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Below is the Views On The changing dynamics of the Indian equity markets By Mr. Sandeep Bhardwaj, Chief Sales Officer: Angel Broking
When it comes to investing in equities, traditionally, metropolitan cities have ruled the roost. Given the higher financial literacy rate of people living in bigger cities, it’s natural to get a large chunk of equity investments from people living there.
But, over the last three to five years, there has been a remarkable change in this trend. Due to lower returns from other asset classes like real estate, gold and fixed deposits, people from tier-2 and tier-3 cities have begun to explore investing in the stock market. One of the biggest reasons for this change is the realisation among investors that gold as an asset class is not liquid and so is real estate. Stocks, on the other hand, are not.
THE RISE OF SMART INVESTOR
To give you a perspective, on January 1, 2013, gold was priced at INR 30,893, per 10 gram, on February 1, 2020, it traded at Rs 41,746, giving a return of 35%. On the other hand, the Sensex was trading at 19,580 points on January 1, 2013, on February 1, 2020, it traded at 39,735- clocking a return of 103%.
Similarly, a decade long slump in the realty market has ensured that people in the smaller towns break their inhibition about investing in stock market. There was a time when investing in stock market was a forte of a particular class – those who were traditionally rich and understood the complexities of markets – but not anymore.
The rise of new-age, tech-savvy investors, with exposure to multiple, reliable sources of information on equities has ensured that people are able to easily compare the returns on different asset classes to make smart investment decisions. Today, finding people hooked onto a business news channel in the trading hours is a common sight in smaller towns of India. Sensex and Nifty are no more the words to be found only in the books of commerce graduates, they are also the buzzwords that one can hear in a gathering of five people in Bulandshehar, Ranchi, or Siliguri.
THE EASE OF TRADING
Apart from knowledge barrier, another hurdle that stopped small-town investors from investing in equities was difficulty in operating their Demat accounts. Over the years, internet penetration has changed the whole dynamics of the stock market investments. People now can do e-KYC and get going with their investments in stock market. The fact that an investor can keep track of his/her investments through a click on the mobile phone, while sitting in a shop or working in factory, has made trading in stocks an attractive proposition for investors.
The more number of people upgrade their phones to 4G and 5G technology in smaller towns, the higher would be the investments in equities from these places in the coming years.
GOVERNMENT’S INITIATIVE AND ROLE OF SIPS
Over the last decade, the government, with an objective to promote inclusive growth in the country, took the initiative of promoting investment in equities among retails investors. The market regulator Securities and Exchange Board of India (SEBI) has left no stone unturned to ensure that an average Indian becomes a part of the corporate India’s success.
The rise of Systematic Investment Plans, also known as SIPs, has contributed massively in democratising the equities investments among the masses and has been popular in smaller towns. Technically, an investor can ride on the growth of India’s equity infrastructure by investing as little as INR 500 a month.
THE WAY AHEAD
Over the last decade, the government has focussed on bringing a large section of Indian population under the ambit of BFSI sector. Be it through the spread of Aadhar-linked bank accounts or allowing tech-based BFSI companies to offer their innovative products through supportive policy measures. The government, through its policies is also looking into the capital needs of the small and medium enterprises that are largely present in tier-2 and tier-3 cities.
With India aiming to become a $5 trillion economy by 2024, a renewed focus on getting the average Indian to invest in the stock market is needed. As Indian companies look to meet their capital needs to expand their business, the focus of policy makers should be on getting the retail investors to invest in the equity markets.
Today, more than 80% of Indians have a bank account. If these people get introduced to the opportunities of equities, it would lead to the inclusive growth in the country. Because, it’s equity investments that make people rich, traditional investment instruments barely manage to beat inflation.
Above views are of the author and not of the website kindly read disclaimer