Vijay L. Bhambwani's Ticker: Retail investors appear exhausted

Subscribe to enjoy similar stories. Dear reader, Last week, I wrote about the near-term trends being dependent on institutional investors. Another factor that would curtail the participation of retail investors was the end of the financial year.

That hypothesis played out along expected lines as headline indices slipped marginally in the truncated week. Last week I also wrote about the importance of monitoring marketwide position limits (MWPL) after the expiry of the February derivatives series. This indicator is a good way to determine the buying enthusiasm of deeper-pocketed players.

MWPL levels indicate fatigue in the retail traders' camp. They are buying, albeit in far smaller quantities. More on this in the Matryoshka analysis segment below.

Index futures turnover hit multi-month lows as a shorter week and higher span (initial) margin requirements curtailed trader participation. Though higher traded volumes are critical while markets are rising, the same is not true on the way down. Markets are known to slide on extensively lower volumes as retail traders have limited resources.

This fortifies my view that retail traders and investors are exhausted. Buying the dip may be an aspiration but monetary constraints are a bigger hurdle. This week will see continued action on public sector undertaking (PSU) stocks, particularly PSU banks.

Defence, power, energy and logistics are the other PSU segments that may witness above-average participation. In the private sector, interest-rate sensitives (banks, NBFCs, EMI-dependent sectors, heavily debt-laden companies and highly capital-intensive sectors) may see large price moves. The cost of funds is something my readers must understand deeply and immediately.