By Srishti Sahu
According to the latest SEBI reports, the population of the Demat account holders in the country has gone up from 3.59 crore in 2018-19 to 7.38 crore in the current fiscal year, doubling the number of account holders in almost 3 years. Notably, it’s not just metropolitan cities that are adding to the ecosystem. Retail investors from emerging regions have been increasing their participation in the market through various direct and indirect routes (equities, mutual funds systematic investment plan, provident funds).
Speaking at NISM’s second annual capital market conference, Sebi chief Aajay Tyagi said that number of retail investors in the Indian security market has accentuated dramatically from 2020-21 onwards. According to him, internet-based trading and large shares of trade originating from mobile devices have been significant indicators of increased retail participation.
The IPO street has been kept abuzz as a result of loose monetary policies by global central banks which has resulted in ample liquidity and healthy momentum in the secondary market. The huge influx of retail investors, chasing quick money, has been propelled by the improved investor education via enhanced availability of information on digital modes and easier access to stock markets and high returns.
Now that these 5.13 million new investors have tasted blood with the blockbuster Zomato IPO, they have increased their risk appetite and added more money in the market, which is often more than the issue size.
The crypto market has been experiencing a similar boom, with youngsters and small investors flocking to make their first crypto purchases. The young investors are also experimenting with other forms of cryptocurrency like Defi assets and NFTs.
“In fact, tier-2 and tier-3 cities have driven almost 55 percent of total user sign-ups on WazirX in 2021, thereby overtaking tier-1 cities, which demonstrated a sign-up growth of 2,375 percent,” said Nischal Shetty, CEO at WazirX.
The recent SEBI report shows that individuals with income up to Rs 5 lakh account for 1.3 crore investor accounts, or 70.01% of individual investors across the country, and 28.54% of the total assets under management (AUM) of the mutual fund industry. Retail holdings increased in 958 companies listed on NSE in the last quarter. Those earning up to Rs 10 lakh accounted for 1.65 crore investor accounts (89.29%) and 47.2% of the industry AUM.
Over the last six years, the share of individual investors rose by 12% points from 33%in FY16 to 45% in FY21, rising sharply in 2021. Most of the economists are conservative as they feel that these new investors who have never seen a serious market decline, might cause frenzy when the market goes for correction and the stock prices go down.
As US Federal Reserve Chairman announces central banks’ plan to scale back asset purchases to $30 billion a month, intensifying its battle against inflation, may result in FPIs pulling out more funds from the Indian market. FPIs have already pulled out equity investments worth over Rs 35,000 crore since November 22.
The hike in the interest rate in the US could lead to RBI raising interest rates to prevent FPI outflow from the Indian bond market. As Foreign portfolio investment into the Indian equity and bond market slows, the rupee could weaken further even as the dollar gets stronger due to interest hikes. The experts believe that a faster-than-anticipated tapering could hurt the Indian stock market.
Experts are afraid that the roaring 1990s are coming back as the swinging 2020s and the real worry is for those retail and small investors who have invested big chunks of the savings in the market. Does the only question remain that whether these investors emerge unscathed after knowing what happened in the 1990s?