Indian equity markets maintained a robust rally that began in the previous calendar year, hitting multiple record highs in 2024. Notably, the frontline indices have maintained a consistent upward momentum for the past three years, primarily due to active participation from Indian retail investors.
Domestic brokerage Motilal Oswal highlights that a surge in retail investor savings pools, especially in equities, has been the primary driver behind the unprecedented rise in the Indian equity market over the past three years.
The influx of retail investors post-pandemic has significantly altered ownership dynamics. The combined ownership of domestic institutional investors (DIIs) and retail investors in the free float market has risen to 62.9% in March 2024 from 55.1% in March 2014 and 58.7% in March 2019.
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Non-institutional investors accounted for more than half of cash trading volumes in FY24, up significantly from 38% in FY14 and 49% in FY19. India’s weighting in the MSCI index has also shot up to 19% from 7% in FY14 and 9% in FY19.
According to Motilal Oswal, total DII inflows in the first half of 2024 reached $28.5 billion, surpassing the $22.5 billion inflows in the whole of 2023. For the cumulative period 2022-1H24, FII inflows reached $4.8 billion while DII inflows reached $83 billion. Indian retail investors have traditionally been thought of as “buying high and selling low” but this view has been reversed, he noted.
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The brokerage also highlighted that on June 4, 2024, retail investors took advantage of the market correction to strategically increase their stock holdings.
The report highlighted that the country’s mutual funds’ assets under management (AUM) grew significantly year-on-year. ₹From $1.9 trillion in March 2014 ₹27.7 trillion as of May 2024. Moreover, the number of demat accounts is growing rapidly from 36 million in March 2020 to 160 million in June 2024.
These factors, combined with strong earnings performance across Indian companies, have helped the country’s market capitalization exceed $5 trillion.
The momentum continues
India now boasts a unique combination of size and growth. With elections over and a virtually identical NDA government led by Prime Minister Narendra Modi back in power, brokerages expect policy continuity to further boost overall economic momentum.
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Infrastructure, capital investment and manufacturing will continue to be a key focus and take centre stage. The new government’s upcoming federal budget is expected to outline its priorities for the next five years.
The widely reported 100-day policy plan will also give a good idea of the policy framework for the government’s third term. Brokerages also expect the government to strategically use the windfall from RBI dividend to provide relief to the poor and middle class, and encourage consumption ahead of crucial state elections scheduled for October and November 2024.
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Disclaimer: The views and recommendations expressed in this article are those of individual analysts. They do not necessarily reflect the views of Mint. We recommend that you check with a certified professional before making any investment decisions.
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