How the new wave of retail investors are defining prices and trends

Podcast Duration: 6:46
How the new wave of retail investors are defining prices and trends Voice over: Hello doston! Welcome back to another exciting and investing special podcast! Doston, I am sure aapne notice kiya hoga ke the number of stock market investors, traders and dabblers around you has suddenly increased. Well, aapka anecdotal observation is quite on the mark. Pichle dedh (one and a half) saalon mein kai saare new investors ne market mein entry li hai and they are leaving their imprint on the markets. In fact, according to a SBI research report, in April and May of this year alone, close to 44.7 lakh new retail investors joined the markets. In FY21, the total number of new individual investors went up by 1.42 crore. Aap mein jo sceptics honge shayad woh yeh soch rahe honge ke retail investors ke join karne se market mein koi khaas impact nahi padta. But, then, I would urge these sceptics to think again and look hard at the data that has been released in the SBI report. According to the SBI report, the value of equity shares held in these demat accounts has increased from 31.9% in March 2020 to 36.6% in May 2021 for CDSL accounts and 13.6% in March 2020 to 15.8% in May 2021 for NSDL accounts. Yeh figures dekh kar samajh aata hai ki retail investors ka dab-daba dheere-dheere badh raha hai. Let us go a little deeper in how retail investors are faring against FIIs and DIIs. As per the report, NSE equity segment mein the share of retail inventors in the total turnover has risen from 39% in March 2020 to 45% in May 2021, while the participation of DIIs and FIIs during the same period has declined to 7% from 10% in March 2020 and that of FIIs has declined to 10% from 15% in March 2020. In fact, agar aap Index futures market dekhenge toh aapko ek aur baar retail traders ka impact pata chalega. 39% of the total turnover in the Index futures market is carried out by retail traders, while FIIs are only at 15% whereas proprietary traders, matlab brokerage firms ke internal trading arms, are at 1%. Same is the case in the Index Options markets. Proprietary trading that was at 50% in 2016 now accounts for 40% of the total turnover and retail investor participation has reached 30% from about 22% in the past. FIIs on the other hand account for 16% of the total participation. Toh doston, dekha aapne ke how an army of millennial retail investors are spearheading a great fundamental change in the markets where the control that was exercised by FIIs and DIIs is slowly being eroded. Yeh Indian markets aur economy dono ke liye hi achchi baat hai ke retail participation increase ho raha hai but as per the research report, total retail participation in the market is only 7.3% of the total adult population. Kehna ka matlab yeh hai ke kewal 7.3% of the adult Indian population is present in the Indian markets via demat accounts or SIPs. Obviously, the scope of market penetration is very high in India and hopefully, with greater market penetration, Indian markets will rise to newer heights. Meanwhile, another matter of concern is that retail participation is higher in terms of trading and lesser in investing. The ownership pattern of NIFTY-50 shows only a modest increase in retail share to 8.1% in Mar’21 from 7.8% in Mar’20. Iska matlab yeh hai ke increased retail participation mein se bahut kaam log invest kar rahein hai aur maximum trading kar rahein hai. Aap mein kai log soch rahein honge ke why is that out of nowhere there has been a sudden spurt of retail investor interest in the markets? Well, retail investors started taking a major interest in the markets once the lockdowns were declared in March. Forced to work from home, many people started taking an interest in the markets while many others who had just been fired or had their salaries cut started looking at the markets as a quick way of potentially making money. Iske saath saath, low interest rate regime ki vajah se returns from many other investment options also started declining. Aap log bhi bahut achche se jaante hai ke ek time pe FDs mein jo 8% return milta tha woh ab kahin nahi milta. Depending on your tenure, ab aapke FD ka return 2.9% se le kar 5.4% tak rehta hai. Aaj ke din mein aap agar Sukanya Samridhi Yojana mein invest karenge toh aapko milenge 7.6% returns ya fir Senior citizen savings scheme which gives you 7.4% or PPF mein karenge toh 7.1% or National Savings Certificate nikalenge toh 6.8%. Compared to these returns, secondary markets, yaane ke Nifty and Sensex have delivered substantially better returns in the past one and a half years and that is why people are channelling a lot of their savings in the markets. Iske saath mein, India, is also an investment destination for FIIs that have invested close to $36.18 billion in FY21. Another important fact to notice is that SIP investments that were moderating since June 2020 jumped to a record investment of Rs 9,182 crore in March 2021 as the job situation for white-collar employees improved. Rising SIP investments suggest that more and more people are now open to accepting the risks that come with market investments, and look to the equity markets for long term capital preservation and appreciation. Doston, aaj ke liye sirf itna hi. Jaane se pehle, ek baat yaad rakhiyega ke stock market investing mein risk hamesha rahega. This podcast has been made for educational purposes only and the investor must do his own research as well. Aise aur interesting podcasts sunne ke liye humein follow karein via youtube and other social media channels. Until then goodbye and happy investing! Investments in the securities markets are subject to market risks. Read all the related documents carefully before investing Sources: