India Strategy : Where Money Flows - November 2023 By YES Securities
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Investor Trends: Sector Preferences in Focus
We examine market participation patterns which reveal distinct choices among investor groups. Our inference is as follows:
* Retail Investors' Playbook - Small Sectors Steal the Show: Retail investors lean towards smaller sectors, showing an overweight position, a stark contrast to other investor categories
* FPIs' Big Bet - Financials, FMCG, and Oil & Gas Take Center Stage: Foreign Portfolio Investors (FPIs) show a clear inclination toward larger sectors, notably Financials, FMCG, and Oil & Gas
* DIIs in Step - Larger Sectors Lead the Way: Domestic Institutional Investors (DIIs) align with FPIs, favouring larger sectors, excluding Financials
* Shifting Sands - Dynamic Changes in Investor Preferences: Investor choices have undergone significant shifts, with Capital Goods, Automobiles, and Construction witnessing increased allocation
* Performance Matters - Surge in Allocation Linked to Price Outperformance: The rise in allocation to certain sectors is primarily attributed to their price outperformance, impacting investor preferences
* Selective Interest - Oil & Gas and Healthcare on the Decline: Oil & Gas and Healthcare sectors experience a decline in interest across investor categories
* Retail On the Rise - Demat Accounts Surge, but Derivatives Dominance Emerges: Despite a stellar 54% CAGR in demat account over the last 3.5 years, the increase in aggregate retail number of shareholders (total number of retail shareholders in all listed companies) is not commensurate, growing at half the rate of rise in Demat accounts. Pertinently, ratio has fallen from the pre-Covid levels of 5.8 to 3. This states that a demat account on an average now holds only shares of 3 companies when compared with 5.7 during March 2020. This amply suggests that a significant number of new retail investors engage mainly in the derivatives segment.
* Through 40 interesting exhibits, we focus on prevalent domestic and global liquidity flows to assess the evolving situation in financial markets. Shared below is our assessment.
Exhibit 1: Free Float basis PIE of Nifty 500
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