“In strong cycles, they may seem reasonably valued, but on reversal of market conditions these stocks can have sharper drawdowns and earnings volatility can be high, said Sambre.
The number of demat accounts in India has risen to a record six crore as on June 30, from about four crore in February 2020. The surge began in March last year when individual investors started venturing directly into the stock market amid shutdowns on account of Covid and underperformance of equity mutual fund schemes. Brokerages have been direct beneficiaries of this retail investor rush. Given that pure broking is not a major earnings source for most of them, experts said these brokerage firms also benefited from cross-selling of products to these investors. IPOs of tech companies and other non-traditional sectors are also boosting retail interest.