At a time when global stock markets were going through a lean patch, the Indian bourses moved to its all-time high banking on the inflow of investment pushed by rapid investor base expansion. This sudden rise in the number of new investors was facilitated by the emergence of new-gen digital brokers who made the process of investing earlier for the first time or new investors, especially the one’s under the age of 30, reported Bloomberg. The CEO of India’s largest online broker Zerodha, Nithin Kamath estimates that his platform serves about 10 to 20 million daily orders that continue to see a spike with new-gen investors.
While the stock market has gone through some correction in recent times, Indian retail investors have continued their buying streak even amidst the rising risks of volatility.
Encouraged by the new investment from retail investors and RBI’s policies to increase the cash flow, India’s benchmark S&P BSE Sensex Index rose to over 20 per cent in the first 10 months of 2021 touched its all-time high in October. However, it thereafter took a plunge and is currently trading at an average of nearly 10 per cent less than its all-time high.
But Kamath feels that young investors have little to lose as for them, there’s still time to learn about the market. “They have a long path to future earnings. You make mistakes, you learn, and you bounce back,” Kamath told Bloomberg.
The predictions of volatility in the market gained more validity as the Indian markets on Monday opened to a rude shock for the trading week. Even strong shares across sectors recorded a sharp plunge as market benchmarks NIFTY and Sensex fell over 3 per cent before showing some improvement. Sensex dropped over 1700 points whereas Nifty fell over 550 points.
The panic in the market was seen as a global slowdown as several markets recorded a dip amidst the rising threat of COVID-19’s new variant Omicron.
A few days ago, Kamath, in a LinkedIn post, expressed concerns over the rapid decline in stock prices of new-age tech companies. The Zerodha CEO advised new-gen tech firms to prioritise lower long-term volatility over short terms gains. He argued that the net worth of the core teams in most new-age businesses was attached to ESOPs and the more the company tried to talk up its share value, the chances of large drops & volatility in the long term increased.
Kamath added that when the company valuation is based on what they “project, counterintuitively, it may be a good idea to talk down than talking up the price.” He suggested that companies should strive for lower volatility in their shares and that would also be great for new investors.
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