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Stock trading in India sees massive growth, courtesy young investors

Stock market investing takes off with fall in interest rates, faster internet

trading

Indians for long have considered investing in equity a risky bet and many of our forefathers stayed away from it. The leaning was always towards savings options like bank deposits and small savings instruments, which offered good, stable and low-risk returns. But, as interest rates fall and with the advent of technology, investing in stock markets has taken off in India, and it's the younger investors, including millennials, who are driving the big shift.

According to recent data from the Bombay Stock Exchange, it crossed 7 crore registered users based on unique client code this month. The jump in the registered users to 7 crore from 6 crore has happened in just 139 days, compared with the 241, 652 and 939 days that were taken for the previous milestones of 6 crore, 5 crore and 4 crore users.

The National Stock Exchange data also points to significant jump in retail investor interest in equities, which it says was also aided by the market rally.

Nearly 14.3 million new investors were added by the two depositories NSDL and CDSL combined in the year ended March 2021, a 1.9 times year-on-year jump. The share of individual investors in the cash market turnover, too, has risen to 45 per cent in 2020-21 from 39 per cent, a year ago, according to NSE data.

“A sharp market crash in March 2020 after the onset of COVID-19 pandemic lured retail investors into trading in equity markets, with a strong market rebound thereafter further strengthening their sentiments,” said NSE.

On Tuesday, the BSE Sensex hit a fresh intraday high of 53,057.11. On March 24, 2020 the benchmark index had hit a level of 25,638.90.

Technology that has made share market trading easy and at one’s fingertips is one reason why many now find it convenient to invest in stocks. New-age firms like Zerodha, Upstox, Paytm,and even the traditional full service broking firms have invested a lot in technology, which has made it faster to open a trading account, and buy and sell shares in minutes using a smartphone.

“We believe that technology now plays an important role in most aspects of our daily lives, and investments are no exception. The fintech industry's rapid growth has been aided by a large untapped retail market, favourable demographics, rising financial literacy and deepening internet penetration,” said Ravi Kumar, co-founder and CEO of Upstox.

At Upstox, customer onboarding grew three times in the last financial year and its total customer base now exceeds four million, of which more than 80 per cent are between the ages of 18 and 36, and over 70 per cent are first-time investors, added Kumar.

It is a similar trend at other stock brokers, too. Angel Broking’s gross client acquisition was nearly 4.2 times in the financial year 2021, compared with the year earlier. It acquired a total of 2.4 million clients last year, said Prabhakar Tiwari, chief growth officer at Angel Broking.

Last year, as COVID-19 forced the majority of people to work from home, investing in stocks picked up in a big way. Experts say there is still a huge potential for growth.

Last year, Angel Broking clocked a run rate of around 0.2 million clients per month, which has risen to 0.37 million per month in April and May this year, pointed Tiwari.

The average daily turnover at Angel Broking has increased to about Rs 4.8 trillion in May 2021, up from Rs 253 billion in the first quarter of 2019-20. “Even after a stellar run last year, India’s retail participation is still just slightly above the 4 per cent mark. This figure has sizable headroom to grow when compared to penetration of China’s more than 11 per cent and the USA’s 32 per cent,” added Tiwari.

Data shows this surge in new investors is being driven by young investors. Of the 7 crore users at the BSE, 38 per cent are in the 30-40 age bracket, followed by 24 per cent in the age of 20-30, the stock exchange data showed.  What is also worth noting is that the numbers of users with age of less than or equal to 20 now account for 5.9 per cent as of June 7, 2021, compared with 3.9 per cent in May 2020 and 3 per cent in January 2016.

Kumar of Upstox pointed out that more than 80 per cent of its customer base is between the age of 18 and 36, and over 70 per cent are first-time investors. “Low-cost trading, deeper penetration of smartphones, faster internet, and simplification of trading applications will make it possible for an increasing percentage of people across age groups to trade with ease,” said Kumar.

This has also helped people in smaller towns take to equity investing in a big way. At Upstox, more than 80 per cent of its total customer base is from tier II and tier III cities. More than half of clients added by Angel Broking last year came from tier III cities and beyond, while a third were from tier II towns, said Tiwari, who says on an average a person can now join the stock market in just five minutes.

Stock broking firms are now engaging these small town customers and expanding support in regional languages too, which will help in adding more customers from these centres.

“It has made it possible to engage more people from tier 2, tier 3 cities, and even beyond, who are becoming increasingly interested in the stock market. They are expanding their outlook and including equity investments as a part of their investment portfolio, which earlier only comprised bank savings, recurring deposits, and real estate investments,” said Tiwari.

Maharashtra and Gujarat still lead in terms of investors with a share of 21.5 per cent and 12.3 per cent of the 7 crore investors on the BSE. However, Assam, states in the north-east and Jammu and Kashmir are among regions that are recording fastest growth rates. Even among the larger states, it is Uttar Pradesh, Rajasthan, and Madhya Pradesh that have recorded the fastest growth in the region of 22 per cent to 29 per cent, last year.

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