Adding fuel to the fire are low-interest rates that are making fixed and debt instruments unattractive. Moreover, low rates are compelling Indian households to take some risk with equity markets. Currently, there are approximately four crore retail investors in the Indian market. “What if from four crore, retail investors number moves up to 10 crore?” asked Amol Rao, a former fund manager with Michael Dell Family Office in India. Experts feel that if the bull run continues then it may permanently alter the structure of the Indian market. Rao believes that with low returns on debt and fixed instruments, retail and HNI investors are left with no other option but to park money in the stock market.
Sandeep Shenoy, a market veteran and executive director of Mumbai-based Investment Boutique Firm Pioneer Invest Corp, says today retail and FIIs are making a fine balance between Indian equities. Any selling by FIIs is now easily being absorbed by retail investors. Shenoy believes that if small saving schemes start pouring into the Indian market, then market base case P/E may change to 22 to 24 times which is generally 16 to 18 times. It means that an investor who was earlier willing to pay ₹16 for ₹1 profit is now willing to pay ₹22 for ₹1 profit. Such high P/E (₹22 to ₹24) will become the general norm and growth would be chased more feverishly that may lead the Nifty P/E to 40-42 times in a euphoric environment.