Tech fueling retail-investing boom in markets

We are at the verge of entering into the next financial year. The current fiscal year, FY22, is a watershed year in many ways. From a record number of unicorn additions in startup space to India's enthusiastic initiatives to be self-reliant (Atmanirbhar Bharat) in critical technologies, the country has navigated many global and domestic events during this period tactfully. Interestingly, technology-enabled applications and solutions have been acted as great enablers in the current financial year.

For instance, Indian equity market has shown the resilience in this fiscal year despite heavy selling by FPIs (foreign portfolio investors). So far in FY22, FPIs have been net sellers of Indian equities. The net outflow was a staggering $18.5 billion so far. Such exodus was last seen during global financial crisis in 2008. Despite huge outflows, BSE Sensex has risen more than 10 per cent during this period. It is definitely a feat. It indicates households are allocating a rising proportion of savings in financial assets. Retail investors are also taking more exposure to equities. According to NSDL (National Securities Depository Ltd), 25.3 million active accounts of Indian residents are there by the end of February, 2022. This is around 68 per cent jump over a five-year period. So, the participation of Indian retail investors in equities is real. Such movement towards equities is largely driven by technology-powered discount brokerage firms in India.

India has seen entry of many discount brokerage firms in recent years. Companies like Zerodha, Upstox, 5Paisa, and many more have brought in a paradigm shift in the equity investing landscape. Technology-powered apps with customer-friendly digital interfaces have attracted a lot of young investors to come into the fold of the Indian capital market. Now, the scene of youngsters trading through their mobile handsets has become common. New account openings reflect the rise in the number of retail investors in Indian capital market. The total number of demat accounts increased to 8.06 crore by the end of December 2021 from 5.51 crore in March 2021, which translate into a net addition of 28.33 lakh accounts per month in FY22. The share of younger age groups is also increasing.

Rising participation of youngsters reflect that a sustainable level of participation is likely to continue for several decades in Indian equities. This is definitely a good news for the country's capital market which has long been held captive to the actions of FIIs. Whenever FIIs decide to pull out, Indian markets use to see a large fall. However, despite huge outflows, Indian markets have not corrected much this fiscal year. This shows the power of retail investors.

As compared to developed markets like the US and other European countries, India has a very low participation rate so far. In this perspective, the country has a long runway to cover. And technology can play a critical role in driving the participation in coming years. As more brokerage firms come up with technology-powered interfaces that are easy to operate, the reach of Indian equities will soon reach the hinterland of the country.