A Kotak Equities study shows that the top 20 retail-heavy stocks in the Nifty-500 have posted negative returns since June 2024, after a strong run-up between March 2023 and June 2024, with similar patterns seen in high retail-owned “narrative stocks.”
Among these stocks, Reliance Infrastructure, where retail investors hold around 45%, slipped 13% from June 2024 to December 2025. Olectra Greentec fell 34% over the same timeframe, and Tata Technologies declined 36%. That said, not all stocks in the basket underperformed — HBL Engineering and Anand Rathi Wealth stood out with gains of 69% and 54%, respectively.
Crucially, the brokerage warned that valuations in many of these narrative-driven stocks remain disconnected from underlying fundamentals, even after recent corrections triggered by the failure of growth or turnaround stories.
“These stocks are likely to lose a significant portion of their market cap over time, potentially prolonging the period of weak returns for retail investors,” it said.
Indian markets have been dubbed the world’s worst-performing in 2025, and the start to 2026 has been anything but good. Nifty lost over 2% already this year, dragged down by continuous foreign investor exits that started early last year.
Even the returns over the last few months through institutions remained uneven. The brokerage said that retail investors’ direct equity holdings, as well as investments routed through mutual funds (MFs) and portfolio management services (PMS), have trailed benchmark indices and tested investor patience during a prolonged phase of time correction in the broader market.As per the report, equity-oriented mutual fund investors likely earned very modest returns between July 2024 and December 2025, even though this period accounted for nearly 53% of the total equity MF flows mobilised between CY22 and CY25.
The brokerage points out, stands in sharp contrast to the positive returns delivered by major indices during the same period. Kotak Equities observed that a retail investor would have needed to invest consistently since September 2022 to achieve an XIRR of more than 13%, even before accounting for expenses and taxes.
The report also highlighted that the underperformance was driven by weak returns in key MF sub-segments. Midcap, smallcap, and thematic funds — which attracted the bulk of inflows over the past two years — delivered returns that were similar to or worse than overall equity mutual funds over the past 18 months. This divergence between flows and performance underscores a growing mismatch between investor expectations and realised outcomes.
Portfolio Management Services (PMS) offered little relief as well. Kotak Equities’ review of the top 20 PMS strategies by assets under management shows that only a few schemes delivered meaningful returns over the past year. Even so, PMS products continued to attract robust inflows.
The brokerage warns that prolonged underperformance could threaten future inflows, especially as investors place greater emphasis on risk-adjusted returns.
On direct equities, the report highlights that retail AUM in NSE-listed stocks has stayed broadly stable at about Rs 43 lakh crore over the last 18 months. Although retail equity AUM expanded at a CAGR of around 15% between 2021 and 2025, most of this growth was concentrated between March 2023 and June 2024. Since then, retail participation in equities has cooled, reflecting caution amid uneven stock performance.
At a broader level, the findings are concerning. While market indices have remained robust, retail investor outcomes have lagged considerably, reflecting challenges in timing, stock selection, and excessive exposure to high-risk segments. Kotak Equities cautions that this divergence between market perception and portfolio reality may increasingly strain retail confidence if performance does not recover over the next few quarters.