The Rise of Indian Retail Investors: A Paradigm Shift in Investment Preferences
13 Dec 2022
The Rise of Indian Retail Investors: A Paradigm Shift in Investment Preferences
The typical Indian investor has long preferred to place their money in three different types of investments: land, fixed deposits, and gold. Equity was hardly ever a factor.
Because of the low participation of retail investors, India's exchanges have been dominated by the big guns, institutional, and foreign investors in the business news. This made Indian indices quite volatile—in every downturn; foreign investors were the first to exit, as they searched for a different market with better returns.
The COVID epidemic followed that. After the pandemic, there has been a noticeable change in how people have been investing their money, according to a recent Jefferies India report. From 2.7% of family savings in March 2020 to a record 4.8%, stocks increased.
The amount of free time many investors had during the epidemic, especially millennials (those born in the 1980s and 1990s), was a major factor in their decision to invest in the stock market. Both marketplaces and stores were closed. How much Netflix can one watch at once? However, the BSE and NSE were open and trading despite lockdowns.
As a result, many individuals opened their first Demat Account.
The sudden stock market decline brought about by the pandemic provided Indian investors, notably millennials, with a once-in-a-lifetime opportunity to purchase equities with the potential for enormous gains. This bet was successful. The Nifty50 increased by 127% in the past 2.5 years, from 8,083 in March 2020 to 18,300 last week. The number of Indian demat accounts reached 100 million for the first time in August 2022, up from just 40.9 million before the pandemic.
Will these investors remain? is the current question.
The indicators are positive. Pippa Norris, a political scientist, describes the generational shift as a "very powerful force" that transforms people's fundamental views on risk, security, and wealth.
While previous generations witnessed stock market scams that made them see stock investing as "gambling," the younger generations view it differently. The professionalisation of the stock market and clarity in regulation have encouraged them to invest.
Indian stocks have historically benefited investors over the long haul. The Nifty50 has increased six times in 13 years, from 2,800 in 2009 to over 18,000 today, following the 2008 financial crisis. And so far, the Indian stock market has remained