Retail Investors in Small-Cap Stocks Beware! These Are The Repercussions

Dr Ruzbeh Bodhanwala and Dr Shernaz Bodhanwala, faculty at FLAME University, Pune, dissect the current ‘frothy’ scenario

While the increasing participation of retail investors in the equity market is heartening, certain features make Small-Cap stocks correct relatively much faster than Large-Cap stocks when the overall market corrects. Dr Ruzbeh Bodhanwala and Dr Shernaz Bodhanwala, faculty at FLAME University, Pune, dissect the current ‘frothy’ scenario 

There is a massive rise in retail participation in India with around 40 lakh new demat accounts opened in the month of January 2024. The total number of demat accounts as of February 2024 was around 14.83 crore. As per the data published by the Association of Mutual Funds in India (AMFI), the SIP flows into mutual funds are increasing with total assets under management (SIP AUM) at over ₹10 lakh crore as of February 2024. This strongly indicates a big shift in the financial nature of the Indian economy. This financial aspect refers to moving away from traditional asset classes like land, home properties, physical gold, etc. towards financial assets.