying spree during this period.

They bought Rs 790.5 crore till date in the current year and close to half of that - Rs 345 crore - came post-Budget.

Apart from insurance companies, only Indian financial institutions (Rs 467.36 crore) and non-resident Indians (Rs 103 crore) remained net buyers.

Banks, the other major players, also remained net sellers although their operations are relatively small compared to the insurance companies.

"Retail investors turned cautious after the May 17, 2006 crash; they are seeing every increase in the market as a selling opportunity and have been proactive rather than reactive, which they were till recently," said Mr Arun Kejriwal, market analyst. According to market sources, the situation is unlikely to change for at least a couple of months. "It looks like the market will be lacklustre for the next 3-6 months," said Mr Kedia. "Clients may even prefer to invest in fixed deposits, where they will get 11-12 per cent interest."