Retail Investors Continue Equity Selloff in May Despite Market Rebound:

Suspense crime, Digital Desk : Externally, mutual funds and even foreign institutional investors (FIIs) have sequentially increased their buying activities which put the market into a Frenzy on the buying side. Mutual funds, for their part, spent ₹13,459 crore in March, 18,062 in April, and 24,792 in May, for a total of 62,313 crore in net buys. After being net sellers... the FIIs switched in March, netting ₹1,718 crore, then 10,732 in April and 15,843 in May, marking a steady increase.

On the other hand, many market experts, speculate that... strong market rally over the past year... my own profits and not reinvest into...valuations in small and mid cap segments…”

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After the COVID-19 pandemic, there was significant growth in retail participation in equities. A number of new investors experienced significant growth during the bull market and considered minor pullbacks as buying opportunities. However, the entire market experienced a deep correction starting in July 2024, resulting in all indices enduring significant drawdowns. The large-cap index alone saw a decline of 10-15% between September 2024 and February 2025, while mid and small-cap indices experienced an even steeper drop of nearly 20%.

Profit Booking Not Panic Selling

This specific trend has prompted Nikunj Saraf, a Choice Wealth Vice President, to highlight the fact that this should be looked at as tactical profit booking or asset class churn instead of a vote of no confidence by investors. Sustained retail interest suggests many individual investors, [IPOs] continue to show interest as evidenced by strong SIP inflows amidst high sustained long term interest.

Market Recovery Brings Partial Relief

This has been accompanied by some relief for investors, with the recent recovery in markets described as providing much needed relief. It was part of the upsurge boosted by Donald Trump's 90 day pause on tariffs which has enhanced market sentiment. The markets also saw further increases in March. The Sensex and Nifty gained 5.8% and 6.3% respectively while the BSE MidCap and SmallCap indices rallied by around 8% which was also followed in April, with the benchmark indices seeing gains of 3.5% midcap and small caps rising by 3.3% and 1.6% respectively. Midcap and small caps also followed suit, with Sensex and Nifty seeing increases of 1.6% and 2% respectively marking May so far, while small and mid cap shares surged by 5.4% and 9.5%.

Move Toward Safer Investment Avenues

Many retail investors, regardless of the recovery, seem to be gravitating toward safer investments such as debt mutual funds and fixed deposits. This change is being influenced by global uncertainties and geopolitical tensions. Additionally, interest in IPOs has gone up, especially with consistent listing gains.

OmniScience Capital's CEO and Chief Investment Strategist, Vikas Gupta, pointed out that retail investors might continue to be cautious about the secondary markets until some positive momentum motivates a re-entry. It appears the focus for many, at least for now, is focused on capital preservation.