Retail investors' participation up 55% YoY in 2021 on technology penetration, IPO success, dwindling income scenario amid job losses, say experts
User base saw an incredible jump in Tier-2 and Tier-3 cities as states like Assam, Bihar and Uttar Pradesh added maximum number of investors in terms of per centage growth in one year time. Assam saw over 300% growth YoY in retail investors, while Bihar and Uttar Pradesh witnessed 111.23% and 78.34% growth in new investors respectively in one year
The Indian equity markets witnessed a massive surge in retail participation this year as record number of demat accounts were opened in 2021. The total number of registered retail investors as on December 18 stood at 90316090, a 4.06 per cent jump on month-on-month basis and a whooping 55 per cent on annual basis, as per the BSE data.
Interestingly, the data shows that user base saw an incredible jump in Tier-2 and Tier-3 cities as states like Assam, Bihar and Uttar Pradesh added maximum number of investors in terms of per centage growth in one year time. Assam saw over 300% growth YoY in retail investors, while Bihar and Uttar Pradesh witnessed 111.23% and 78.34% growth in new investors respectively in one year.
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Lakshadweep (134.39%), Arunachal Pradesh (121.43%), Manipur (116.12%), Madhya Pradesh (105.71%), Odisha 100.20% and Himachal Pradesh (94.16%) were the other states which recorded massive jump in retail investors participation.
As per data from the NSE, net investment by retail investors in cash market stands at Rs 86,000 crore already till September this year, which is much higher than Rs 51,200 crore in 2020. Also, since the pandemic, retail traders accounted for 45 per cent of all investors on the NSE in FY21.
Meanwhile, domestic equity benchmarks Nifty50 and the S&P BSE Sensex gained 23.50% and 21.6% respectively in the last one year as on December 17, 2021. This is despite the Indian stock market having corrected nearly 10 percent from their respective highs they attained in October.
Experts are of the view that technology penetration, impressive listing of IPOs, positive market outlook and a shift in approach towards the importance of having an alternative source of income due to the pandemic were the important factors that brought in new investors on Dalal Street.
Here is what market experts and analysts think of what brought in change in perception about the equity market and massive participation by retail investors in one of the biggest bull rallies in decades.
Vinod Nair, Head of Research at Geojit Financial Services
Nair says it was a global phenomenon, which happens when secondary market provides excellent returns. However, this time it has been much better than usual and we need to acknowledge the timing, new investors and research-based approach to buy equities during major downfalls. They were supported by a strong primary IPO market and tech-based investment platforms. Retail investors seems to have learned progressively in the investment curve like from the last decade of global financial crisis.
Santosh Meena, Head of Research, Swastika Investmart Ltd.
We are in a different kind of market growth, where there is a massive surge in retail participation in the Indian equity market thanks to the technology, which is helping in the penetration of the stock market in India.
In the past, we have seen instances when a sharp surge in retail participation coincides with massive subscriptions in many IPOs, the market tops out, however, this time, things are different because this bull run has a combination of both mature retail investors and speculative traders.
The only worry for me is that most of the new investors who debuted in the equity market in the last one and a half years have not seen any meaningful correction. It will be important to see their reaction if the market witnesses 10-20% correction. Short-term volatility will take out the weak traders, however, stock market penetration in India may continue to rise and the bull run is likely to prevail for the next two-three years.
Manoj Dalmia, Founder and Director, Proficient equities Private limited
There were several reasons behind strong retail activity in the equity market. Lesser FD rates, increasing inflation and lucrative bull run by the markets and its recommendation by peers were some of the reasons. Besides, pandemic too caused a shift in the sentiment, making people realise a need for a secondary source of income.
Gaurav Garg, Head of Research at CapitalVia Global Research
There was record addition of demat accounts as young investors and traders became more inclined towards stock markets. Moreover, what really attracted Retail investors is that there were large number of IPOs has made impressive listing gains and positive euphoria on overall sentiments of the markets.
Ravi Singh, head of Research and vice president, share India
During the peak of the pandemic, when most of the people were witnessing pay cuts, had lost their jobs, were incurring huge loss in business due to the lockdown and were staring at uncertain future, they started looking for ways to support their financial needs. This gave a rise to technology penetration.
This further led to improved awareness towards various investment options and market news. Potential investors of Tier-2 and Tier-3 tier cities who were earlier ignorant of portfolio diversification are now empowered with online trading tools and real-time price movements. Low interest rates on investment options like FDs and debts have made them less attractive and people are looking for higher return avenues. With the growing influence of social media and digital infrastructure, we expect this phenomenon to continue.
12:33 PM IST