Groww launched stocks in June 2020 and has already opened over 8 Lakh Demat accounts since then. Investors under the age of 30 make up more than 2/3rd of the users on Groww with GenZ’ers (18-24) comprising 33 percent and young millenials (24-30) being 37 percent of the investor base.
Since the launch of Groww stocks, our observation is that currently, more than half of the new users onboarded on Groww intend to invest in stocks.
About 50 percent of these investors also start adding mutual funds to their portfolio within a few months of starting stock investing on Groww.
The trend that we are observing is that while there has been financial uncertainty, a large section of the urban class is saving a lot more money than before as spending on travel, restaurants, cinema, luxury purchases, etc. has gone down.
The pandemic induced lockdowns and many organisations in the private sector adopting a work-from-home culture has given users more time to research deeply about investing in stocks and mutual funds.
By making onboarding and account opening smooth and frictionless, platforms like Groww have made it easy for users to benefit from the prevailing market conditions, and do it quickly and at the right time.
These factors have also played their part in helping investors tread carefully yet confidently when it comes to navigating stock investing. As investing becomes more democratic, retail participation in the equity segment will continue to grow in the days to come.
The most popular sectors (arranged according to their contribution towards the total turnover from stocks; mentioned in the bracket against each sector) on Groww are as follows.
Banking & Finance (24%)
The Banking and Finance Industry was affected by the COVID-19 pandemic and its subsequent impact on the economy. Overall, the Nifty private banks went down by 5.5 percent in 2020 as opposed to a positive return of 16.9 percent in 2019.
However, HDFC Bank and Kotak Mahindra Bank gave good returns of 13.45 percent and 9.41 percent respectively in 2020. Public banks too suffered, as Nifty PSU Banks went down by 31.8 percent.
The situation was much better with financial services companies as they managed to generate a positive return of 0.5 percent -- going by the Nifty financial services index.
In 2019, the Nifty financial services went up by 25.8 percent, and as the economy rebounded, the future of the BFSI sector could improve in the months to come.
The Nifty energy went up by over 8 percent so far in 2020 as against a gain of 13.54 percent in 2019. Most of the gains came from power generation, and distribution companies with Adani Green generating a huge return of 685 percent so far in 2020.
India has a per capita power consumption of 140 watts. This is one of the lowest in the world and hence there is tremendous pent-up demand.
Companies looking to exploit this gap by moving to generate power from renewable sources of energy have been viewed favourably by the market.
On the other hand, with oil prices turning negative for the first time in history, returns on all refinery stocks were negative except Reliance Industries in 2020. Oil prices are now stable at 45-50 dollars per barrel and may even rise as many economies across the world recover after covid 19.
Pharmaceutical & Drugs (8.8%)
Without a doubt, the best performing sector in 2020 was pharma, and with the first global pandemic since the Spanish flu in 1920, this was no surprise.
Laurus Labs led the way, generating a return of 383 percent for its investors. Nifty Pharma went up by 53.5 percent.
Among 50 pharma companies with a market cap of above 500 crores, only 2 companies generated negative returns for their investors. It is easy to forget though that things weren’t great for pharma stocks always as the Nifty pharma went down by 7.7% in 2019.
While the automobile industry had been seeing a slowdown in 2019 and the first six months of 2020, the pent up demand and a greater need for individual mobility seemed to have spurred growth in the sector.
The Nifty auto went up by 11 percent so far in 2020 as opposed to a fall of 7 percent in 2019. As compared to 2019, there was a growth in sales of 8.8% for the entire automobile sector in November 2020 even after the outbreak of the pandemic.
The recent demand surge is likely because of the risk associated with travelling in flights/trains due to the virus and people preferring to go by road instead.
IT Software (6.4%)
Along with pharma, IT companies went from strength to strength in 2020. The IT index went up by 44 percent so far in 2020. The returns were decent in 2019 too with Nifty IT going up 11.55 percent but low when compared to returns in 2020.
So, what caused this uptick? Here are a few possible reasons:
The pandemic has introduced changes to consumer behaviour & preferences with strong demand for cloud-based services
The workplace has undergone a digital transformation in recent months with organizations looking at new ways to digitize and automate almost every function
The increase in sales and order book has been accompanied by an increase in operating margins too
2020 was a good year for telecommunication stocks with the telecom index going up by almost 17 percent so far in 2020. All telecommunication stocks except two generated positive returns for investors this year.
This is a significant turnaround from 2019 when telecom stock generated a negative return for their investors with the BSE Telecom index going down 10 percent. This rise in demand for telecom stocks could be attributed to the following possible factors:
The momentum in this space has shifted to data led by 4G services. With smartphones becoming more affordable there is tremendous demand for data. India now has the second-highest number of internet users in the world
There is consolidation in this sector with 3 major players left after a period of turmoil for most players in the industry with tariff hikes being seen recently and more planned in the future
There is clarity over the AGR dues now with Vodafone-Idea, Airtel & other operators having to pay their dues in the next ten years. Previously there was a lot of uncertainty over the same resulting in significant volatility
FMCG Stocks (3%)
The coronavirus pandemic didn’t have any negative effect on FMCG stocks in 2020 as even during the lockdown, goods of FMCG companies were categorized as essential goods.
As a result the NIFTY FMCG index went up 13.45 percent so far in 2020 as opposed to a negative return of 0.15% in 2019. Almost all the stocks in this space went up with L T Foods and ADF Foods generating a return of 171 percent & 84.56 percent respectively in 2020.
Big names like Hindustan Unilever Limited also did well generating a decent return of 18.3% in 2020.Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.