"First, my friend introduced me to the trading business. Later, I got hooked on it. Went on pursuing several courses to understand the operations of the stock market and invest in the same, said Shubham Jagtap, a 25-year-old investor from Satara." Further adds, "Though it involved risk, the main motto was to earn quick profit in a short period, which I did."
Like Shubham, 18-year-old Shomil Singh started investing in 2020. The only difference was he never took classes. Shomil and his society friends during their meets used to have conversations on cryptocurrency and bitcoin. He said, "Once we touched on an Instagram reel talking about financial literacy and other investment options. Thereupon we all researched and decided to invest a little amount in bitcoin." Shubham and Shomil are first-generation investors investing in Shares. Their parents had little idea of the share market but investing in it was the last straw. Shomil daily watched market-related YouTube videos to learn the concepts and invest.
Source: Business Standard
India’s stock market is booming, attracting individuals like Shomil and Shubham to invest. The millions of youths have shifted to the contemporary way of investing that is - the stock market. Unusual to their older folks. Many new investors are first-timers. Deutsche Bank pointed out that 61% of new retail investors were under the age of 35. It won't be wrong to say- today, financial literacy has broken the cover of myth, come much closer to people through social media. There were times when people only invested in physical assets such as land and gold. Today, the youth is considering other options, trading shares, debentures, stocks, and cryptocurrency. And physical assets are secondary in the whole investment portfolio. The MSCI India index is up about 30% for 2021, nearly twice the return of the global index. According to the Indian Express report, the initial months of 2021 showed Domestic Institutional Investors (DIIs) overtaken the foreign portfolio investors (FPIs) in net investment in Indian equities. DIIs (mutual funds/insurance companies) pool money from small investors and trade in various country assets.
Stock Market Attracting Novice Investors
The primary reason for young investors moving towards stock trading and virtual trading is quick profit in a short period. The youngsters or first-time investors have shown immense interest in the capital market instrument. A study shows 27 % of those who applied for Zomato's IPO on Paytm Money on day one were under the age of 25, while 60 % were under 30. Similarly, the Paytm IPO and Nykaa IPO attracted myriads of youth.
Likewise, it has become handy for youngsters to invest money on one click. Rajesh is an owner of a photography studio and works part-time for Zomato, Pune. He operates his stock trading account through trading applications such as ET Money and Zerodha. He has strategically invested in large-cap companies’ example HDFC, and mid-cap companies. He believes companies must be Debt-free and fundamentally strong. Further adds, "I started investing in Stocks, Systematic Investment Plans (SIP)s, and Equities through my mobile. I do not prefer brokers or agents." Many individuals prefer to take their portfolios into their hands rather than give them to the brokers. The global corporate digitalization initiatives have led to an upsurge in investments. According to the SBI Ecowrap report, the share of individual investors in total turnover on the stock exchange has climbed to 45% from 39 % in March 2020.
Source: Economic Times
Another possible reason is the conventional saving avenue and their minimal interest rates. Considering the current low-interest-rate regime, the stock market has grabbed the attention of youngsters. Many of them are a new lot of investors. According to the SBI Ecowrap report, 122.5 lakh new accounts at Central Depository Services Ltd, (CDSL), 19.7 lakh in a National Securities Depository Limited (NSDL), and investors increased by 142 lakh in the financial year 2021. Manisha Patil, a 27-year-old Senior Analyst working with a MNC said, "My portfolio includes Shares, SIPs, and Equities. To add more, I am a regular investor in Public Provident Fund (PPF). It gives me returns of 7.10% p.a, comparatively low to what I get from the stock market. However, PPF has its own perks such as tax benefits and secured natured. Stock trading interests me more."
Moreover, the millennials are looking for quick profits citing early retirement goals. *Miraj Gupta, a 27-year-old Software Engineer, said, “Every month I earn a fixed salary, investing a small amount consistently in stocks will give me great returns. Great enough to retire early.” According to him, there has been a wave of retiring early in the IT sector, compared to the previous generation. Miraj researched, started with mutual funds (secured and moderate risk). Later, with emerging gags on social media, shifted to cryptocurrency (high risk & higher returns). Well-known tech geeks on social media and his peers influenced him to try new investment options.
