Derivatives, small-caps and gold.

"A survey by Ipsos has found that 69% of Indians believe that India is moving in the right direction. India is the third most optimistic market globally, the survey reveals." DD. Singapore and Indonesia are more optimistic than India. Curiously, Singapore is the only developed country, with a gross national income (GNI) per capita of $67,200 (World Bank), which is optimistic. People of all other developed nations, starting with Australia at 49% of optimism, are pessimistic in varying degrees. Indonesia had a GNI per capita of $4,580 in 2022, while that of India was $2,380. That enormous optimism manifested as, "Retail investors pumped in a hundred times more money into derivatives than shares on the NSE scondary market in the first half of FY24, and all the indications are that the trend may continue." Mint. "Against Rs 500 crore (Rs 5 billion) invested in NSE's secondary market, direct retail pumped Rs 50,500 crore (Rs 505 billion) into equity futures and equity options during April-September." Also, "Retail investor shareholding in NSE group firms surged to a record high of 7.62% during the September quarter," as "Retail investors pumped in Rs 7,596 crore (Rs 75.96 billion)." Mint. "The report showed that the DIIs (domestic institutional investors) saw their holdings rise to 15.99%, surpassing Rs 50 trillion in the quarter ended 30 September." The flow of money into stocks has jumped from Rs 63.8 billion in 2018-19 to "Rs 385.3 billion and Rs 486.1 billion in 2020-21 and 2021-22, respectively. In 2022-23, it stood at Rs 230.4 billion," wrote Vivek Kaul. In the past prices fell when FIIs sold stocks but buying by retail investors has supported prices. "Between August-end and 9 October, foreign portfolio investor have net sold stocks worth Rs 225 billion or $2.7 billion." "Data published recently...tells us that the number of folios of small cap equity mutual funds (MFs) as of August had shot up to 13.85 million, a jump of over 27% from March," wrote Kaul. Hence, "Between March and August, the BSE SmallCap Index has rallied by a huge 37.8%. During that period, the BSE Sensex - which is a large-cap index and India's most popular stock market tracker - gave a return of around 14.4%." A damning report by brokerage firm Kotak Institutional Securities said that "there had been no meaningful change in the fundamentals of most such companies," and, in many cases, it has worsened. Why are people piling into risky small-cap stocks and derivatives? Because the Reserve Bank (RBI) has allowed consumer price (CPI) inflation to go unchecked. RI. Gold is a great hedge against inflation although it gives no regular income. "Demand for gold in the country increased by 7.7% by volume to an estimated 42 tonnes and 10% by value to Rs 22,000 crore (Rs 220 billion), according to the Indian Bullion and Jewelers Association (IBJA)." ET. Indians have to be optimistic. Else they may become depressed. Happy Diwali.