Indian Retail Investors Discover Wealth in Equities

The average Indian appears to have discovered equity as an asset class to build and grow their wealth. Opening the gates to a steady surge in wealth creation is the equity market, which has demonstrated incredible resilience despite the recent global events. The National Stock Exchange (NSE) and its benchmark index, Nifty 50, are at the heart of this quest with the numbers revealing that retail investors are seeking out equities as a viable investment option like never before. The number of unique registered investors on the NSE has crossed 8 crore (unique PAN numbers), indicating that retail investors are flocking towards equities at a remarkable pace. [EasyDNNnews:PaidContentStart]

The last 1 crore unique registered investors were added in just the past eight months. Moreover, the first six months of the current financial year saw 76 lakh new investor registrations, vis-a-vis 1.3 crore in FY23, 1.9 crore in FY22 and 0.90 crore in FY21. The growing affinity for equities arises from a synergy of many factors – a thriving Indian economy, a vibrant capital market with myriad products for retail investors, political stability, technological advancements and global integration. It reflects the vision of a ‘Golden Age’ where the fruits of a prosperous and inclusive India are reaching citizens all over the country. 

Proof of this can be found in the fact that the 8 crore new registered investors correspond to around 5 crore unique households in India, which accounts for a significant 17 per cent of households directly investing in the Indian stock market via NSE’s nationwide network of trading members. Moreover, 45 per cent of new investor registrations of the last 1 crore registrations came from outside the top 100 Indian cities. North India accounted for 43 per cent, followed by the West at 27 per cent, South at 17 per cent and the East at 13 per cent. The top cities include Delhi at 7 per cent, followed by Mumbai (including Thane and Raigad) at 4.6 per cent and Pune at 1.7 per cent. 

India is among the world’s fastest-growing economies and its extraordinary growth story has been attracting a ‘young’ India to the capital markets in recent years. In addition, the digital boom has given rise to a number of online trading platforms, quite literally placing the gains of the equity markets at people’s fingertips. Increasing access to information thanks to internet penetration is also playing a part, as is the regulatory push towards e-KYC, which has helped in on-boarding retail investors without any paperwork. The increasing confidence in equities has also arisen from the phenomenal performance of the markets themselves. 

The benchmark equity index, Nifty 50, has delivered annualised returns of 22.66 per cent in the last three years while the Nifty 500 has yielded annualised returns of 24.89 per cent during the same period (all returns as on September 26, 2023), indicating that the performance is long-term, broadbased and not restricted to a few securities. The overall turnover in the current financial year has witnessed growth of around 28 per cent YoY in cash equity and 4 per cent YoY in equity derivatives. The equity derivatives-to-equity cash ratio has been hovering at around 2.5 in FY24, compared to around 3.0 in FY23. The sustained increase in equity investments is also driving liquidity and market capitalisation, thus fostering innovation, entrepreneurship and greater financial inclusion. 

This is propelling economic growth and prosperity, which circles back to the capital markets, which in turn encourages further participation from retail investors – thus continuing to drive the economy onward and upward. The average Indian has discovered the benefits of investing in equities and the pattern is only set to grow. Today, an individual in Jorhat, Assam, can invest his or her hard-earned money in a manufacturing company in Salem, Tamil Nadu with confidence and due research. Through equity markets, common and retail investors can be confident of their investment and, when the business makes a profit, of getting their share in the form of dividends. 

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