For much of market history prior to the Covid crash in March 2020, retail money was often termed ‘dumb money’. But as with everything in markets, nothing lasts forever. Post the crash, retail investors turned the tables and bought aggressively.

In fact, they made institutions look dumb — the GameStop short squeeze being one among many examples. But with the prolonged market correction since September 2024, concerns are emerging over whether the old adage is making a comeback.

After the Indian stock market peaked on September 24, 2024, the reward system changed. Stocks began to crumble, market breadth narrowed, and the easy phase of the bull market gave way to a more punishing one.

Yet, individual investors appear to have stuck to the old script — buy more of what has fallen the most. A bl.portfolio analysis of 1,993 NSE-listed companies using Capitaline data shows that the deeper the stock’s fall since the September 2024 peak, the more likely individuals were to increase their ownership.

Sample this. Total individual stake rose in about 37 per cent of stocks that were flat or delivered positive returns since September 2024. But the proportion climbed steadily as losses deepened.

In the 0-20 per cent stock-decline bucket, total individual stake rose in 44 per cent of companies. The figure increased to 54 per cent in the 20-40 per cent decline bucket, climbed to 68 per cent among stocks that fell 40-60 per cent, and exceeded 83 per cent in stocks that corrected by more than 60 per cent.

It is in this last set that price corrections were the deepest. Take Ola Electric. The stock is down around 60 per cent, but total individual stake has surged 215 per cent. Go Fashion is down nearly 70 per cent, yet individual ownership has jumped a massive 362 per cent.

Small retail, big dreams

While changes in total individual stake capture the combined shareholding of both small retail investors and larger individual/HNI investors, trends among small retail investors (resident individuals holding below ₹2 lakh nominal share capital) reveal the ‘catching falling knives’ syndrome even more starkly.

In the 71 per cent of the universe that has delivered negative returns, small retail investors have increased their holdings in every one of those 1,418 stocks. That 100 per cent hit rate is not even the most striking part. In more than 1,000 of those stocks, small retail investors have at least doubled their holdings.

For instance, in Kaynes Technology (down 42 per cent since September 2024), small retail investors have increased their stake by 131 per cent — from 7.8 per cent in the September 2024 quarter to a whopping 18 per cent by March 2026.

In Brainbees Solutions, which itself went public only in 2024, small retail stake has risen 185 per cent. In fact, across all the 1,418 stocks that have fallen since September 2024, small retail investors have increased exposure by at least 30 per cent.

Institutions haven’t shown the same appetite

The contrast with institutions is stark. Among stocks that have fallen more than 60 per cent from their September 2024 peaks, total individual stake rose in 83.5 per cent of companies. FIIs raised holdings in only 20.3 per cent, mutual funds in 6.3 per cent and insurers in just 5.1 per cent.

In Allcargo Logistics, individual stake rose 140 per cent even as combined institutional ownership (FIIs, mutual funds and insurers) fell 34 per cent. Sterling & Wilson Renewable Energy showed a similar pattern, with individual stake up 57 per cent and institutional ownership down 52 per cent.

Lower valuations may have supported the buying case in some stocks, but the broader behaviour appears to have been driven more by price damage than by valuation discipline. Consider high P/E stocks such as Epack Durable (128x), Entero Healthcare (171x) and Easy Trip Planners (441x). Total individual and small retail holdings have increased even though these stocks have become more expensive on valuation metrics.

The trillion-dollar question is not whether the old needle-hunting instinct of individual investors has survived the market’s turn. It is whether buying fallen stocks will once again be rewarded. In the current phase, many investors are no longer picking needles from a rising haystack. They are averaging down in a field that has, in its entirety, started to prick.

Individual investors would do well to buy based on fundamentals, valuations and the direction of a company’s business — not merely on how far a stock has fallen from its peak.

Published on June 27, 2026