Millions of young Indians have started to dabble in stocks as a strong rally since the end of March has boosted many confidence in their stock picking abilities.
Risk appetite has also multiplied over the past six months, with the average age of new investors dropping to 29 from a typical range of 31 to 35.
Besides the fear of missing out on the opportunity (FOMO), analysts attribute this to various reasons such as stagnating real estate, falling interest rates, the liquid nature of equity investments, and low cost internet data.
Data from the Securities and Exchange Board of India (Sebi) showed that investors opened a record 4.09 million demat accounts from March to July, accounting for nearly 80% of the five million new accounts opened in 2020 through ‘now. In June and July, 1 million and 1.1 million new demat accounts were opened respectively, bringing the total number of such accounts to 44.3 million.
“Being a mobile-focused trading platform and a millennial choice, client onboarding over the same period saw 23% growth in the absolute number of clients under 30 in April. -August versus November 2019 – March 2020, ”said Ravi Kumar, co-founder and CEO of Upstox, an online discount brokerage firm.
Currently, almost 75% of the company’s total customer base is below 35. More than 80% of the total customer base acquired by the company is from level II and III cities such as Nashik, Jaipur, Guntur, Patna, Kannur, Tiruvallur and Nainital.
“We believe that our millennial customers are able to make mature, well-informed decisions, drawing on the vast pool of information available around us. While some investors may have come with the goal of making quick money by trading in the increasing dynamics of the market, the number of serious investors this time with a medium to long term horizon is significant, indicating the maturity of retail equity investors in India, ”Kumar added.
Discount brokerage Samco Securities saw new account openings increase 150% from a year ago, with nearly 70% of clients being first-time investors in the stock markets and nearly 65% in the age group of 21-35 years.
“Young investors are new to the markets and generally more ambitious. They feel that their ambition to create more wealth would not be met by fixed income instruments and therefore are willing to take a higher risk for a higher return and invest in the stock markets. This trend is likely to persist unless people see a sharp reduction in investments, ”said Jimeet Modi, Founder and CEO of Samco Group.
“As long as investors are investing in good quality companies and have reasonable return expectations, this should be fine. They should stay away from multi-bagger “stories”, high debt securities, penny stocks and in general, the allure of extremely high yields. We think an investor with an expectation of a 15% return is likely to do much better than an investor with an expectation of a 50% return, ”he added.
Others agree. “With greater financial inclusion, we believe this trend is expected to continue and we anticipate significant growth in retailer participation,” said Nikhil Kamath, Co-Founder and Chief Investment Officer, True Beacon and Zerodha.