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Raging volatility, end of remote working send Covid investors away from markets

Retail participation, which peaked during the pandemic, has been declining after the markets turned volatile and returns from fixed deposits and bonds started improving.

December 09, 2022 / 12:22 PM IST
Representational image

Representational image

The Covid investor is vanishing from the Indian stock markets.

Retail investors who thronged the markets during the pandemic, when bulls drove an unprecedented rally from April 2020 to October 2021, appear to have found more attractive investment options. Or no longer have the time and money to invest in stocks.

When global macros, such as inflation, economic tightening, interest rate hikes and commodity prices,  changed in October 2021, the equity markets were impacted immediately and were soon gripped by volatility. First-time and novice investors got their first taste of the downside of the markets, and many learnt it the hard way by burning holes in their pockets. This deterred them from staying in the market.

Though the markets have since recovered and the benchmark indices climbed to fresh highs, retail participation, once the growth engine, has been declining.

Retail loss

NSE Data


The share of individual/retail investors in the Indian equity markets has been shrinking after peaking at 45 percent in FY21, National Stock Exchange of India data shows.

For the first six months of FY23, retail participation stood at 37.4 percent compared with 40.7 percent in FY22. Their current share is the smallest since FY17, when it was 36 percent.

Diminishing growth in new DEMAT accounts

Growth in New Demat Accounts

The pace of opening of new dematerialised accounts in a single quarter has eased since the quarter ended December 2021. From October 2021 to December 2021, an average of 3.45 million new demat accounts were opened across the Central Depository Services (India) Ltd. and the National Securities Depository Ltd. The trend during the preceding two quarters was also positive.

However, once foreign institutional investors started pulling out of India during the fourth quarter of CY21 and the markets went on a downward spiral, demat additions also started declining.

Average demat additions declined to 3.02 million per month during the quarter ended March 2022 and went down further to 2.28 million accounts a month in the quarter ended June 2022 and 2 million a month in the quarter ended September 2022.

Average daily turnover on a decline

Avg Turnover

The average daily cash turnover on both the BSE and the NSE stood at Rs 62,069 crore so far in 2022 (January to December 2), down 17.9 percent from the average daily turnover of Rs 75,585 crore in  CY21.

Turnover is correlated to buoyancy in the market. There was a steep climb in turnover when the Nifty rallied to an all-time high of 18,604 in October 2021.

According to VK Vijayakumar, chief investment strategist at Geojit Financial Services, “That was an unprecedented one-way rally, which saw an unprecedented retail participation and a spurt in volumes.”

Investors were gripped by FOMO and jumped on to the bandwagon.

“The increase in daily turnover in 2020 and 2021 was largely due to the Covid impact, whereby many new investors signed up and most people were working from home, having enough time to do day trade or investments,” said Deepak Jasani, head of retail research at HDFC Securities.

Globally, the Nasdaq and Dow Jones Industrial Average did well between March 2020 and November 2021, giving continuous positive cues to the Indian markets.

Why investors are leaving

However, as stock valuations gradually became expensive, the regulator and the exchanges tightened margin and exposure regulations, which impacted investor sentiment.

“Retail participation declined as the markets became volatile and fixed income returns started improving with FDs and bonds giving more than 6-7 percent returns,” said Vivek Goel, joint MD of Tailwind Financial Services.

That may have prompted investors with a low risk appetite and buyer’s remorse to start moving out.

Experts said the opening up of the economy and the return to office are also among the reasons for the decline in retail participation.

“The time spent by investors in trying their hand at investing directly through a demat account during Covid and work-from-home environment is not available anymore with the opening up of the economy,” said Divam Sharma, founder of Green Portfolio.

People are now considering going through fund managers more than they used to during the pandemic.

Some experts suggested that accelerating inflation also had a role in dragging investors away from the stock markets.

“We are seeing lesser savings as opening up has resulted in higher spends and inflation has also impacted the household budgets,” Sharma added.

The markets in India lately have been driven more by foreign portfolio investment flows than domestic money, which dominated the previous few quarters.

“FPIs are more focussed on large-cap stocks and exposure to these can be taken through futures and options, because of which the F&O turnover is still buoyant,” said Jasani of HDFC Securities.

Disclaimer: The views and investment tips of investment experts on are their own and not those of the website or its management. advises users to check with certified experts before taking any investment decisions. 

Gaurav Sharma
first published: Dec 8, 2022 11:52 am