Retail investors made a strong comeback to Indian equities in 2024, reversing the moderation seen in the previous two years. Net inflows by individual investors in the NSE’s cash market (CM) segment surged to an all-time high of INR 1.65 lakh crore, marking a 32% increase from 2023. This resurgence highlights renewed investor confidence in the stock market, driven by sustained economic growth and attractive equity returns.
From Net Sellers to Dominant Players
Historically, from 2015 to 2019, individual investors were net sellers in the equity markets. However, the landscape changed in 2020, with net inflows of INR 52,897 crore, as retail participation soared due to low interest rates, liquidity-driven rallies, and the rise of digital trading platforms. Inflows peaked at INR 1.43 lakh crore in 2021, before cooling off in 2022 and 2023 as investors shifted towards mutual funds amid geopolitical uncertainty and inflationary concerns.
The record-breaking inflows in 2024 indicate a renewed bullish sentiment, with retail investors increasingly participating in direct equities despite global economic challenges.
Participation Soars in Both Cash and Derivatives Segments
The number of individual investors actively trading in the cash market has grown ninefold over the past decade, from 42 lakh in 2014 to 381 lakh in 2024, at an impressive CAGR of 24.7%. While the average monthly participation in 2024 stood at 143 lakh investors, a slight decline of 1.4% was observed from January to December, although September 2024 saw the highest participation levels ever recorded.
In line with this trend, participation in the equity derivatives segment has also skyrocketed, increasing more than 16 times since 2014. The most significant growth phase came post-2020, with participation rising 74% YoY, followed by a 96% surge in 2021. This shift reflects an increasing appetite for sophisticated trading instruments among retail investors.
Regulatory Measures Impact Sentiment
Despite strong participation, the derivatives segment witnessed some moderation towards the end of 2024 due to SEBI’s regulatory interventions aimed at curbing excessive speculation. These measures include:
- Discontinuation of multiple weekly expiries, allowing only one per exchange.
- Increased contract sizes to reduce risk.
- Enhanced margin requirements on short index option contracts, particularly on expiry days.
While these steps introduced some caution among retail traders, they are expected to foster a more stable and mature derivatives market in the long run.
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