On August 27, 2018, TFI published an article celebrating India’s total number of registered investors with the Indian stock exchanges (BSE and NSE) surpassing 4 crores, riding on the 50 lakh new investors added in 2017. At that time, it was hard to imagine this number doubling in just 3 years.
For decades, the number of investors at India’s stock market has grown at a snail’s pace, owing to majority of the people being located outside Mumbai, who found it too complicated to be involved in securities trading. Also, the stories of fraud and scams, with many people being cheated by Ponzi schemes contributed to a lack of trust, for investing in the stock markets.
However, the digital public infrastructure built by the Indian government in the last decade – Unique ID (Aadhar), JAM (Jan Dhan accounts coupled with mobile number linking and Aadhar card as proof of identity), United Payments Interface (UPI) – led to an exponential growth in the number of investors, especially after UPI’s arrival.
Today, almost every eligible person in India has a bank account and operates some kind of mobile wallet that is powered by the UPI. This made the job of the digital-only brokerage platforms like Zerodha, 5Paisa, Groww as well as traditional ones like ICICI Securities, Kotak Mahindra Securities, very easy. Nowadays onboarding of a customer on the stock market through Demat account takes less than 10 minutes and this has led to a revolution in Indian fintech space.
The doubling of the number of investors in just 3 years is proof of the revolution through which Indian financial markets are going. A few weeks ago, the valuation of Indian stock market valuation crossed 3.4 trillion dollars and overtook France as the sixth-largest in the world. At this pace, it would not take more than a year for the Indian stock markets to overtake the London Stock Exchange to become the fifth largest in the world.
The growth in the Indian stock market is primarily driven by retail investors, who are pumping billions of dollars through mutual funds and direct investment in securities. The last one crore investors were added in just 106 days, or less than 4 months, which resulted in the number of investors to cross 8 crores.
The retail investors have become such a lucrative group that a few months ago, the Reserve Bank of India (RBI) announced that it would allow retail investors to directly invest in government bonds (Read: government debts).
The growing confidence of investors in the Indian Stock Market (which is very professionally regulated as compared to the American stock market) and digital technology have brought crores of retail investors into the market. And now, even the Government of India wants to tap into the savings of the common people to finance itself.
With the rise of retail investing in India, the companies, as well as the government would have access to cheap capital, and the money that was lying idle in assets such as gold and real estate will be poured in the active market.