Calendar 2020 has been a difficult year for investors on D-Street but that did not stop retail investors to participate in the rally. Work from home culture, seamless technology platforms across brokers, and willingness to add an extra source of income amid COVID-19 pandemic fuelled retail participation on D-Street -- popularly known as Robinhood investors.
Both Sensex and Nifty50 have rallied by about 50 percent from the March lows which suggests that the momentum is intact. Much of the participation on the Street has come from retail investors, and experts are of the view that the trend is here to stay.
Almost 5 million new DEMAT accounts were added at the end of FY20. This came when both Sensex and Nifty50 lost more than 20 percent in March. Total Demat accounts by the end of FY2020 stood at 40.8 million, up from 35.9 million as of March 2019, as retail investors took to equities.
“The number of new Demat accounts (dematerialised accounts) opened during the financial year 2020 was the most in at least a decade at 4.9 million. A 22.5 percent increase has been observed i.e. 4 million Demat accounts opened in the previous year, showed data from the Securities and Exchange Board of India,” Jashan Arora, Director Master Capital Services told Moneycontrol.
“While people working from home, have time to explore trading in equities. Low prices of stocks have given the investor an opportunity to enter markets. Low bank deposit rates likewise brought new investors searching for higher returns compared to other asset classes,” he said.
Data suggests that there is tremendous growth in the interest of young investors in stock markets as they consider trading a profitable investment option. Investors who are willing to take part in the journey are mostly millennials, and the composition of female investors stood at 20 percent.
“When we look at the customers acquired since May, they are some clear indicators which to an extent is similar to the trend we have noticed over the past year as well. Looking at our new customer acquisitions of May, June 2020 in terms of demography: Over 60 percent of our new acquisitions are millennials (aged 24 to 40 years),” Shankar Vailaya, Director, Sharekhan by BNP Paribas told Moneycontrol.
“The percentage of females is a little below 20 percent. In terms of occupation, the percentage of salaried is just below 50 percent. And, 30 percent new clients come from tier I cities – Mumbai, Delhi, Bangalore,” he said.
Vailaya further added that even if the WFH is lifted, the trend of increased capital market participation should continue unless the market gets unpredictable. COVID has given a lot of time to investors to read, surf on the web, chat and discover the advantages of capital markets.
“The second, and which we feel will be the more prolonged factor for sustained growth in capital market participation will be the fact that interest rates/FD started falling quarters ago, pushing individuals to look for alternatives to invest their money. When you are used to getting 7-8 percent via FD and now hard reality is around 5-6 percent over 1 year you are open to new ideas including investing in equities,” he said.
If you are constructing a new portfolio, here are some sectors you can look at:
Expert: Harsh Jain Co-founder and COO Groww
Fundamentally strong large-mid cap companies from the following sectors have the potential to generate long term wealth.
Top IT companies by market cap have given returns as high as 50 percent since the lockdown. Needless to say, IT is an evergreen sector and will boom in the years to come.
The government impetus to the sector under Digital India initiatives have also done their part. India is home to a large and diverse set of skilled IT professionals whose expertise is in high demand in foreign markets.
That coupled with a sustained increase in demand for export of software both in domestic markets and abroad will keep the sector active.
As a defensive sector, established FMCG companies have the wherewithal to stand market volatility and deliver robust performance over the long-term.
Lower operational costs, wider penetration due to established distribution networks and products catering to a wide user base are some of the reasons that make this sector a good bet for the long-term.
Infrastructure sub-sectors – Cement
Cement stocks have performed well since the lockdown, with three-month returns touching the 30 percent mark. The government’s impetus to infrastructure projects like affordable housing etc. could spur cement demand significantly in the years to come.
Chemicals is an upcoming sector and has the potential to generate a couple of largecaps in the next 5 years. Logistics is expected to perform well in the long term as e-commerce flourishes in India. Banking and financial services are also a promising sector.
Expert: Jyoti Roy, DVP Equity Strategist, Angel Broking Ltd
The telecom sector should benefit from increased data demand given increasing trend of work from home along with improved pricing power. Bharti Airtel is our top picks in the telecom space.
Agrochemicals are some of the sectors which are essential in nature and should do well given greater revenue visibility. In the agrochemical and chemical space, we prefer Aarti Industries, Galaxy Surfactants, and PI Industries.
Coromandel International, Hero Morocorp, and Swaraj Engines are few of the stocks which will benefit from a resurgence in the rural economy.
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.