At a time when global equity markets were going through a lean period, Indian stocks hit their all-time highs, thanks to investment inflows fueled by a rapid expansion of the investor base. This sudden surge in the number of new investors was made possible by the emergence of new-generation digital brokers who were making the process of investing for the first time before or new investors, especially those under the age of 30, Bloomberg reported. 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 among new-gen investors.
While the stock market has seen some correction in recent times, Indian retail investors have continued their buy streak, even amid mounting risks of volatility.
Buoyed by new investment from retail investors and RBI’s policy of increasing cash flow, the Indian benchmark S&P BSE Sensex Index rose to over 20 percent in the first 10 months of 2021, reaching its all-time high in October. After that, however, it took a plunge and is currently trading on average nearly 10 percent less than its all-time high.
But Kamath believes that young investors have little to lose as there is still time to get to know the market. “They have a long way to go to future earnings. You make mistakes, you learn and you recover,” Kamath told Bloomberg.
Forecasts of market volatility gained traction as Indian markets opened for a rough shock to the trading week on Monday. Even strong stocks across all sectors fell sharply as market benchmarks NIFTY and Sensex fell more than 3 percent before showing some improvement. Sensex dropped more than 1,700 points, while Nifty lost more than 550 points.
The market panic was seen as a global slowdown as several markets plunged amid the mounting threat from the new Omicron variant of COVID-19.
A few days ago, Kamath expressed concern in a LinkedIn message about the rapid decline in the share prices of new-age tech companies. Zerodha’s CEO advised new tech companies to prioritize lower long-term volatility over short-term gains. He argued that the net worth of the core teams in most new-age companies was tied to ESOPs and the more the company tried to increase its stock value, the more likely it was for major declines and long-term volatility.
Kamath added that when the company’s valuation is based on what they project “counter-intuitively, it might be a good idea to talk down rather than talk price.” He suggested that companies should aim for lower volatility in their stocks and that would be great for new investors as well.
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