How India's stock market lost 5mn traders in 9 months
What's the story
The pandemic-induced remote work was a blessing for many. Several Indians, especially the youth, took this chance to try their luck in the stock market.
There was a substantial increase in demat accounts during that time. However, the latest data from the National Stock Exchange (NSE) shows a steep fall in the exchange's active client list.
Let's look at what led to this.
Fall
NSE currently has 3.27 crore active clients
In March 2022, the NSE had 3.6 crore active clients. From March to June, the number of active clients increased to 3.8 crore.
Since then, the exchange's active clients have been steadily declining. Based on the latest data, the number of active clients on NSE in March 2023 is 3.27 crore.
From June 2022 to March 2023, NSE's active clients declined by 53 lakhs.
WFH
It was easy to trade during work-from-home
The decline in active traders can be attributed to various factors. The chief among them is the gradual stoppage of work-from-home.
Work-from-home during COVID-related lockdowns made trading fashionable among the youth. They could easily buy/sell in the market during work hours without any care for what their bosses might think.
With companies calling employees back to offices, many traders lost that freedom.
Inexperienced
Many understood trading is not as easy as it looks
Many who wanted to try their hand at trading during the pandemic boom dreamt of becoming rich overnight. The constantly bullish market during that time added to their hopes.
However, the sideways-to-downward trend in the market in the last one-and-a-half years has shown them that trading and investing are not as easy as they seem.
Many have stopped trading due to mounting losses.
Inflow
Retail inflows in FY23 were the lowest in 3 years
While a reality check from the market checked the excitement of many new traders, other factors also contributed.
Compared to FY21 and FY22, the retail inflows in FY23 were considerably low. In FY22, it was Rs. 1.65 lakh crore, whereas it was only Rs. 49,200 crore in FY23.
Similarly, the average daily turnover in the cash market has also fallen.
Other assets
Investors are attracted by fixed-income investments and alternative asset classes
Another factor that is luring retail investors away from Dalal Street is the growing attractiveness of fixed-income investments. They provide investors with a stable and low-risk alternative.
The rising interest in other asset classes, including cryptocurrencies and real estate, is also behind the decline in active clients.
Many experts see the decline as a cyclical trend that is typical of the Indian market.