By the time you have finished scrolling through this article 1,018 demat accounts have opened, 13,767,766 F&O trades have been executed and 90% of those have lost money!
For the unaware the BSE Sensex just delivered 100x returns over the last 4 decades. But what’s mind-boggling is that most of these are back ended with 70% of these gains coming in the last 4 years. Does that mean, 70% of the progress in India has happened in the last four years? Let’s look at what has changed in the past 4 years:
- With increased market penetration of Discount Brokers, the number of Demat accounts has skyrocketed ~4x from 40 Mn to 160 Mn!
- 1/4th of the trades in Indian Capital Markets originate on user-friendly mobile trading apps.
- The Daily Turnover on the Cash Segment of BSE/NSE has almost quadrupled from Rs 0.4 Tn to Rs 1.5 Tn.
- The market is high on the Algo trading steroid. The daily turnover in the F&O segment exploded 27x to an eye-popping ~ Rs 496 trillion. This is 330x of the Cash Segment!
In this age of instant gratification and validation, technology has acted as a catalyst for the urge to make a quick buck.
Today, opening a demat account is FREE! All you need is a smartphone, an inexpensive $1 Jio network, and a few minutes of your precious time. As Groww’s founder says “Trading is as easy as online shopping”. Everything is available at the ‘click of a button’. Just fill your Demat Basket with your choice of stocks. Don’t worry if you don’t understand which is a suitable scrip. Finfluencers are there to guide you as you embark on the journey of being the “new age investor”.
Online Demat account Opening Process
GenZ’s YOLO and FOMO feelings are triggering spontaneous investment decisions stemming from emotions rather than logical reasons.Technology historically has been attributed to improving efficiencies, but do you think digitization has created a bubble of epic proportions when it comes to the Indian Capital markets? The sheer scale and pace at which new investors have joined the force is alarming. But India is a growing market!
The current market frenzy has led to investors gleefully ignoring the Red Flags:
TOWERING MCAP TO GDP
In 2007, when the Market Cap to GDP Ratio touched 149, the BSE Small Cap corrected by 75%, and the Nifty corrected by 60 % over the next two years. And today at similar levels of 150, all we continue to hear is “India is a growing market”.
HOW STICKY IS THE SIP MONEY?
Yes indeed, we are a growing market, and the Monthly SIPs have been breaking records. While the nation is riding the “Mutual funds Sahi Hai” bandwagon, there is a fair argument on how sticky this SIP money really is! Gone are the good old days when one had to go through a cumbersome process of filling forms which also made people reluctant to close one. With the ease in process stickiness also reduces. The SIP money that is getting auto-debited could also vanish by merely clicking “Redeem across Funds”!
INDIAN DERIVATIVES MARKET: A RUSSIAN ROULETTE?
India’s market cap is just 10% that of USA’s market cap. Ironically, India’s derivatives turnover is 100x that of the USA’s. NSE remained the world’s largest derivatives exchange for the fifth consecutive year in 2023 and dominated the Equity Index Options segment with a 98% global share in terms of contracts traded in June 2024. An attempt to simplify trading apps coupled with gamification by the likes of Zerodha and Groww acted as a powerful tool for attracting new and younger audiences to the world of investing. User-friendly interfaces, real-time market data, and seamless transaction capabilities empowered investors to trade stocks on the go through the mobile app. Weekly expiries and possibility to take leveraged positions is all the push that was required. So, what if 9 out of 10 F&O participants lose money, India is a growing Market!!!
WHERE ARE THE CUSTOMER’S YACHTS?
Post-COVID the market cap of brokers increased by 4x as they continued to get rich. Zerodha’s net profit rose 37% to INR 2,908.9 Cr in FY 23 and co-founder and CEO Nithin Kamath attributed the growing increase in futures and options trading to the growth in the startup’s top line and bottom line.
INVESTOR'S JINGLE POST-COVID
My big basket of stocks is GROWWing,
The roaring Bull is my Angel One.
All I have seen is Upstock in Stock Prices,
With Zerodhan going for brokerage,
I don’t mind putting my last 5paisa in the market.
During Covid-19, brokers spent a lot of money to acquire new customers. With client acquisition costs as low as Rs 200 discount brokers expanded the client base by attracting new traders and investors with no prior experience. As of Apr 2024, more than 65% of Indian retail investors are today using discount broker services.