Few decades back if you had started your career or started earning, equity market in India would probably be your least preferred choice of investment. Most likely it would be centred around traditional investment options like Public Provident Fund, Post-office fixed savings schemes, LIC policies, Kisan Vikas Patra (KVP) or bank fixed deposits. Because that is advice what you would have probably received from your elders.
Traditionally Indians have been averse to saving in the equity market in India and preferred instruments such as gold, real estate and bank deposits. Some of the reasons for this could be attributed to lack of transparency in the equity market in India prior to the commencement of electronic trading when shares were traded in paper and fear on the part of investors due to various scams in 90s such as the Harshad Mehta scam and the Ketan Parekh scam.
On one side while stocks of companies like Reliance, Maruti, Eicher Motors, Wipro, Infosys and TCS have created huge wealth for long term investors, the number of investors who made losses by investing in fundamentally weak companies like Suzlon, Reliance Communications, Essar Steel, Kingfisher Airlines, Alok Industries, GTL Infrastructure, Birla Power Solutions etc. is substantially high. According to estimates the percentage of investors who lose wealth in the equity market in India could be as high as 90%. Horror stories of wealth destruction of these investors who lost money in the market have been a big deterrent for new investors.
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However things have changed drastically over the last few years, especially during the last 5 years with more and more investors moving towards equity market in India.
According to SEBI data, the number of new demat accounts opened in 2018 touched a 10 year high. The total number of demat accounts rose to from 30.8 lakhs in 2017 to 34.8 lakhs in 2018, which is a 13-percent increase.
Some Major Reasons Why Participation Of Retail Investors In Equity Market In India Has Increased In The Last 5 Years:
Demonetization
The Modi government’s decision to demonetize Rs. 500 and Rs. 1000 currency notes in the year 2016, initiated the process of a changing dynamics of household savings by affecting the savings habits of investors. Post demonetization there was a fear among people to hoard cash or park their investments in real estate and gold. As a result, there has been a massive shift from investment in physical assets to digital assets.
Falling returns of other investments
Real estate sector has been largely stagnant over the last few years with property prices falling and huge unsold inventories of properties. Returns of small savings schemes such as PPF, Post office deposits and bank fixed deposits too have fallen considerably from around with reduction in interest rates from around 8-9% interest in 2015 to 6.5-7.5% currently. This has made investment in equity market in India more attractive.
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Huge bull run during the last five years in equity market in India
With the massive bull run in the last five years in the equity market in India, barring the last few months in October 2018 and start of the year 2019, the Indian indices have touched record new highs. This has attracted many new investors and it has been proven time and again that retail participation increases when stock markets are racing towards new heights.
Increase in outreach of technology and awareness
Today India has very huge number of young smartphone users with seamless internet connectivity. This has made it very easy for the people in India to invest in equity market in India at their fingertips and also gather information about it.
So as we can see a combination of multiple factors as mentioned above has led to increased retail participation in equity market in India. This has also resulted in demand for professional investment advice.
Rise In Demand for Equity Market Research Firm In India
With increase in number of retail investors in the equity market in India, the demand for professional expertise for investment guidance is also on the rise, given the huge uncertainties and risks associated with stock market.
Retail advisors in the equity market in India have now started to realize the benefits of seeking expert help rather than do-it-yourself investing or investing on the basis of random tips received from friends, business news channels or social media where the chances of loss making are quite high.
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