Small investors keep faith in India despite Adani rout

Small investors in India who believe the carnage that has wiped off about $130 billion from the value of Adani shares won’t damp the long-term prospects for the nation’s equities.

While sentiment over the broad Indian market took a hit after US-based Hindenburg Research on Jan. 24 accused the Adani Group of share manipulation and fraud —charges the conglomerate denies, the selloff has proven short lived. The country’s benchmark Sensex, which doesn’t count Adani stocks as its members, recouped all of those declines as of Tuesday close.

An increasingly important way individuals are influencing the broader stock market is through the monthly investment plans offered by mutual-fund firms. Those regular flows have helped the market limit losses caused by shocks such as the Adani selloff. Indian stocks have now seen inflows from mutual funds for 23 straight months, according to data compiled by Bloomberg.

“Investors in India are more information-centric, they are making data-driven decisions,” said Tejas Khoday, chief executive at discount brokerage FYERS Securities Pvt. based in Bengaluru. The pace of new client additions by Indian brokerages slowed in the second half of last year but it’s showing signs of picking up again, especially after the federal budget focused on capital spending, he said.

The boom in individual investing isn’t just restricted to India either. The easy money policies and cash handouts from central banks and governments around the world in response to the pandemic helped encourage retail investors around the globe. The proportion of equities in Indian household savings doubled to 5% last year, according to Jefferies Financial Group Inc.

The money coming into Indian stocks via individual investors directly or through mutual funds is set to keep growing, said Sundararaman Ramamurthy, managing director and chief executive officer at BSE Ltd. “India will continue to be a great success,” he said.