With Coronavirus pandemic induced lockdowns since March 2020 having forced millions of people to remain confined in their homes, and also severely denting household incomes, there has been increased retail participation in the stock market as many people have moved towards share market trading.
According to a study conducted by State Bank of India (SBI), increasing retail participation, if it becomes the norm, could also enable a larger resource pool for financing India's infrastructural requirements.
At the same time though, SBI has noted that it is yet to be seen if this increasing retail participation is a transitory phase or the beginning of long term behavioural change.
"Greater retail participation has also led to increased investment in stocks and mutual funds in the second half of 2020-21 and this higher retail participation in stock markets may become more of a self-fulfilling prophecy. The number of individual investors in the market has increased by a whopping 142 lakh in 2020-21, with 122.5 lakh new accounts at CDSL and 19.7 lakh in NSDL," the SBI report said.
Also, another 44.7 lakh retails investor accounts have been added during the two months of the current fiscal. Also, the share of individual investors in total turnover on stock exchange has risen to 45 per cent from 39 per cent in Mar 2020, as per NSE data.
Citing an example, the study elaborated that the share of savings in shares and debentures to total household financial savings, which stood at 3.4 per cent in financial year 2019-20 is likely to increase in 2020-21 to 4.8 per cent to 5 per cent of the total household financial saving, indicating the significant upside to household participation in equity investment.
The report further noted that there is a renewed interest in healthcare stocks and of course financial stocks with stories of Indian financial ecosystem being effectively acting as a conduit of large liquidity finding investment avenues.
"Lower rate in other saving avenues amidst the low interest rate regime has led to greater interest by individuals in the stock market. Another reason could be the significant increase in global liquidity," it said.