The dominance of domestic investors in the stock market is increasing rapidly. Apart from big cities like Delhi, Mumbai, Kolkata, Chennai, Bengaluru, cities like Jaipur, Indore, Rajkot, Pune, Hyderabad, Ahmedabad, Patna etc. are also becoming strongholds of domestic investors. According to the data of Bombay Stock Exchange and National Stock Exchange, the number of domestic investors has increased the most in Bihar, Uttar Pradesh, West Bengal, Madhya Pradesh and Rajasthan on an annual basis. Bihar has come in the top 10 states in terms of investing in the stock market. After Maharashtra in the list, Uttar Pradesh secures the second position with 1.96 crore investors.
According to the data of National Stock Exchange, in May 2024, 1.93 lakh new investors opened Demat account in Delhi and 71.5 thousand in Mumbai. At the same time, the number of investors opening Demat accounts in Bengaluru was 25.8 thousand, 25.5 thousand in Pune, 22.8 thousand in Surat, 21.7 thousand in Ahmedabad, 19.9 thousand in Jaipur and 14.1 thousand in Nagpur. According to the data of the National Stock Exchange, the number of investors investing in the stock market on an annual basis increased the most in Bihar by 49.40 percent in the calendar year 2023, including which today a total of 71.9 lakh investors of Bihar are investing in the stock market, while Uttar Pradesh stood second with an increase of 47.80 percent and 1.96 crore investors are associated with the stock market there. At the same time, West Bengal is at the third place with an increase of 39.10 percent and 1.01 crore investors are associated with the stock market there.
Other states, for example, Maharashtra has 3.34 crore investors and the number of new investors increased by 25.70 percent year-on-year in 2023. Gujarat has 1.67 crore investors investing in the stock market and the number of investors increased by 26.60 percent year-on-year in 2023. Rajasthan has 1.07 crore investors and the number of investors increased by 37.60 percent year-on-year in 2023. Karnataka has 96.2 lakh investors and the number of investors increased by 28.90 percent year-on-year in 2023. Madhya Pradesh has 94.0 lakh investors and the number of investors increased by 37.70 percent year-on-year in 2023. The number of investors in Tamil Nadu is 86.6 lakh and on an annual basis, the number of investors there has increased by 25.60 percent in 2023.
Investors' investment in Systematic Investment Plan (SIP) in India has increased two and a half times from Rs 8,183 crore to Rs 20,904 crore. Apart from villages and towns, the trend of investing in SIP has increased in small cities as well these days. People are giving preference to investing in mutual funds and stock market instead of traditional investments, due to which banks are facing a shortage of deposits.
The analysis also shows that the number of new investors has not increased rapidly in major urban areas or metros. At the same time, there has been a significant increase in the number of investors in small cities. With these investors joining the stock market, investment in the country has increased and dependence on foreign investment has reduced. Most new investors are investing in Futures and Options (F&O). However, trading in it is risky, as their valuation is very high, but investors are doing this in the desire to get money quickly.
In fact, in recent years, the desire to earn money as soon as possible has increased among the youth. The Indian economy remained strong during the Corona epidemic as compared to the developed countries of the world, due to which the Sensex and Nifty also remained bullish and the investor kept earning. Due to this, the number of people opening Demat accounts increased during the Corona period and after that. According to a report by the Securities and Exchange Board of India (SEBI), 1 crore 7 lakh Demat accounts were opened during April 2020 to January 2021, because buying and selling in the stock market can be done only through a Demat account. By March 2024, the total number of Demat accounts in India reached a new high of 15 crore 10 lakh. In March 2024 alone, about 30 lakh new Demat accounts were opened.
Due to the change in the traditional investment pattern in the country, there is a shortage of deposits in banks at present. In this regard, banks have made a double mistake in the matter of deposits. First, they stopped running attractive schemes to increase deposits and second, bank deposits started being used to increase mutual fund and insurance business. Bank employees started luring customers with high returns in mutual funds and insurance. Due to this, customers started investing in mutual funds and insurance by withdrawing from term and savings accounts. Over time, to collect maximum tax or increase revenue collection, the government made the interest on savings and recurring deposits taxable and due to the availability of cheap capital in the initial period, the interest rate on term deposits was significantly reduced by the banks, due to which customers started avoiding investing in bank deposit schemes.
One reason for the deposit problem is that banks set aside a portion of the deposits collected for regulatory requirements, such as cash reserve ratio (CRR) and statutory liquidity ratio (SLR), which has reduced the lendable amount. In recent quarters, banks used their surplus SLR holdings to accelerate loan growth amid slow deposit growth, which led to a reduction in the SLR buffer and banks faced the challenge of balancing profitability as well as deposit rate hikes.
Recently Bloomberg conducted a survey on the increasing number of new investors in the stock market, according to which the Indian stock market can give higher returns than the US in the second half of the current calendar year. Not only this, the survey also said that investing in the Indian stock market can give better returns than Japan and China in Asia. Two-thirds of the investors surveyed believe that the Asian market will give returns around 10 percent by the end of this year. The Indian market will remain safe from the negative effects of the ongoing tension between the US and China or the global geopolitical crisis. Asian equities will outperform US stocks due to Fed rate cuts and cheap borrowing. According to a Bloomberg survey, the stock market in the country will remain in a booming condition and corporate profits will also improve in the coming days, which will also lead to a boom in foreign investment.
Since 2014, the Indian economy is continuously getting stronger, due to which investors in the stock market and mutual funds are getting attractive returns. Due to this, people are avoiding depositing their capital in the bank and are giving priority to investing in the stock market. Therefore, the number of investors in the stock market is continuously increasing.
(Views are personal)