While the nation has been in a lockdown since March, many investors used the time to invest in equity markets, according to top brokerage firms. According to them, there has seen a rise in new accounts being opened during March-May period, especially from Tier-2 and Tier-3 cities.
Nifty50 made an intermediate bottom at 7,500 in March and since then the index has rallied over 30 percent. Money invested in the market in March has already reaped returns.
Ajay Menon, CEO, Broking & Distribution, Motilal Oswal Financial Services told Moneycontrol monthly acquisition is up 50 percent compared to last year’s average during the March to May period.
Another brokerage firm, 5paisa.com added over 60,000 accounts in March and the trend continues and we expect to add over 2 lakh accounts in the April-June quarter, Prakarsh Gagdani, CEO, 5paisa.com told Moneycontrol.
Angel Broking, which is India's largest independent full-service digital broking firm, witnessed average monthly new accounts of over 1 lakh since the lockdown started in March.
The lockdown might have had a negative impact on the economy, but investment via equities as well as through mutual funds has only increased. The reason behind this – financialisation of savings amid record-low saving rate in banks, say experts.
Tracking the trend, brokerage firm Phillip Capital initiated coverage on AMC companies. “Financialization” of savings is a big structural change in India’s economy. With the current COVID crisis expected to start a new NPA cycle, we find AMCs as an attractive play with limited balance‐sheet risks,” it said in a report.
Tier-2 and Tier-3 cities take the bigger chunk:
Well, the value unlocking is happening from the Tier-2 and Tier-3 cities, according the brokerages. Zerodha, a discount brokerage firm with over 2+ million clients, said that they opened over half a million new accounts since the lockdown started.
“Overall we have registered an increase of more than 27% in our client-base with a nearly 300% increase in the monthly account opening numbers. We have already opened more accounts in the first 5 months of 2020 compared to what we had acquired in 2019,” Nithin Kamath, Founder & CEO, Zerodha told Moneycontrol.
“The majority of our clients' growth came from the metro and tier-1 cities but we have also registered handsome growth from tier-2 cities like Nagpur, Jaipur, Nasik,” he said.
The trend is not limited to Zerodha, Angel Broking added more than 1 lakh new accounts in March 2020, and said that more than 80% of their acquisitions have been in Tier-2 and Tier-3 cities. Out of the overall figure, around 65% of our new clients are first-time investors.
“Angel Broking is also doing handholding with free of cost fundamental analysis and by conducting in-depth webinars on wide-ranging nuances of trading,” Vinay Agrawal, CEO, Angel Broking told Moneycontrol.
“Further, about half of them belong to the mid-age group of 25 to 35 years, while a quarter are between 18 and 25 years of age and balance are more than 35 years old,” he said.
5paisa.com also suggested that about 70 percent of the accounts they have opened are from Tier-2, Tier-3 cities and beyond. For five paisa this has always been the trend, however, there has been an increase in trading volume from the smaller locations since the lockdown.
Women investors on the rise?
The proportion of women investors have remained almost 10 percent of the new accounts being opened which is approximately the same compared to pre-COVID period – but it is still encouraging sign.
Since the implementation of lockdown, Angel Broking has introduced over 30,000 women investors to the D-Street. This is about 10.5% of the total account opened during this period.
“The women’s participation in stock markets is increasing directly in line with the retail participation. A factor behind it is the gradually decreasing gender disparity across workplaces,” Agrawal of Angel Broking told Moneycontrol.
“Since stock investments offer superior financial empowerment as well, we are surely going to tap and augment this burgeoning force,” he said.
Prakarsh Gagdani, CEO, 5paisa.com told Moneycontrol that women investors are around 10%, there is no significant change in their numbers.
However, data from Motilal Oswal sees rise in women investors during the lockdown period.
“The new accounts are coming from across locations as we are present in 500+ cities. Mostly accounts come from the metro and tier-2 cities only, and 20% accounts are getting opened by women investors,” Menon of Motilal Oswal Financial Services Ltd told Moneycontrol.
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