Retail participation may increase exponentially in 2021: Experts

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January 8, 2021 2:55 PM

As investors warm up to the idea of equities and investing becomes more democratic, retail participation is expected to increase exponentially in 2021 as well.

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While the first half of 2020 was riddled with financial uncertainty, there was a remarkable increase in the number of Demat accounts being opened in the country.

Industry experts say three factors contributed to these developments- Firstly, the coronavirus crisis created an opportunity for investors to invest in good quality stocks at a cheaper price. Secondly, a large section of office-goers working from home was able to save on several fronts, had more time to analyse companies and invest for the long term. Thirdly, the ease of investment apps and digital platforms gave the additional push.

Harsh Jain, Co-founder and COO, Groww, says, “Investment apps and digital platforms like Groww made investing easier, faster, and transparent for the DIY (do-it-yourself) generation, removing hurdles with paperless onboarding and low brokerage.”

He adds, “2020 gave ample opportunities to millennials to explore the wealth creation potential of equities and also made them aware of the risk-reward trade-offs. As investors warm up to the idea of equities and investing becomes more democratic, retail participation is expected to increase exponentially in 2021 as well.”

According to reports and investment trends observed by Groww in 2020, investors under the age of 30 make up more than 2/3rd of the users with GenZ’ers (18-24) comprising 33 per cent and young Millenials (24-30) being 37 per cent of the investor base.

Jain says, “There has been a marked shift in the average age of investments. While earlier generations started investing well into their mid-thirties, millennials are starting to invest as early as the mid to early twenties.”

According to the data and report by Groww, top tier 2 cities that have the maximum concentration of investors include Lucknow, Ahmedabad, Patna, Jaipur and Bhubaneswar, whereas, Pune, New Delhi, Mumbai, Bengaluru, Hyderabad, and Kolkata contribute to only 45 per cent of their investor base.

The report also stated, from Jan to March 70 per cent users invested via SIP, this number increased to 77 per cent during the lockdown period, especially around the time markets were volatile – this shows a high awareness among the user base about SIP being the best investment mode during volatile markets, owing to the benefit of Rupee cost averaging it offers.

Out of the total Asset under management on Groww, before the lockdown 78 per cent was allocated to equities, 19 per cent to debt and the rest to hybrid. The numbers shifted slightly post March 31st – with 75 per cent to equity and 22 per cent to debt. The data states there was also a slight increase in the sectoral/thematic funds after March 31, with defensive sectors such as Pharma, FMCG, etc. garnering more interest.

Jain, says, “While users were leveraging market volatility to accumulate more units in equity mutual funds, they had also been investing in debt fund categories to cushion against uncertainties. Most popular investment class in debt was liquid funds – 33 per cent of the assets allocated to the debt category is constituted by Liquid Funds currently.”

According to the report, ultra-short duration comes at a close second with 25 per cent. Experts say high withdrawal flexibility, safety as well as better capital appreciation have made these funds a popular investment class to park excess cash and prepare for emergencies.

Similarly, other products that have gained favour among millennials have been IPOs and Exchange Traded Funds (ETFs). Based on the series of new product launches like Stocks, IPO, ETF’s, Digital Gold etc., the average ticket size of a transaction has holistically gone up by 70 per cent on the Groww platform. The data states, the average SIP ticket size has gone up by 30 per cent.

Jain, says, “A large section of the urban class is saving a lot more money than before as spendings on travel, restaurants, cinema, luxury purchases, etc. have gone down. The pandemic induced lockdowns and many organisations in the private sector adopting work-from-home has given users more time to research deeply about investing in stocks and mutual funds.”

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