Private investors took advantage of a tumultuous stock market in February and March to buy shares, accumulating £636 million of equities, says Capita Registrars. This figure takes their total net buying to £1.1 billion since the start of the year, making private investors modest net buyers of shares for eight months running.

Nevertheless, the total £2.2 billion net buying since August 2007 is still dwarfed by the £14.7 billion they dumped in the previous year and a half, the final months of the bull market.

According to the research, by the end of March, investors owned £204.8 billion of UK equities, down from £206.6 billion at the end of January, a decline in value of less than one per cent.

Allowing for the net buying in February and March, the fall outperformed the overall market, which dropped by 2.4 per cent (FTSE Allshare) during the period.

John Roundhill, director of Capita Registrars, says, ‘The stock market was extremely volatile in February and March, with the FTSE 100 swinging more than 11 per cent from peak to trough. A bipolar market like this one normally frightens off private investors but the dips have clearly proved a real draw. It’s pretty brave, but they have exploited the down days to top-up their portfolios.

‘With the housing market tumbling, the advantages of good dividend yields and the ability to diversify one’s risk make shares look more attractive. Bricks and mortar are no longer absorbing investors’ every spare pound. With the outlook for property now much less rosy, investors will be looking for an alternative home for their cash.’

The net buying in February and March followed an unusual pattern. Private investors continued to favour the more defensive sectors of utilities, telecoms, healthcare and food and drink stocks, in keeping with the well-established trend. However, they reversed December and January’s £300 million of net sales of financials stocks, buying back £340 million in February and March.

Roundhill says, ‘The bipolar nature of the market is epitomised in the financials sector. It seems, with results season out of the way, private investors breathed a collective sigh of relief. But this is still a relatively modest reinvestment in the context of the £3 billion of financials shares they had dumped since October 2006. This looks like opportunistic short-term trading, rather than a long-term strategy to rebuild their holdings. Reports of a weak ISA sales season reinforce the notion that private investors are using direct trading as a short-term tactic.’