Millions of Indians join pandemic-fueled rush to invest in retail

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Inside a cramped photocopy kiosk in Mumbai, Umesh Khamkar checked his phone every 30 minutes. He is the owner of the small store, but Khamkar was focusing on his other more lucrative business as a day trader.

These days, he makes more money trading stocks on an app than he does with his copier. Khamkar, a light man in his 50s, began investing in Indian stocks after the country’s punitive lockdowns in 2020 sent him to a burrow of YouTube investment seminars.

Addicted, he encouraged his friends to get into trading. His list of converts now includes a cashier at a nearby restaurant selling booth lunches to commuters.

Khamkar is one of the millions of Indians who have started investing in the stock market since the start of the pandemic.

More than 50 million investors are listed on the National Stock Exchange, up from 31 million two years ago. The NSE does not break down businesses and individuals, but retail brokerage firms have reported booming client numbers.

Thanks to technology and access to some of the cheapest data in the world, retail investors now account for 45% of the total exchange market share in India, with their increase reflecting the increase in the number of traders in the states. United and the United Kingdom which have caused the madness of the actions.

“Retail investors have now become a force to be reckoned with since the onset of the pandemic,” said Rajesh Sehgal, managing partner of Mumbai-based Equanimity Investments.

This boom in the number of ordinary people investing in stocks, a riskier asset class, has helped fuel the bullish run in the Indian stock market, Sehgal said. “There have been at least two or three declines in the market during that time, but when foreigners or large institutional investors started to sell, the retail business bought.”

This has helped Indian stock prices to soar. The Nifty 50 index of India’s largest companies is up 25 percent year-to-date, while Mumbai’s Sensex has gained 23 percent over the same period.

But when the indices collapse, Sehgal warned that retail traders could weigh on the market: “When there is a serious downturn and these retail investors start selling, who is going to buy it? “

Nithin Kamath, founder and managing director of Zerodha, India’s largest brokerage by number of active users, warned that retail investing was “cyclical, every bull market thinks behavior has changed, but it’s not. the case. Basically, people are just sucked in by greed.

Zerodha’s customer base has more than tripled in the past 18-20 months, from 2 million customers to almost 8 million today. Kamath estimates that with 10-15 million orders per day, Zerodha accounts for 10-15% of transaction volumes in India.

But Kamath said the big change was that three-quarters of new customers are under 30. [can’t] think historically when there were so many 20 to 30 years that entered the capital markets. . . traditionally, people only thought about investing in the markets when they were married and had savings, ”he said.

Technology has democratized what was previously a “closed club” in commerce, said Rajamani Venkataraman, chief executive of financial services firm IIFL.

According to data from the Bombay Stock Exchange, 19% of trades were made on mobile devices in November, up from 3% five years ago.

Mobile devices have also enabled people in the vast Indian hinterland to access markets. The NSE said in October that more than half of new traders came from outside India’s 50 most populous cities.

While many new investors make their own bets on Indian companies, others want the professionals to do it for them.

There are now nearly 19 million Indians invested in professionally managed mutual funds, according to Pankaj Chaudhary, deputy finance minister.

He said that by the end of October, the money overseen by these managers had increased 68% year over year.

For amateur stockpickers, risks abound. Many try to reap quick profits from cheap but volatile stocks, such as IT group Equippp Social Impact Technologies or telecommunications company Tata Teleservices, while others make leveraged bets that allow them to win – or lose – more money.

“Most people can’t handle leverage and when it goes down it goes horribly wrong,” Kamath said, explaining why Zerodha isn’t offering it.

Others turn out to be cautious traders. “There is a much faster education that seems to be happening,” said Ram Srinivasan, a banker-turned-start-up founder based in Chennai. “What it took me 10 to 15 years to learn, some of these guys learn in a few years.”

Khamkar, the owner of the Mumbai store, has increased the 20,000 Rs ($ 264) he invested in early 2020 to Rs 530,000. This is a small fortune in a country where Credit Suisse estimates the wealth of an average individual at $ 14,000.

Khamkar said the markets were down but he was not troubled. “When the markets are down, people get scared and sell,” he says wisely. “This is when you have to buy. “

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