Increasing Participation of Retail Investors Stopped the Fall in the Stock Market

Nirmala Sitharaman

Union Finance Minister Nirmala Sitharaman said in a program organized by the Ministry of Corporate Affairs on June 7 that domestic institutional investors (DIIs) are protecting the stock market from heavy selling pressure by foreign portfolio investors (FPIs).

Nirmala Sitharaman said retail investors are maintaining stability amid market turmoil. FPI sell-offs are no longer impacting the Indian market as much, as the retail investor base has increased substantially.

The number of retail investors in the country has increased tremendously since the COVID period and has registered a further spurt in the last few quarters. Traders say retail investors have risen due to higher liquidity.

A hike in interest rates raises the cost of credit for industries and corporates, affecting the rate of economic growth.

Foreign investors have pulled out capital of $ 42 billion or Rs 3.26 lakh crore from the Indian market in the last eight months. Domestic investors pulled out $32 billion, or Rs 2.5 lakh crore, in the same period.

Morgan Stanley said in April last year that holdings of domestic investors have increased by 600 basis points since 2015, while FPIs have fallen by about 150 basis points.

The number of demat accounts has increased seven times since FY20. The average number of new demat accounts in FY20 was four lakh per month. In FY21 it increased to 12 lakhs and in FY22 it increased to 29 lakhs.

The total number of demat accounts as of March 2019 was 36 million, which increased to 77 million last year.

The contribution of internet and mobile based investment platforms in making the common people accessible to the stock market is undeniable.

Along with retail investors, the number of domestic institutional investors has also increased in the country.

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