3 stocks per demat account: Where are retail investors investing?

Despite a strong 54 per cent rise in demat accounts compounded annually over the last three-and-a-half years, the rise 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, YES Securities said in a note.

The domestic brokerage noted that a demat account on an average now holds shares of only three companies when compared with 5.7 in March 2020. YES Securities said: "This amply suggests that a significant number of new retail investors engage mainly in the derivatives segment."

Sebi Chairman Madhabi Puri Buch recently talked about a growing popularity of F&O trades among retail investors. While launching the Investor Risk Reduction Access (IRRA) platform at the BSE recently, she said one should adopt a long-term approach to investments, where there is a high probability of wealth creation "rather than losing money on a daily basis in the F&O segment."

A report by Sebi earlier this year suggested nine out of every 10 equity F&O traders (89 per cent) incurred losses in FY22 -- the average loss being Rs 1.1 lakh.

The YES Securities report suggested that retail investors tend to hold an overweight position in smaller sectors, while foreign portfolio investors (FPIs) favour larger sectors such as financials, FMCG and oil & gas. Domestic institutional investors (DIIs) also exhibit a preference for larger sectors, except for financials. This is based on NSE500's public holding pattern.

On a sequential basis, YES Securities said three categories of investors (FPI, DII and retail) added financials. In the cases of IT, real estate and media, institutions have increased their pie while retail has trimmed. Retail investors have increased their allocation to construction and capital goods, the brokerage suggested in its November 24 note.

Also read: Fortis Healthcare shares in focus on Tuesday on sale of Fortis Malar Hospital for Rs 128 crore 

Also read: Gurunanak Jayanti on November 27: Is Indian stock market closed today? Check details of BSE, NSE trading holidays