Retail equity holdings shoot up 60% in 2021, shows data

Value of holdings rises to Rs 55 trillion as 30 mn new investors enter market

Individual investors’ equity holdings saw one of the highest-ever increases during a calendar year as droves of first-time investors flocked to the stock market in 2021. The combined value of their equity holdings rose by Rs 21 trillion, or 60 per cent, to Rs 55 trillion in the year, underpinned by an across-the-board up move in stock prices.
 
The number of active dematerialised (demat) accounts surged by a record 30.7 million to nearly 80 million, data provided by depository firms CDSL and NSDL show.
 
This growth in retail investors’ equity assets under custody (AUC) outpaced the growth in India’s market capitalisation (m-cap) during the year, indicating that savvy investors were able to reap the benefits of the market boom. The m-cap of all BSE-listed companies rose by Rs 78 trillion, or 41.5 per cent, to Rs 266 trillion in 2021. The 60 per cent jump in retail AUC was also way more than the 24 per cent jump in the Nifty and 46 per cent surge in the Nifty Midcap 100 index for the year.
 
This suggests large incremental flows moved into the equity market, a possible shift from other asset classes such as debt, gold and real estate.

 
Retail AUC as a percentage of total m-cap rose from 18 per cent at the end of 2020 to 19.65 per cent at the end of 2021. Besides direct equity holdings, retail investors also hold shares through the other routes such as mutual funds (MFs), pension funds, and insurance.
 
According to an analysis by UBS, over Rs 2 trillion ($28 billion) of domestic household flows entered the stock market, either directly or through MFs, during the first nine months of 2021.
 
These sharp retail inflows are seen as the major factor behind last year’s world-beating rally in the domestic market.
 
“The scale of retail money is the fuel which is keeping the market up. As a consequence, India has become very unattractive from a valuation perspective,” Sunil Tirumalai, executive director and India equity strategist at UBS Securities, told Business Standard in a recent interview.
 
He said most of the activity in the market is only on account of high networth individuals (HNIs).
 
A closer look at the data provided by depository firms suggests not all individual investors have benefitted from the boom. The average holdings per demat account remained stagnant during the year at around Rs 7 lakh.
 
Industry players said this could be because of a number of factors. They said several individuals have opened multiple demat accounts but have concentrated their holdings in a single account. Also, many have opened accounts simply to subscribe to IPOs, while many young investors haven’t made any meaningful investments.
 
“I believe that it is a relatively smaller fraction of successful investors owning a larger share of incremental value while most others hold balances much below the average. A closer look at the rapid rise in number of demat account openings would reveal that most participants are younger Indians and first-time capital market investors holding lower balances due to limited financial ability and limited risk-taking ability respectively. With increasing awareness and participation, the average ticket sizes will go up,” said Rakesh Singh, CEO of Fisdom Broking.