Till a few years ago, stock market investments in India were left in the hands of institutional investors, as the market was perceived to largely be a risky investment that the common man could not bear.
Financial institutions and their teams of stock traders were believed to be the only experts who could navigate this landscape and so, were tasked with investing money for others, individuals and organisations alike.
For the typical Indian individual, savings were limited to risk-free avenues, such as bank accounts, FDs, and PPFs.
However, in recent times, retail investors have taken to trading themselves, choosing to invest their savings in mutual funds, stocks, and bonds.
Retail investors are investors who invest their own savings directly in the stock market, even though they are not trained or certified, in order to enhance personal earnings.
NSE data shows that in the five years between 2019 and 2023, over 120 million investors were registered. In January 2024 alone, more than 5.4 million investors were added.
As per BSE, as on February 9, 2024, the number of registered investors stood at nearly 161 million.
Association of Mutual Funds in India (AMFI) said that as of January 31, 2024, as many as 79.2 million SIP accounts were active through which individuals were investing in various mutual fund schemes in India.
The month witnessed record SIP contribution to the tune of Rs 18,838 crore from these accounts, AMFI data further revealed.
This contribution was 36 per cent higher than the contribution recorded from SIPs in January 2023, indicating the rapid pace at which retail investors are ramping up their activity in capital markets.
The key factors that are leading to increased retail investment in stock markets are financial inclusion programmes, user-friendly trading apps, relaxed norms for KYC, as well a higher risk appetite among millennials.
Financial inclusion programmes
Financial inclusion has been a major focus in India in recent times. As the country moved towards digital payments, especially UPI, people became less afraid of technology and became more streamlined with the advancements that eventually led to a higher level of financial inclusion.
As individuals, especially the younger generation, became more actively involved in their finances, which were previously deemed inaccessible without going to banks or ATMs, they also gained freedom beyond the solutions available on their mobile banking apps.
A part of this financial inclusion also came in the form of more easily available knowledge regarding investment options, which made individuals more confident in their potential to earn from capital markets themselves without needing a middleman.
User-friendly trading apps
With people becoming more comfortable with technology, the advent of user-friendly trading apps opened the avenue of stock market trading directly from their phones.
Majority of the retail investors fall in the age group of 22 to 35, as they strive to maximise their earnings from investments.
This mobile-savvy group, which believed that earnings could go beyond FDs and PPFs, readily accepted the step up from mobile apps and payment portals to apps that allowed them access to capital markets where they could apply their knowledge and earn on their own using their primary income.
Relaxed norms for KYC
Since earnings from capital markets are taxable and hence, need to be disclosed, there is a KYC process that needs to be followed before an individual can begin investments. These KYC norms have been relaxed greatly.
According to NSE, KYC requires six attributes, including name, complete address, PAN, mobile number, email ID, income details, as well as details of custodians in the case of custodian-settled clients.
Higher risk appetite among millennials
The majority of retail investors have a higher risk appetite, which can be attributed to higher exposure to avenues like mutual funds from commercials that have aired for most of their lives, more accessibility to information and knowledge, as well as ease of access to trading due to digitalisation.
They enter the capital market investment avenue with the knowledge of the risk attached and hence are willing to bear it to get the chance to earn significant earnings.
Retail investors are on the rise and as per Fitch Ratings, this segment will continue to gain importance when it comes to the stock market.
(The author is Convenor, 13th International Convention & Chairman, ANMI-NR )
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(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
