2020 was a historic year as the Indian market witnessed almost a deluge of retail investors in the market due to reasons ranging from attractive valuations to having extra time to study equities and the market.
Brokerages believe this trend may continue. This belief is backed by the current set of data which show the number of demat accounts has been constantly rising.
Besides, a remarkable point to notice is that non-metro cities are also witnessing strong participation by retail investors.
According to Vinay Agrawal, CEO, Angel Broking, the top 4 performing non-metro cities that are leading in terms of retail investors are Surat, Jaipur, Nashik and Ahmednagar.
"Due to low-interest rates, investors are not finding good yields through fixed income instruments. Thus, we are seeing more participation through trading accounts or through mutual fund investments. As on Dec-20, total demat accounts in the country stand at 4.98 crore while MF AUM hit an all-time high of 31 lakh crore," said Agrawal.
Agrawal pointed out the market correction in March 2020 was taken as a good opportunity by retail investors to enter the market.
"Due to the correction which happened in the market in late March, retail investors found a good opportunity to enter at attractive levels especially in many of the blue-chip companies. Also, since most of the businesses shifted from conventional offices to work from home scenario, a good part of the working population got some extra time to learn about financial markets and make investments in equity markets," he said.
These factors, coupled with a low-interest-rate environment, attracted greater retail participation, especially from non-metros.
"This is leading to a surge in demat accounts, especially with flat fee brokers like us. In FY21, more than 90 percent of our acquisition came from tier-2 and tier-3 cities," Agrawal said.
Ravi Kumar, Co-founder & CEO, Upstox, believes that Tier-2 and Tier-3 towns will lead to equity participation in the country.
"This wave of change can be attributed to higher levels of financial knowledge, availability of information on the internet, various investing tools, and advanced technologies that offer unique customer experiences, even on mobile apps," Kumar said.
"Additionally, the pandemic triggered a boom in equity participation as an alternative to earning some income, coupled with incentives and discounts from brokerage houses."
Kumar highlighted that as much as 70 percent of Upstox’s customer base is from Tier-2 and Tier-3 towns like Nashik, Jaipur, Guntur, Patna, Kannur, Tiruvallur and Nainital.
"We witnessed almost 100-200 percent increase in participation in the capital market, compared to the last year, from Tamil Nadu, Kerala, Telangana, Andhra Pradesh, and Karnataka," Kumar said.
Mobile trading is making it easier for investors and traders to engage actively in the market. Kumar agrees with it.
"A significant trend emerging among retail investors was the rise in mobile trading. Over 85 percent of Upstox customers placed their daily trades on their mobiles. This trend continues well into 2021, backed by increasing internet connectivity and increased investor awareness," he said.
Another remarkable phenomenon is that the younger population is coming to the market and even women are making their way.
"We witnessed a growth of 5x in account opening by women in 2020, compared to 2019. Interestingly, more than 60 percent of these women are first-time investors, with more than 30 percent of Upstox women customers being housewives. Another trend that we believe will continue to see is the rise in the young customer base. More than 75 percent of the existing customer base is below the age of 35," said Kumar.
Equity participation from retail investors is here to stay as a large portion of this growth is driven by better internet connectivity, paperless account opening, and easy accessibility through investment apps.
As per Agrawal of Angel Broking, close to 90 lakh new demat accounts were opened in just 9 months of FY21 compared to around 50 lakhs in the entire FY20, which shows the interest of the retail population in equity markets.
"Since equities have demonstrated better return profile, coupled with a greater understanding of markets, access to easy to use products at uncomplicated pricing and low-interest rate scenario, we are witnessing more retail population opening demat accounts," Agrawal said.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.