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Market Pulse | Here's how changes in the last few years are shaping FY22

Retail participation through direct investing grew steadily rise last year. The rise in the share of individual investors in FY21 can be attributed to the easy access to technology and advice that encouraged more people to take the plunge.

June 12, 2021 / 09:36 AM IST

Markets have witnessed significant events in the last few years. From the rally since the swearing-in of the new government in 2014 to the emergence of passive funds as an asset class to crashing to new lows following the coronavirus pandemic only to scale the 50k peak—we have seen it all.

Astoundingly, markets’ resilience has been such that the lows of March 2020 seem to be a distant memory. While the second COVID wave has created an air of uncertainty and volatility, markets seem to be well-positioned to address these concerns.

Having said that, let’s examine the changes we have seen over the last few years, especially since the outbreak of coronavirus in India in early 2020, to understand how they will shape in the financial year 2022.

Rise of internet-based trading

The digital boom in India is for everyone to see and this has propelled internet-based trading (IBT) to new heights. IBT has also benefited tremendously from India’s tech-savvy millennial population which likes to do things on the go. The proliferation of smartphones and low-cost data have served as the perfect breeding ground for IBT.

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Coronavirus-induced lockdown saw it gain momentum, with retail investors and traders turning to online platforms to trade from their homes. Amid the pandemic—with work from home becoming the new normal—people got more time to research and enter the market.

At the same time, in the past few years, there’s a growing community of new-age investors who have taken a keen interest in self-analysis and choosing the stock that they deem fit. Also, with lockdowns in several parts of the country and vaccination drive picking up, investors are finding the digital mode more convenient to enter the market to make meaningful gains.

Retail participation through direct investing

Retail participation through direct investing saw a steady rise last year due to multiple factors. The significant rise in the share of individual investors in FY21 can be attributed to the increase in new investor registrations.

Pumping of money from FIIs further fuelled retail participation along with low-cost trade coupled with an industry-wide shift to online trading when curbs were placed to contain the outbreak of the novel coronavirus.

Our EMT platform, too, witnessed a surge in the number of active users by 70.32 percent year-on-year from Q2 FY21 in comparison to Q2 FY20, with volume-based trading witnessing a significant jump. A large amount of demand has come from tier-II cities.

The concerns are different this year. We are witnessing a pocket-based recovery against a narrow-based turnaround with mid and small-caps climbing up the growth chart. It remains to be seen whether growth in retail participation will sustain momentum or not.

This is because the threat of the coronavirus is yet to subside. While the second wave seems to be declining, there’s a threat of the third one hitting us very soon. Markets will remain on tenterhooks and the COVID uncertainty, which seems to be far from over, will keep them guessing.

The emergence of black fungus, declared an epidemic by several states, has further created an air of uncertainty and it will take time before things stabilise. Hence, as an investor, you need to be cautious, follow the tenets of asset allocation and have enough liquidity to sail through.

Conclusion

We strongly believe that that technology is going to play a defining role in investors’ behaviour in the way they interact with markets.

With the payment system being updated, open banking architecture is helping the industry by giving convenience and security for customers to transact freely.

Also, the presence of multiple advisers on common platforms will increase engagement and choice for the best advisory for investors.

The regulator technology is creating a space to empower users by educating them. While new-age investors have been quick to enter the markets amid the rally in the past one year, it will be interesting to note their behaviour when volatility intensifies.

Those who haven’t seen any down cycle may find it difficult to remain committed, however, it’s essential that you remain invested for the long haul to maximise your gains.

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.

 
Rahul Jain is the EVP at Edelweiss Wealth Management.
first published: Jun 12, 2021 09:36 am

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