How And Why Retail Investment Frenzy Arose Post-Covid
India's retail investment boom was led by the rapid growth of digitisation and awareness among young people. Moreover, the pandemic worked as a catalyst for the same. Millions of people were left stranded at home searching for means to augment their income because of wage cuts, job losses, and lockdowns.
Similarly, millions of Indians found themselves with money, and free time to invest. A State Bank of India report shows the number of individual investors in the market increased by 142 lakh in 2020-21, with 122.5 lakh new accounts at CDSL and 19.7 lakh at NSDL.
At the same time, retail ownership of the 1,500+ companies listed on the National Stock Exchange (NSE) increased by 9% in Q3 2020, the highest gain since March 2018.
Notably, a pandemic alone would not have had such a profound impact without technology. With the penetration of the internet into the most remote corners of the country, Indians now have access to a completely new world of online access.
Because of improved accessibility, investment education, market news, and growing awareness of various investment options, many brands have created their own easy-to-use investment apps, while social media has made the discussion of the investment community more accessible. Twitter, Telegram, Reddit, etc., are home to active investor communities which are always prepared to share market analysis and investment opinions.
With the digitalisation of financial products and currency (adoption of online banking), retail investors can also open DEMAT accounts, buy global equities, gold, crypto and much more without having to leave their homes, which has been a major factor in facilitating this increased participation.
Almost 4.5 million retail investor accounts were opened in just the first two months of FY21, as well, continuing to grow exponentially. The total number of retail investors increased by an astonishing 14.2 million in FY21, with 12.25 million new accounts being opened on CDSL and 1.9 million in NSDL.
In October of 2021, the Nifty 50 crossed 18,604.45, SENSEX reached an all-time high of 62245.43, and the SENSEX Stock Market Index crossed 62254.43. Retail investors have lots of confidence in the market because of the solid growth and the number of good companies.
Because of the pandemic, a global WFH (Work from home) culture was formed, allowing individuals to devote more time to financial markets. This resulted in retail investors' domination on the Indian stock market. Retail investors' share on the NSE alone grew from 33% in 2016 to 45% in 2021. The interest is not decreasing either, with monthly registration of new investors increasing to an all-time high of 1.5 million in June 2021.
There have also been some regulatory changes in India that made it easier for investors to access a wider range of products easily and hassle-free. For example, regulators are supporting online payments and enabling account openings.
The value of real estate has not changed much over the last few years, along with the hassles of managing property, which has led to a flight of capital into non-movable assets. Among Indians, individual investors represent a broad shift away from the traditionally preferred physical assets, such as gold and real estate, and bank deposits.
Moreover, low interest rates have made traditional investment avenues, such as fixed deposits and debt instruments, less appealing. Therefore, Investors started looking for inflation-proof substitutes.
In fact, as the digital infrastructure continues to grow and digital natives continue to enter the markets in droves, some experts predict that online trading could reach a value of $14.3 billion in India by 2025.