Indian youth are tapping into wealth creation opportunities in the market

Over the last few weeks, Trending Now has been bringing insights from industry leaders on how their organisations are geared up to seize the opportunities in 2022, break through the Covid disruptions and find growth and remain resilient.

In conversation with Adgully, Harsh Jain, Co-founder & COO, Groww, speaks about the trends that will dominate the investment sector in 2022, the road to recovery in the post-pandemic times and more.

What are the trends that you expect to dominate in your sector?
India’s investment sector has undergone a significant transformation over the last two years. The sector witnessed a boom in retail investing fueled by retail investors from across the country including metros, smaller towns and other regions.
On Groww’s platform, first-time investors comprising mostly the Gen Z (18-24 years) and Gen Y (25-30 years) audience continue to lead the chart. India’s youth is increasingly becoming aware of the need to build a stable financial future. This trend is likely to continue.

What are the challenges and new opportunities that you see emerging in the year ahead?

In the last two years, while investors beyond metros have shown promise in making sound financial investments, there still exist certain gaps impeding large-scale progress.

Many new investors have realised the wealth creation opportunities in the market. They actively look for trustworthy and reliable resources to understand investing. To help these investors, the main area of focus should be on making financial literacy programs accessible across all regions. Platforms including social media like YouTube and Instagram can be leveraged for the same.

How is this year’s turnout expected to be in this sector as compared to the last two years?

The participation of retail investors in the securities markets has increased in the last two years. This is evident with the surge in the number of demat account holders.

According to data from ICRA, the financial year of 2022 (FY22) has witnessed a net addition of more than 2.83 million demat accounts per month. This is more than double that of FY21. The surge in retail investor participation was particularly noticeable during the year 2020.

As per NSE data, retail equity ownership has grown by 9% in the top 1,500+ companies listed on the NSE since 2020. The number of retail investors increased by around 10.4 million in the latter half of that year. Participation from Tier 2 and Tier 3 markets has also seen tremendous involvement marking a growth era without geographical limitations.

How strong the recovery will be, what are the changes that have happened in this sector in the last two years?

The strong bounce-back of the equities market after a correction in March of 2020 has made retail investors optimistic about investments.

Notably, the newly added tribe of retail investors are tech-savvy and prefer investing through online platforms and mobile apps. A study by NSE shows a surge in internet-based trading by around 70% between FY20 and FY21. Equity mutual funds have been a popular preference among individual investors. According to the Economic Survey, the share in these funds grew by 16% between February 2020 and February 2021. Individual investors now account for 44.7% of the equity cash segment while in FY17 the retail segment was at 36%.

How strong will this sector’s growth be compared to the last two years as well as the pre-Covid period?

As per NSE data, in December 2021 there were 3.1 crore active accounts, and currently that number stands at 3.6 crore. This indicates that the rate at which the industry is currently growing is almost equal to the growth witnessed last year.

In 2022, the sector’s growth will depend on macro and microeconomic factors. For instance, markets all over the world witnessed a dip in February following the Russia-Ukraine crisis. Other factors including crude oil price volatility, and the risk of rising interest rates globally could make an impact on the market. Additionally, there are specific countries/ regions/ states related factors to be taken into consideration as well.

Nevertheless, if all factors remain in favour we can see an even bigger or equivalent growth than that of last year.