Retail investor engagement in Indian stock markets is increasing, according to an SBI report, with 44.7 lakh retail investor accounts added in the first two months of this fiscal. Individual investors climbed by a remarkable 142 lakh in FY21, with 122.5 lakh new accounts at CDSL and 19.7 lakh at NSDL, according to the data. Additionally, according to NSE data, the share of individual investors in total stock market turnover has increased to 45 percent from 39 percent in March’20.
The onset of the pandemic and accompanying lockdown resulted in a considerable increase in household financial savings in Q1 FY21, followed by a severe decline in Q2 FY21, according to the SBI report. “However, the data indicates that currency in circulation increased by an incremental sum of 80,501 crore and 95,181 crore in Q3 and Q4 FY21, respectively, compared to a total of 17,225 crore in Q1. Additionally, the markets have steadily strengthened, with the Sensex rising from 28,265 at the start of April to above 52,000 currently. This resulted in higher investment in equities and mutual funds during the second fiscal quarter of FY21 “It was stated.
1) As savings options have dwindled as a result of the low interest rate environment, individuals have developed a stronger interest in the stock market.
2) With the key repo rate set at 4%, the FD rates range from 2.9 percent to 5.4 percent for various tenures (SBI FD rate). Even minor savings rates are now low, ranging from 7.6 percent on the Sukanya Samriddhi Yojana Account Scheme to 7.4 percent on the Senior Citizen Savings Scheme, 7.1 percent on the Public Provident Fund, and 6.8 percent on the National Savings Certificate.
3) Another possibility is that global liquidity has increased significantly. This is reflected in the $36.18 billion in FII inflows in FY21.
5) Additionally, the epidemic that has resulted in people spending more time at home may be contributing to their increased interest in stock market investing.
6) Over the recent year, the market capitalisation of stock markets worldwide has increased significantly. However, it has been higher in India than in other big countries. The BSE Sensex’s market capitalization has surged by 1.8 times its value from a year ago. Russia saw the greatest rise at 1.6 times the rate, followed by Brazil, China, France, and South Africa.
However, it remains to be seen if this increase in retail activity is transient or the start of a long-term trend, the survey stated.
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Bhoi Smrutirekha Dharanidhar
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