Businesses locked down, owners turn to stock market to make money

Ashish Rukhaiyar

Ahmedabad-based Chaitanya Joshi was doing well for himself. The 33-year-old was managing a few hotels, was consulting and also organising events including weddings. Then coronavirus struck, ravaging the hospitality industry as the lockdown put a stop to travel and movement of people.

“The pandemic changed everything. I still clearly remember that the last deal I did was on March 24 and thereafter a deal happened last week. So, literally, there was no business in nearly four months,” Joshi said.

It was on March 24 that Prime Minister Narendra Modi in an address to the nation announced the first lockdown, which continues in some form or the other across the country.

Forced to stay in and with little to do, Joshi took up gardening but there was no income from the hobby. It was then that he turned to the stock market and today, he checks his trading app once every 45 minutes.

“I am not a day trader. I do my research and invest only in known companies that have a proven track record of a couple of decades. I started investing actively during the lockdown and till now have invested well over Rs 10 lakh. I am happy that in some of the transactions, my margins have been better than what I make in my hospitality business,” Joshi said.

He is among a wave of new investors and traders who have hit the share market during the lockdown to make some quick money, to keep themselves occupied or find an alternative source of income as the viral outbreak takes a toll on businesses and jobs.

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Most brokerages have seen a spike in new account openings, with business owners accounting for a higher-than-normal share of the pie.

“The lockdown has definitely increased participation in equities. We reckon many small business owners and entrepreneurs are participating actively as their business was closed and they had more time and energy to do research and trade or invest,” said Prakarsh Gagdani, chief executive officer, 5paisa.com, a leading discount broking firm.

Anil Kedia is among those who did some research before taking the plunge. He owns a hosiery supplies business in Kolkata that was brought to a standstill by the lockdown.

He needed money and fast. “There were fixed costs to be paid as my employees have been there with me for 30 years,” he said.

Kedia did some research, took advice from his broker and invested when the market tanked.

“I have been lucky the returns are good because of RIL, HDFC Bank and Bajaj Finance. I have partly sold the shares and made some profit, which was better than my possible business earnings,” the 53-year old said.

Brokerages say the new traders and investors are making informed decisions. They are making good use of time to understand share trading. Some are even enrolling for short-term courses to master the finer points.

Gagdani said most of their clients were from Tier 2 and 3 cities and towns and there was a significant increase in trading volumes also.

“Mobile penetration, zero brokerage offerings and availability of research and educational videos are also prompting entrepreneurs to understand the dynamics of markets and investments,” he added.

5paisa estimates that about a third or more of its new customers are small business owners or entrepreneurs.

Mobile trading scaled a new high during the lockdown. The share of mobile trading grew to a record 23 percent in April as well as May on the National Stock Exchange (NSE). Mobile trading refers to transactions done using a mobile phone.

Discount broking firm Zerodha, which is India’s largest brokerage in terms of the number of active clients, also saw a sizeable jump in the number of business owners opening trading accounts.

“There was a 35 percent spike in the number of new accounts opened, wherein the occupation was mentioned as business,” Zerodha founder-CEO Nithin Kamath said.

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Typically, the share of such accounts is around 10 percent of the overall new client additions. “But during the months when there was a nationwide lock own, this share moved between 13 percent and 13.5 percent. Interestingly, the share of new accounts opened by private-sector employees fell in the same period,” Kamath said.

The fall can be attributed to the widespread salary cuts and job losses as companies struggle to keep the cash flow amid lockdown, fall in demand and labour issues.

The spike in new investors entering the market can also be attributed to good returns. Experts have warned repeatedly that the market is running ahead of fundamentals and is completely out of sync with the economic reality but the fact remains that markets have, for now, shrugged coronavirus worries.

While the first quarter of the current calendar year saw the benchmarks and the broader markets lose ground, indices fared much better during the lockdown and even if there was a drop, the fall was not as steep as in earlier months.

Take for instance March. The Sensex lost a little over 23 percent while the Midcap and Smallcap indices were down 27.60 percent and 29.91 percent, respectively, during the month.

Thereafter, barring May when the three indices fell between 1 and 4 percent, all the other months have seen shares rise, with the broader indices even outperforming the 30-share benchmark in June. Midcap and Smallcap indices gained over 10 percent each while the Sensex rose less than 8 percent.

Business owners who have taken to share trading say they are in for a long haul and will continue even after things get back to normal.

“I may not be able to check my trading app every 45 minutes but I will not stop my trading activities. I will have to better manage my time but I will ensure that stocks remain my second source of income even as I work towards rebuilding my business operations,” Joshi said.

Kedia, too, is of the view that while stock returns may not always be great, he will continue to invest in good ideas.