The unabated love of retail investors in the equity markets
1 min read 25 Mar 2022, 01:06 AM ISTIn FY22 there was a net addition of more than 2.83 million demat accounts per month, more than double of FY21
PremiumEquities have gained popularity among retail investors as an investment option following the coronavirus outbreak. An analysis of Indian household asset holdings, based on savings data and mark-to-market calculations, of more than 15 years by Jefferies India Pvt. Ltd shows that equities have risen to a record 4.8% of household savings from 2.7% in March 2020.
A new set of retail investors too seem to be driving this growth. Analysts say the generation of millennial retail investors saw the steep correction in India’s stock markets at the peak of the coronavirus pandemic in CY20 as an opportunity to take exposure in equities.
“At that time, there were massive job losses. So, for many, trading in the stock markets became a route to earning additional/alternative income," an analyst said, requesting anonymity.
Consequently, demat account openings surged. In FY22, there has been a net addition of more than 2.83 million demat accounts per month, more than double the monthly addition of 1.19 million in FY21, pointed out rating agency Icra Ltd.
“Disclosures by prominent listed brokerage entities point to an increasing share of age groups of less than 30 years among new clients. The evolution of low-cost digital and user-friendly broking platforms has successfully catered to the young investor’s preference for human-free interaction," said Karthik Srinivasan, senior vice-president and group head, financial sector ratings, Icra.
Indeed, the overall robust retail participation, along with domestic institutional investors, has contained a sharp fall in equity benchmarks at a time the Russia-Ukraine conflict has prompted foreign institutional investors to flee.
India’s brokerage industry has also benefitted. An analysis of 18 leading broking houses by Icra showed that in FY21, they saw a year-on-year (y-o-y) revenue growth of around 38%. Growth is expected to be strong in FY22 too.
However, considering the limited experience of young investors across the market cycle, a sustained trend of participation is yet to be witnessed, Srinivasan contended.
Equities are gaining popularity among Indian retail investors, but bank deposits remain the most preferred investment option, grabbing around thrice the share of equities in overall household savings, showed the Jefferies analysis. This is not surprising, as bank deposits are considered safer with fixed returns vis-Ã -vis equities, which are subject to risks and can see wild swings during times of economic uncertainty.
