Inside a cramped photocopying kiosk in Mumbai, Umesh Khamkar is checking her phone every 30 minutes. He’s the owner of the small shop, but Khamkar is focusing on his other lucrative business as a day trader.
Today, he makes more money trading stocks on an app than he does with his copier. Khamkar, a light man in his fifties, started investing in Indian stocks after the country’s punitive shutdown in 2020 got him fired during investment seminars on YouTube.
Lured, he encouraged his friends to start trading. His list of converts now includes the cashier of a nearby restaurant that sells lunches to commuters.
Khamkar is one of millions of Indians who have started investing in the stock market since the outbreak of the pandemic.
More than 50 million investors have registered with the National Stock Exchange, up from 31 million two years ago. The NSE does not distinguish between businesses and individuals, but retail brokerages have reported an explosive number of clients.
Powered by technology and access to some of the cheapest data in the world, retail investors now account for 45 percent share of the total trading market in India, with their rise reflecting the rise of US and UK traders that have fueled the meme stock mania.
“Retail investors have now become a force to be reckoned with since the start of the pandemic,” said Rajesh Sehgal, managing partner at Mumbai-based Equanimity Investments.
The explosion of ordinary people investing in equities, a riskier asset class, has helped boost India’s stock market, Sehgal said. “There have been at least two or three downside moves in the market during that time, but when foreigners or large institutional investors start to sell, the retail sector has bought in.”
That helped boost Indian stock prices. Up to now, the Nifty 50 index of India’s largest companies has increased by 25%, while Mumbai’s Sensex has increased by 23% in the same period.
But as the indexes plunge, Sehgal warned that retail traders could cripple the market: “When there’s a severe downturn and these retail investors start to sell, who’s going to be? buy it?”
Nithin Kamath, founder and chief executive officer of Zerodha, India’s largest brokerage by active users, warns that retail investing is “cyclical, every bull market people think. that the behavior has changed, but it doesn’t. Basically people are just getting sucked into greed.”
Zerodha’s customer base has more than tripled in the last 18 to 20 months, from 2 million customers to nearly 8 million today. Kamath estimates that with 10 million to 15 million orders per day, Zerodha accounts for 10 to 15 percent of India’s trading volume.
But Kamath says the dramatic change is that three-quarters of new customers are under the age of 30. “I [can’t] Think about history when a lot of people between the ages of 20 and 30 entered the capital markets. . . Traditionally, people would only think about investing in the market when they were married and they had some savings,” he said.
Rajamani Venkataraman, chief executive officer of financial services firm IIFL, said technology has democratized what was previously a “closed club” in trading.
According to Bombay Stock Exchange data, 19% of transactions were made on mobile devices in November, compared with 3% five years ago.
Mobile devices have also allowed those living in India’s vast hinterland to access the market. NSE said in October that more than half of new traders come from outside of India’s 50 most populous cities.
While many new investors are betting on Indian companies, others want professionals to do it for them.
There are now nearly 19 million Indians invested in professionally managed mutual funds, according to Pankaj Chaudhary, junior finance minister.
By the end of October, the amount of money overseen by these managers was up 68 percent year-on-year, he said.
For amateur shoppers, the risks abound. Many people try to make quick profits from cheap but volatile stocks, such as IT conglomerate Equippp Social Impact Technologies or telecoms company Tata Teleservices, while others bet leverage allowing them to win. – or lose – more money.
“Most people can’t handle leverage and when it goes down it goes horribly wrong,” said Kamath, explaining why Zerodha doesn’t offer it.
Others are appearing to be cautious traders. “There is a much faster education that seems to be happening,” said Ram Srinivasan, a banker turned startup founder in Chennai. “It took me 10 to 15 years to learn what, some of these people are learning for several years.”
Khamkar, a shop owner in Mumbai, raised Rs 20,000 (US$264) which he invested in early 2020 to Rs 550,000. It’s a small fortune in a country where Credit Suisse estimates the average individual’s wealth to be $14,000.
Khamkar said the market was bearish but he was not confused. “When the market goes down, people get scared and they sell,” he said calmly. “That’s when you have to buy.”
