Even as foreign investors have been on a selling spree across most emerging markets, including India, a record $60 billion in addition to retail inflow, through mutual fund and direct route, into domestic equity over the last 12 months has helped absorb heavy foreign selling. But inflows from retail investors can moderate, Jefferies said in its report dated May 24, 2022.

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As returns in the past one year drop towards zero in another three to four weeks, the pace of retail inflows can reduce, it said.

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This moderation is in light of new dematerialisation account openings declining in the March quarter, the brokerage firm highlighted.

New demat account openings were down 12 percent quarter-on-quarter (QoQ) in the March quarter 2022. Besides, the non-institutional share of market volume has declined by 8ppt to closer to average levels now, the brokerage firm explained.

Additionally, over the past decade, retail flows have been strong when deposit rates have declined or been lower.

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However, Jefferies said that a structural shift to equity savings is also underway which should help in the long run.

Domestic participation has broadened over the last 12 months with the mutual fund retail-equity folio count and systematic investment plan (SIP) accounts rising 29 percent and 42 percent, the brokerage said. Retail investors have also participated directly by way of stock purchases, it added.

The number of demat accounts has jumped 63 percent year-on-year (YoY) and Jefferies estimates an inflow of $36 billion directly into stocks from retail investors over the last two years.

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First Published:May 31, 2022 11:02 AM IST