1 million new investors entering the market on a monthly basis, shows data

Mansi Majithia has just begun the process of signing up to invest in the stock market. She’d invested earlier, but the amounts were small. This will be her first serious foray into equities. And, it comes even as the market has touched an all-time high. She is not alone in putting her money in the stock market.

There are around one million new investors entering the market on a monthly basis, shows regulatory data. Around 10 million new investor accounts were opened in 2020, shows data from the Securities and Exchange Board of India’s (Sebi’s) monthly bulletins. 
 

Faster account opening, which allows investors to start trading without ever leaving their homes or visiting a physical branch of their local brokerage has played a role in the surge, according to experts. This is a far cry from the time when people like 67-year-old Vinod Dadlani started trading. He began in 1977, before the S&P BSE Sensex. The index has a base year of 1978-79. It was first compiled in 1986, but calculated including data over the previous few years.

People often had to go to their brokers at the stock exchange to place their orders over a cup of tea, he recalls. It was not as easy to buy and sell shares even after you had a brokerage account. Getting the shares even after the transaction was complete wasn’t a cakewalk.

 “People would go all the way from (the) suburbs to South Bombay to pick up shares,” he recalls.

Things have changed since then, with most investors trading on mobile phones. The share of mobile phone trading in the cash segment of the stock market is up 8-12 times in the last five years. The Sensex touched an all-time high of 50,184.01 intraday on Thursday. It has nearly doubled from the level of 25,638.9 seen in March.

“Investors have been very fortunate, those who have come post-March... they’ve seen a fantastic run,” said Alok C Churiwala, managing director at Churiwala Securities. He advised caution, suggesting that new investors who have seen such spectacular returns in such a short time should remember that markets can also correct.

Deven Choksey, managing director of KRChoksey Investment Managers, a veteran on Dalal Street, said investors should focus on doing things the right way. “The effort should be to select the right business,” he said. Getting the right kind of advice would be key, according to him.

Majithia’s advisor has suggested taking a long-term approach and looking at companies with steady businesses rather than quick money, keeping in mind things such as her temperament and approach to risk.

Older investors like Dadlani are used to waiting for years for profits. His first investment traded below par for around five years, he recalls. It has repaid him handsomely since then.

New investors have nearly doubled in the last few years with a large chunk coming in during 2020. The total number of investors as of November-end was 49 million, according to data from the latest Sebi bulletin. It was 27 million in December 2016.

In Majithia’s case, the timing is the outcome of the fact that the surplus liquidity and safety nets she felt she needed before such a foray have only now been put in place. She hopes to stay invested for the long term and is not perturbed by current market levels.