(Bloomberg) -- If bets in the futures market are any guide, India’s retail investors remain optimistic about equities despite a 14% plunge in the nation’s stock market from a record high hit last year.
The ratio of outstanding long-to-short positions in single stock futures is at 6.74 times versus a 10-year mean of 3.74, data compiled by Bloomberg show.
While that’s down from about 10.4 in January, the fact it remains elevated could point to the risk that retail investors are too optimistic and vulnerable to disappointment from an array of threats.
The still-elevated ratio shows “retail traders remain sanguine despite the fall” in stocks this year, said Shrinivas Balasubramanian, director of institutional equity sales trading at JM Financial Institutional Securities Ltd. It also signals complacency and hence a possible risk for stocks if the mood sours, he said.
Retail investors have become increasingly important in Indian equity markets -- official figures show they accounted for 45% of trading in 2021, up from 33% five years earlier.
About 14.2 million new retail accounts were opened and registered with the country’s two main depository houses in from April to October last year as stocks rebounded from the Covid crash.
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