Even though the Indian market is going through a downtrend, retail investors have doubled their bets on smallcap stocks during the December quarter. Interestingly, some of these stocks have given strong returns of up to 253% in the last 6 months. Kitex Garments, V2 Retail and Indraprastha Medical are some of the stocks on which retail investors have increased their stake during October-December 2024. These stocks have more than doubled the investors' money in the last 6 months.

Retail investors' holdings have also increased in some other stocks including Pokarna, Lloyds Metals, Siyaram Silk Mills, Anant Raj, Precision Camshafts and Authum Investments. Although these stocks have not given as much profit as the top performing stocks giving triple digit returns, they have still given a return of more than 80% in this period. These bets by retail investors indicate that they have maintained positions in their chosen stocks despite the sharp decline in the market.

How much did small and midcap stocks fall?
In the last 3 months, the BSE Smallcap index has fallen by 8% and the Midcap index by 7%. The major reasons for this decline include factors such as outflow of foreign capital, slowdown in corporate income and the possibility of slowdown in the country's economy. So far in January, foreign investors have withdrawn more than ₹ 50,000 crore from the Indian stock market. However, the increase in the participation of retail investors in some of these stocks does not mean that the positive trend will continue in them in the future.

What is the opinion of experts? In a report, Economic Times quoted Abhishek Jain, Research Head, Arihant Capital Markets, as saying that historically, the increase in retail stakes during a correction is sometimes considered as part of the distribution phase, where informed investors exit while retail investors buy. Even though the stock market is well below its peak, most analysts are still not in favor of investing in this situation. They say that the valuation in the broader market is still not considered completely 'cheap'. But the correction in the market has made some sectors attractive to retail investors. This has created an opportunity for savvy investors to identify and invest in high quality companies available at more reasonable valuations. Need to be cautious However, analysts say that it is important to be cautious in this, as the smallcap segment is inherently high risk. But this change in thinking is being seen due to comparatively more stability and strong performance and a shift in focus of retail investors is being seen, especially in some defensive sectors.