Big rush of new investors to stock markets amid economic slump

Number of new investors rushing to the equity markets has surged by three times, according to BSE data

The number of new investors rushing to equity markets has reached a new peak in the first five months of the current financial year.

Even as the markets have seen a high degree of volatility in the past few months, the number of new investors rushing to the equity markets has surged 3 times, according to data available with the Bombay Stock Exchange (BSE).

This is also 2.8 times higher than 1.78 million registrations seen in the comparable period last year.

Previously, the highest number of new investor registrations took place April-August 2018 when 1.81 million new unique client codes were generated -- 63% lower than the current year's tally.

As of date, the total registered investors on the Bombay Stock Exchange (BSE) stand at 54 million. To put the things in perspective, the combined growth in the new investors seen in April-March 2018 and 2019 is 27.6% lesser than the growth till August in FY2021.

Experts say that pursuit by salaried class to up their incomes on the face of lower business activity and the pay cuts has attracted many new investors to the equities.

Read: Indian equities log most gains in a decade despite economic slump

"Since many aren’t able to spend money due to the lockdown and are having surplus in their hand, which is finding its way into equity markets. Work from home, digital offerings, and smart recovery in the market also lured many to make a quick buck through trading in the stock market," according to Hemang Jani, Head - Equity Strategy, Motilal Oswal Financial Services.

Interestingly, according to an analysis by Motilal Oswal, there has been a sharp jump in the market share of non-institutional investors (NII) participating in the cash segment, which is the highest since August 2009. The share of NIIs jumped sharply over the last four months to 72% in July from around 38% in March 2020 -- hinting at more and more participation by retail investors.

BSE tracks the new client registrations through Unique Client Code (UCC). In order to facilitate maintaining the database of their clients and to strengthen the know your client (KYC) norms; all brokers have been mandated to use unique client code linked to the PAN details of the respective client which will act as an exclusive identification for the client. According to SEBI, it is mandatory for all members to use unique client codes for all clients.