Retail investors have got it wrong once again. They seem to have given up hope and exited equity, much before the rally began. Shareholding pattern of companies in the CNX 500 index reveals that retail investor holding has declined to 7.6 per cent now from 7.93 per cent in March 2013.

These investors have been liquidating their funds portfolio too. Retail investor holding in equity mutual funds have fallen to 59.76 per cent now from 68.7 per cent in March 2013. Data from the Association of Mutual Funds of India show that in equity and ELSS funds, which have high retail holding, there was a net outflow of ₹9,269 crore in 2013-14. This is after a ₹14,587-crore outflow in the previous year.

The heavy redemptions have reduced the domestic institutional investors’ holding in the market. A fund flow study by Motilal Oswal shows the holding of these investors in the market (BSE 200 basket companies) is at six-year lows.

Nirakar Pradhan, Chief Investment Officer, Future Generali India Life Insurance, says, “There have been a lot of redemption requests in ULIPs. Retail investors want to play safe. Their money has moved from equity to debt.”

Rama Chandran, a senior citizen who bought a ULIP in 2007, told us that he gave a redemption request on his policy last week. “I have been waiting for five years to sell this ULIP. Actually I wanted to quit as the lock-in period was over but then I was making a loss. In the last one month my NAV has run up quite a bit, so I have asked my agent to redeem it.”

Give me more

Data reveals that high networth individuals have preferred to take the indirect route to equity investing; through mutual funds. HNI holding in equity mutual funds have increased to 28 per cent now from 19.54 per cent last year. “HNIs have the appetite for risks, but retail investors lack it,” says Dipen Shah, Head — Private Client Group Research, Kotak Research. “We see HNIs understanding the markets and willing to take risks and wait to make returns. And as these people have made money in real estate and gold in the last one-two years, they had enough cash to bet on equities.”

HNIs have, however, been moving away from investment in gold. HNIs have reduced their exposure in gold ETFs to 15.91 per cent now from 18.59 per cent in March 2013.

With gold exchange-traded funds moving into a premium to NAV on gold import restrictions, these investors could have booked profit in gold ETFs and moved the money to equities.

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