The coronavirus pandemic and the rise of trading apps and social media are attracting a new breed of Indian equity investors who are not afraid to take risks.
According to a report in Bloomberg, there has been a massive boom in the number of 20- and 30-year-old millennials who have turned to stock trading during the pandemic. Many of these day traders are first timers, driven by a combination of COVID-induced boredom and the ease of trading provided by numerous new online platforms, the agency reported.
Active investor accounts in India hit a record 10.4 million last year – a sign of confidence in India’s equity markets, which crashed last year at the onset of the lockdown but which have since scaled record highs.
Retail ownership in companies listed on the National Stock Exchange of India rose to 9 per cent in the third quarter of 2020, the highest since March 2018, Bloomberg reported. The agency quoted Angel Broking, a securities company, as saying 72 per cent of the 510,000 customers it added from October to December had never traded stocks before.
Only about 3.7 per cent of India’s 1.36 billion people invest in equities, compared with about 12.7 per cent in China. In the US, about 55 per cent of the population owns stocks.
Bloomberg quoted Mark Mobius, an emerging-market investor, as saying that China is “probably a model of what you can expect will happen in India” in terms of retail investor participation in the stock market. “India could easily equal China’s market cap in the next five to 10 years because going forward, growth in India’s market will probably be faster,” he said.
Unlike during previous investing booms, many of the new entrants live outside of Mumbai and New Delhi.
Souparnika K, a 25-year-old who hails from Gurgaon, is one such investor. She started investing last year using the discount broker Zerodha Brokers, which saw investors in the age group of 20-30 increase to 69 per cent of its total figure, from 50-55 per cent pre-COVID.
“The registration process was very easy and affordable – around ₹300 – and I did it sitting at home during the pandemic,” she told The Federal. Souparnika said she wanted to “learn how to invest and gain some investment experience”, and like other millennials, she turned to YouTube and internet research to improve her understanding of the markets.
“The adoption of internet and online access is going deeper into the country,” Bloomberg quoted Peeyush Mittal, a co-manager of the Matthews India Fund in San Francisco, as saying. “What we hear from companies in the brokerage space is Tier 2 and Tier 3 city investors are more long term in their view of the market.
Mittal could be talking about Harsh G, a friend of Souparnika who lives in Goa. He started investing in the stock market in 2018. When the pandemic hit and markets crashed, he became skittish and backed off for a period. “I was thrown off a little by the volatility,” he told The Federal. But “I do want to keep investing”, he said.
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Compared to previous generations, millennials today have limitless access to market information, and they are also more savvy about their finances.
In a recent report, Forbes quoted Prakarsh Gagdani, CEO of 5paisa.com, as saying India’s millennials have “learnt to protect their investments, which is a good thing because that will allow them to stay invested in equities unlike in earlier decades when new investors would leave the market after losing money”.
“We saw many new investors waiting to invest until markets fell sharply, rather than when they were at their highs. Now, when markets have moved up significantly, they are taking calculated risks,” Gagdani said.
Zerodha offers stock market tutorials and financial lessons under its initiative Zerodha Varsity. Harsh credits Zerodha Varsity with helping him improve his knowledge of the stock market. “I’ve learnt a lot from Zerodha Varsity – that is what prompted me to choose Zerodha’s apps over others,” he told The Federal.
Following the lockdown, market regulator Securities and Exchange Board of India (SEBI) took several steps to ease market participation, which has led to the current boom. It introduced regulations to ensure orderly trading, effective risk management and price discovery in the market.
In April, it reduced broker turnover fees to 50 per cent of the existing fee structure for June 2020-March 2021, and filing fees on offer documents for public issue, rights issue and share buybacks.
It also digitised the entire know-your-customer (KYC) process – among SEBI’s most progressive regulations of the year, according to Forbes. This allowed investors to fill their details via the internet.