Money9 Edit | March of democracy in Indian stock markets

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The Indian political theatre is known for its robust democracy. Now it is the turn of the Indian financial markets, especially the stock market. Indians have traditionally been known as conservative, risk-averse investors. But that perception seems to be changing quickly and ironically the most spectacular participation by the masses took place in Covid-crippled 2020. In February 2020, the Sensex touched a high of 42,273.87 only to spectacularly dip to 25,638.90 by March 23 – a crash of 39.35%. Then came the rebound and at a time when a historic gloom had engulfed the country ravaged by job losses, slashed wages and ruined businesses. The market rose to 52,425.89 on February 16, 2021.

In the subsequent weeks enthusiastic participation of the investors prevented a crash as seen last year despite the second wave of the COVID being far more aggressive than the initial one. Without a doubt the robustness of the market is attributable to the rising participation of the retail investors who now form as much as 45% of the trading turnover of the stock markets up from 33% in 2016. Foreign investors who were once a very conspicuous category of players in these markets have come down to constitute 11% of the trading volume.

In the derivatives market too, the retail investors have emerged as bigger than institutional players.

During the lockdown the people of India found a taste for equities and signs of satiation are not expected anytime soon. With mobility and entertainment avenues severely restricted people did what best they could with their money – invest. And the phenomenal growth stoked the hunger along an upward spiral. The millennials have been so enthusiastic about direct participation in the equity markets that they are pulling out money from mutual funds and pumping it in the stock markets.

With less than 4% of the Indians investing in the stock markets, there is endless headroom for growth.