A legend goes on. Born in Sawan, saw rain in Bhado and said, Baap re father, never seen such rain in life. Nowadays this proverb seems to be realizing in the stock market. Especially for those who have recently entered the market. Recently means in the last one or two years, that is, after the Corona crisis. The day the lockdown was announced, there was a terrible fall in the stock market. The Mumbai stock market index had closed down nearly 4,000 points and 13 per cent in a single day. Same was the case with Nifty. The panic persisted for a few days. By the beginning of April, the index had fallen nearly 13,000 points to 27,000 from a high of 41,000. It was a horrifying sight for the weak-hearted, but the momentum the market gained after that was such that no one had even imagined. By October last year, the same index had reached a new high of 61,000. That is, at a time when the whole world was facing its biggest challenge, all the industries in India, from big to small, were struggling with great difficulties, when the questions of bread and employment were becoming increasingly serious, at the same time India’s share The market was busy filling its loudest furore.
The effect of this was that many such people in India who had never turned to the stock market, were drawn towards the stock market. The number of registered investors on the Mumbai Stock Exchange has exceeded ten crores. In the year 2020, on an average, four lakh new demat accounts were opened every month. On an average, 12 lakh accounts were opened every month in 2021 and in 2022, so far this count has reached 29 lakh. That is, more than seven times as compared to 2020. So what is behind this train of crores of people coming towards the stock market?
When all the other avenues of earning seem to be drying up and in the midst of that the stock market is going up, defying all the fears, then gradually conquering the fears and fears, a person moves on the path of earning. That’s what happened. More people have entered the market through mutual funds than those who have started investing directly in shares by opening a demat account. This is also a safe method. Common people in India are investing money in the stock market, this is also a good sign, but it can also prove to be very dangerous. Good because in the long run big wealth can be made in the stock market. A sample of this is in front. Foreign investors have sold shares worth about $23 billion in the Indian market in the last seven-eight months. That is, they have withdrawn so much money from the market. Despite the volatility in the market, till March there was complete strength and since April till now there has been a decline of about 11 percent. While the attitude of foreign institutions seems to be completely sell-off. Just a few years ago, such selling used to cause a huge fall in the market, but this time the market has recovered so far, so the reason for this is that the common people of India have invested a lot of their money in the market. According to a report by Morgan Stanley, one of the world’s leading investors, Indian investors may soon overtake foreign institutions in terms of stake in India’s big companies. So far, the largest share of the country’s largest companies has been with these foreign investors. But since 2015, while foreign holdings have fallen by around 1.5 per cent, the share of Indian institutions and small investors has gone up by six per cent.
It is a good sign for any country that its stock market is more dependent on domestic investors than foreign investors. That is why Finance Minister Nirmala Sitharaman has also expressed her gratitude to these new investors in Parliament. But it is important to remember here that more than two thirds of these investors have entered the market for the first time in the last two years and they have never seen any major fall or felt its shock. This is the reason why market experts have been advising caution for a long time and now perhaps the time has come when it will be necessary to revisit this advice. It is not known when this crowd of investors will turn into a stampede if precautions are not taken.
Foreign investors have started selling in the market since April and so far Sensex and Nifty have fallen more than 10 percent. So much is the blow that the buying power of domestic institutions and investors is there. But the biggest reason behind the boom that was going on for the last two years was not the hope that Corona is going and life is getting back on track. Rather, the reason for this was that the governments of most countries of America and Europe were distributing money to their citizens by printing notes. This money was roaming around and fueling the boom in the stock markets of India and other countries. Seeing this boom, how the number of investors in India increased, it is in front. But now the wheel is turning upside down. Inflation is sky high in America and Europe. Instead of distributing money, their central banks are now depositing them back, and the pressure is on foreign investors to pull back their money held in markets around the world. This pressure of rising inflation and interest rates is beginning to be felt equally in India too. The fight in Ukraine is working to turn the problem into a crisis and there is a possibility of corona spreading again in China.
At this time, the biggest challenge for the government, SEBI and all the responsible people of the stock market is how to keep the spirit of the new investors and how to teach them a lesson how to maintain a constant balance between the market volatility and needlessly. Don’t take too much risk. Indeed, this is the time when we should move very carefully in investing.
(These are the author’s own views)