Technology fuelling equity cult in India

Retail investors are entering the market in droves. India's largest stock broking platform Zerodha's FY21 performance is its biggest indicator. According to reports, the startup has posted a profit of Rs1,122 crore in FY21, a jump of over 164 per cent from Rs424 crore in FY20. Similarly, revenues also surged by 190 per cent to Rs2,729 crore in FY21 from Rs 938.45 crore a year ago. Zerodha's active clients grew from 14.14 lakh in FY20 to around 34 lakh in FY21. Such huge jump in profitability and client base shows the rise in equity culture in the country. Not only Zerodha, all discount brokerage firms like Groww, Upstox have also seen massive rise in client base since the beginning of the pandemic.

In addition to stock broking landscape, even online mutual fund investments have also seen a huge jump. More number of people are taking equity exposure through systematic investment plan (SIP) accounts. With 26 lakh fresh accounts added in January, the number of SIP accounts crossed 5 crore, for the first time in history. Not only equity culture, even investors across the country are taking exposure in the cryptocurrencies. Despite lack of regulations, some reports suggest that more than 10 crore accounts have opened so far in the country. These trends indicate that retail investors are more willing to take exposure to risky assets. Analysts suggest that job losses and health concerns led people to save more during a crisis period like the Covid pandemic.

Apart from these factors, technology also played a critical role in driving this trend. It is pertinent to note that most investors who have entered the market in the last two years are young. As the new age discount brokerage firms have come up with customer-friendly digital interfaces, these young investors find investment process very easy. While cumbersome paperwork is replaced with seamless digital onboarding, investors buy and sell stocks through a swipe in the trading apps. Similarly, the feedback process has also improved a lot. Now, investors can share their grievances through chatbots, get the status of their transactions swiftly without any physical interfaces. Such hassle-free investment experience is attracting more investors into the market. Just like Robinhood, despite being in controversy, attracting young investors into the US market; many new age fintech startups are making the whole process easy and user-friendly. Though stock market is not likely to repeat its performance of 2021, the sustainability of equity culture is very much likely in coming years. This is because of the fact that technology has made the process very easy through rapid digitalisation. As India has growing number of people using internet everyday, this culture is likely to penetrate the hinterland of the country. In a way, this is good news for the Indian capital market as money channelised to the stock market will fuel growth of businesses, which in turn will support the GDP growth. However, it is important to make investors aware of the risks attached with the assets like equity and crypto. In this aspect also, technology can be leveraged by regulators and other stakeholders to spread awareness for achieving a healthy and sustainable growth in the long-term.