Did the rise of Indian stocks owe to retail investors?

Yesterday, the Indian stock market once again hit a new high record, with both Nifty 50 and Sensex reaching historical highs.

In addition to the favorable factors in the fundamentals and Modi's re-election, the hot IPO market has also helped the rise of Indian stocks to a certain extent.

Due to the soaring prices and good prospects, India has become one of the hottest regions for IPOs this year. According to compiled data by the media, the average increase of new stocks listed in India this year has reached 57%, which is more than twice the global average and exceeds the level of 32% in the Asia-Pacific region.

This has attracted many retail investors.

According to data from the Prime Database Group, in the 36 IPOs on the Indian exchange this year, retail investors applied for shares worth about US$10.6 billion, with an oversubscription ratio of more than 12 times.

Taking the Exicom Tele-Systems, a recently listed electric vehicle charging company, as an example, the application for shares by Indian retail investors has reached 120 times the number of shares issued. The stock has risen by nearly 230% from IPO price.

Pranav Haldea, Managing Director of Prime Database Group, commented that many retail investors are short-term traders of new stocks and do not intend to hold them for the long term:

"Most retail investors are basically for speculation, not for a grasp of the company's fundamentals."

"Based on the current listing gains we are seeing, as long as one can get the allotment, he or she can mint money."

It is reported that the personal quotas for all new stock subscriptions in the Indian market are already fully allocated. In the next few months, at least 15 companies are actively preparing for IPOs in India, with a total expected fundraising amount of up to US$11 billion.

Indian retail investors have become the "main force" in the stock market.

Vineet Arora, manager of Singapore's NAV Capital Emerging Star Fund, believes that the enthusiasm of Indian retail investors is unstoppable:

"I have talked to many young investors. Most of them do not want to buy houses or real estate, which are assets that people usually invest in shortly after starting work. Now, this money is flowing into the stock market."

Not only in new stock subscriptions, in recent years, Indian retail investors' "control" over the stock market has been increasing.

Brokerage firm Motilal Oswal said that the surge in stock funds from domestic retail investors has been a key driving force for the unprecedented rise of the Indian stock market in the past three years.

According to a report released by the company, in June, the scale of mutual fund assets under management in India reached a new high of US$730 billion, with more than 0.153 billion retail investor accounts holding more than half of the assets, and the total funds continuously flowing into stock funds for 40 months in a row, showing a strong sentiment of retail investors in stock investment.

In addition, the influx of retail investors after the epidemic has changed the market ownership structure. According to data from the report, the proportion of shares held by domestic institutional investors and retail investors in the secondary market has risen from 55.1% in March 2014 to 62.9% in March 2024.

The report pointed out that the "buy low and sell high" concept previously held by Indian retail investors has been broken, and they have begun to increase their holdings during market corrections.

Some analysis believes that thanks to the end of the election and Modi's re-election, the Indian stock market will continue to rise in the next period of time. Modi's emphasis on infrastructure and manufacturing is expected to continue to be the market focus.