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In the financial markets, every move counts. Each buy or sell order, whether it’s a single share or a million, leaves an imprint. But who’s making these moves? Enter the world of Retail and Institutional Investors.
But what sets them apart? Why does it matter to us? This article explores the concept of retail investors vs institutional investors.
Who are retail investors?
Retail investors, often called individual investors, are regular people who put their own money into the market and invest it into different types of financial products. They use trading firms, either in-person or online, to buy and sell stocks, bonds, mutual funds, and exchange-traded funds (ETFs).
There is a wide range of backgrounds and investing approaches among retail investors. Some like to be hands-on with their research and data analysis, and then others would rather just invest in diversified mutual funds or exchange-traded funds (ETFs).
Their investment sizes differ greatly according to their income levels, level of risk tolerance, and objectives.
A vital part of the financial sector is the function that retail investors play. They are a source of funding for companies when other options don’t appear feasible. They provide a steady stream of capital over the long haul since they invest for longer periods than institutional investors. They constitute a substantial chunk of the market’s activity when taken as a whole.
A vital part of the financial sector is the function that retail investors play. They are a source of funding for companies when other options don’t appear feasible. They provide a steady stream of capital over the long haul since they invest for longer periods than institutional investors. They constitute a substantial chunk of the market’s activity when taken as a whole.
A list of top retail investors:
| Name | Networth (₹ crore) | Company Holdings |
| Rakesh Jhunjhunwala and associates | 49,839 | 26 |
| Premji and associates | 196,693 | 1 |
| Radhakishan Damani | 179,668 | 14 |
| Mukul Agrawal | 4,715 | 54 |
| Mukul Mahavir Prasad Agarwal | 4,517 | 52 |
Who are institutional investors?
Institutional investors are groups or individuals that invest in the stock market, real estate, or other financial assets by pooling their resources or by making loans to other investors. For the benefit of others, these businesses and organizations contribute capital. A few examples are endowments, mutual funds, insurance firms, pension plans, and hedge funds.
When it comes to the stock and bond markets, institutional investors are major players. Market trends are driven by their expertise and substantial capital. These organizations oversee substantial sums of money for other organizations, which affects corporate governance, drives liquidity in the market, and makes capital allocation more efficient.
Because of the presumption that they are more educated and capable of protecting themselves, they are frequently subject to laxer rules. Their activities have the potential to disrupt market equilibrium, leading to unexpected fluctuations in the value of assets like stocks and bonds.
A list of top individual investors:
| Name | Networth (₹ crore) | Company Holdings |
| President Of India | 3,878,487 | 79 |
| SBI group | 533,028 | 167 |
| HDFC group | 411,391 | 254 |
| ICICI group | 398,049 | 241 |
| Kotak Mahindra group | 253,375 | 172 |
Key difference between retail and institutional investors
| Retail investors | Institutional investors | |
| Trading volume and frequency | Smaller quantities and less frequent trades are usual for retail investors. | Due to the substantial capital they oversee, institutional investors engage in frequent large-volume securities trading. |
| Costs and fees | Transaction expenses are typically proportionately greater for retail investors because of their smaller scale. | Due to the high volume of transactions, institutional investors typically pay lesser fees. |
| Access to research and investment opportunities | Regular people can do their own research. Investment opportunities are sometimes less accessible to them. | Specialist information and extensive research are available to institutional investors. They are in the know when it comes to several investment alternatives, such as private equity and initial public offerings. |
Retail investors vs institutional investors percentage
In December 2023, retail investors held 60.1% of total assets, while institutional investors accounted for 39.9%.
Institutional investor and retail investor SEBI
SEBI plays a crucial role in overseeing both institutional and retail investors in India. It ensures compliance with regulations, transparency, and fair practices.
For retail investors, SEBI focuses on investor education, disclosure norms, and safeguarding their interests against market manipulation or fraud.
SEBI sets guidelines for institutional investors, including disclosure requirements, voting rights, and corporate governance standards.
Impact of retail and institutional investors on the market
Even if retail investors don’t have the deep pockets of institutional investors, they can nonetheless sway asset prices and market patterns when they band together, especially during times of extreme volatility.
The magnitude of investments made by institutional investors, however, allows them to have a disproportionate impact on market movements. Their combined moves might cause changes in the market as a whole, which would have an impact on volatility and prices.
The investing market is evolving. Real estate investment trusts (REITs), tiny cases, non-fungible tokens (NFTs), and digital gold are replacing more conventional savings tools for retail investors.
We are entering a new period of uncertainty, disruption, and tremendous changes in public expectations of society and industry, and institutional investors are adapting their tactics accordingly. The three main areas of focus are competence, portfolio building, and purpose.
Bottomline
Retail and Institutional Investors are two key players with distinct roles and impacts. Understanding their differences, from trading volumes to market influence, is crucial for individual investors. As the investment landscape evolves, staying informed about these dynamics can help navigate the market more effectively.
FAQs
Retail investors are individuals who invest their funds in various financial instruments. They typically deal with smaller investment amounts. Non-institutional investors (NIIs), on the other hand, are entities like individuals, corporate bodies, and trusts that invest over ₹2 lakhs in initial public offerings (IPOs). They participate actively in the markets, making large deals with greater flexibility and fewer regulatory restrictions.
Institutional investors are entities like pension funds or insurance companies that trade securities in large volumes on behalf of others. They have access to in-depth research and sophisticated investment strategies. Commercial investors, on the other hand, typically refer to businesses investing in commercial real estate. They invest large sums in commercial properties, often to generate rental income or capital appreciation.
Yes, a venture capitalist (VC) is considered an institutional investor. VCs are private equity investors that provide capital to companies with high growth potential in exchange for an equity stake. They could fund startups or support small companies wishing to expand but lacking access to equities markets. However, VCs and institutional investors are not technically the same, as many institutional investors act as intermediaries rather than investing directly in companies.
Retail investors are individuals who invest their funds in various financial instruments. According to SEBI guidelines, the maximum limit for retail investors in an IPO (Initial Public Offering) is ₹2 lakhs. They can also buy and sell stocks up to the same limit in the stock market. However, SEBI retail investment limits are not applicable for commodity trading.
An angel investor is an individual who provides capital to startups, usually in exchange for convertible debt or ownership equity. They invest their own money into promising business ideas. These investments are high-risk but potentially offer higher returns than traditional investment opportunities. Angel investors can be professionals, successful entrepreneurs, or even crowdfunding platforms. They play a crucial role in the early stages of a company’s growth.