However, monetary terms are not only the driving factor to shift to the stock market. One of the factors is planning inflation. By this, it means not letting the value of money decrease. Inflation increases the prices of products, the purchasing power of the rupee decreases, reducing the value of money. Miraj said, “Inflation impacts savings in banks as well as investments, but there are investments that are indexed for inflation risks. These investments earn more returns when inflation is high and vice versa.” In such cases, fundamentally strong companies can protect the value of money in the form of Stocks and Mutuals. Stock Market trade in such conditions could also be viewed as benefits that allow a trader to take risks.
Shubham Jagtap emphasized COVID-19 for being responsible for the sudden booms of the Stock Market. People were home, looking to do something, the trading gave them their past time. Ashish Raigandhi, a Chartered Accountant, working with RBL bank, pointed out that post lockdown the investors increased massively. The reason was networking- people started sharing their personal experiences with relatives and friends about markets encouraging them to trade." The market research firm Mintel has the same to highlight. As per the report, 11% of generation Z and 13% of millennials say that investing in stocks and shares will be a priority after the Covid-19 pandemic ends, compared with just 4% of generation X and 3% of baby boomers.
Disadvantage: Gambling or Investing
The market is volatile and fragile; it nurtures the risk in itself. It is so fragile that anything can crush it. Social media further adds to it. For example, Tesla Chief Executive Elon Musk made a statement causing sharp swings in the cryptocurrency value. A famous figure and little internet can influence the market and the minds of the people. This can be threatening and disadvantageous to the investor.
Increasing exposure, too many platforms, social handles offering investing tips are available online. The teenagers, youth in colleges find their free time valuable in learning from these platforms. However, a certain amount of the information is sugar-coated avoiding the grey side of it, hence misleading the beginners. Rajesh says, “Social handles exhibit only their profits and not losses, people don’t get this. They might not exploit them in actual terms, but it hacks their mind. Broker or agent offers 30 % if investments are made with them, which I do not find right”.
New investors find it thrilling to play in such a volatile market, by play means to gamble. Often, the investment made is a gamble, less market research, Shares are bought without understanding companies' performance, and so on. Satyajit Athlekar, Vice President of Livguard company, believes- without research, investing is gambling. Further adds, “I started investing since my college days that is 2007-08, not a boom that time. The start was reckless, and friends influenced decisions. To compare, those times with today nothing has changed as such, in fact youngsters have got naively faster in an urge to make quick money. If asked- what is blockchain? They hardly know! Although I invested little in crypto, research is required to have strategically hold of it. Nowadays new batch of investors doesn’t find it necessary. I still believe in long-term blue-chip investment than being a high return, short-term investment.”
Buying and selling digital coins has been handy more than before. Apps such as WazirX, CoinDCX, CoinSwitch, and many more provided a user-friendly interface to trade. Curiosity is one part that makes attracted towards cryptocurrency, but at the same time, Apps social media campaigns created this curiosity. Also, the youth especially teenagers has got into following trends, be it a dance number or investing money. As a result, more than 15 million people had got into trading. Blockchain Data Platform Chainalysis shows India ranks 11th out of 154 nations in terms of cryptocurrency adoption. Most of the crypto investors are little clear with their concepts, but they are fearlessly investing.
The Stock Market has long been established in India. It is not new for Indian citizens. Primarily, the people have been actively trading, the only difference is the time period and type of investment they are interested in. The figures in new investors are climbing rampantly. The same figures have shown major interest in Cryptocurrency, high-risk digital money. The earlier generation started trading after achieving little economic stability and cautiously trading in Stocks. These principles do not apply to new investors. The beginners are teenagers, with the mere age of 16-17, investing under their parent’s credentials with an appetite to earn fast money. The youth in their 20s are planning their finances, their retirement right when they are entering the economic world. The sensitization among youth is massively increasing due to social media and their urge to become successful as soon as possible.
*Names are changed
- Snehal Mutha