Covid fuels newbies' flood in stock markets, ushers buying spree

Mumbai, Dec 17 Besides an economic slowdown, the Covid pandemic has brought millions of new investors into the country's stock markets, ushering in a massive buying spree.

These newbie investors, have ventured into the market, via the DMAT route.

As per SEBI data, close to 6.3 million (63 lakh) new Demat, or dematerialised, accounts have been opened during the April-September 2020 period, representing an increase of 130 per cent on a year-on-year basis.

The total count of DMATs stood at 44.46 million, with an average addition at 1.05 million investor accounts per month during the Apr-Sep 2020 period.

Besides, a considerable number of folios were also enrolled in MF schemes.

The data by AMFI, revealed that 40 lakh folios have been added in the April-November 2020 period.

"A lot of millenials signed up for trading or investment and rode the upmove through trading in cash segment and in derivatives segment," said Deepak Jasani, Head of Retail Research at HDFC Securities.

"The Covid-19 outbreak brought the economy to a standstill as businesses suffered and jobs were lost, the share market offered a chance to supplement income in such times. The lockdown gave people time to think and understand the market and invest."

Interestingly, though the lockdown gave time and mental space for many of these newbie investors to think about their financial wellbeing, the period also brought record low interest rates and cheaper stock valuations.

"In the current scenario, where interest rates are going down, many people are looking at equities as an alternative investment," said Hemang Jani, Head - Equity Strategy, Broking and Distribution, Motilal Oswal Financial Services.

"Since many aren't able to spend money due to the Covid-imposed precautionary restrictions and hence are having surplus in their hand - such money is finding its way to equity. Work from home, digital offerings, and such a bull rally in the market also lured many to make a quick buck through trading in the stock market."

However, the real upmove was not just triggered by foreign funds but also came from investors in tier II, III cities rather than metros.

Notably, the BSE data showed among the large states, Telangana registered the highest percentage increase in new clients at 157 per cent YoY, while Andhra Pradesh clocked a 33.4 per cent rise in people from smaller cities opening Demat accounts.

"Due to improving investor education and growing awareness, an increasing number of retail investors from tier-2 and tier-3 cities have been actively participating in equities," Jani said.

"The millennials are recognising the importance of savings and are getting attracted towards the equity market. Increasing digitalisation is making it easier to open Demat or trading accounts and start investing from the comfort of one's home."

"Further low fee trading platforms are also attracting huge participation especially the day traders. The millennials have huge risk appetite as compared to earlier generation."

Accordingly, the regular buying of the retail investors both the existing and the new, have contributed significantly to the market buoyancy, said Suman Chowdhury, Chief Analytical Officer, Acuite Ratings & Research.

"The extent of oversubscription in some of the recent IPOs particularly in the retail segment is also an evidence of the strong retail participation in the current market upturn," Chowdhury said.

According to Gaurav Garg, Head of Research, CapitalVia Global Research: "The choice of these investors is spread over a wide range of sectors. It seems that realty stocks along with metal, PSU banks and capital goods stocks are the major recipients of the funds from these maiden investors with stocks like 'Godrej Properties' and 'Hindustan Copper' being the notable major gainers among many."

In addition, Rahul Gupta, Head of Research-Currency at Emkay Global Financial Services, said equities will keep on attracting new investors as the trend is sustainable.

"The overall uptrend is sentiment-driven and not by fluke."

"Globally, all governments and central banks including Fed, ECB are infusing ample amount of liquidity to boost growth which has kept the euphoria intact. This trend is sustainable until interest rates start rising."