Indian markets have gone through a volatile journey since the onset of the Covid-19 pandemic in March 2020. While it initially witnessed a sharp correction at the beginning due to the lockdowns, it managed to recover a majority of the fall. In such a volatile environment, investors tend to get worried about managing risk and protecting their wealth. However, this time, retail investors did not panic. In fact, their participation increased despite the economic uncertainty.
There are a couple of factors driving retail investors to the stockmarket.
Millennials are recognising the importance of savings and are attracted to the equity market.
Increasing digitalisation is making it easier to open demat/trading accounts and start investing from the comfort of one’s home. Further, low fee trading platforms are also attracting huge participation, especially from day traders.
Moreover, millennials have a huge risk appetite as compared to the previous generation. Also, due to improving investor education and growing awareness, an increasing number of retail investors from tier-2 and tier-3 cities have been actively participating in equities.
In the current scenario, where interest rates are going down, many people are looking at equities as an alternative investment.
All these factors have increased retail participation in the stock market to one of the highest levels ever. CDSL added 26 lakh accounts between March and June 2020. This is far higher than the 8.4 lakh accounts that were opened in the first two months of 2020. Exchange data also shows there is a sharp jump in the market share of non-institutional investors (NII) in the cash segment; this is the highest since August 2009. The share of NIIs jumped sharply over the last four months to 72 per cent from around 50 per cent in FY20.
