In the recent bear run in the Indian stock market, the number of retail investors in Uttar Pradesh has declined by almost 50 per cent.
Experiencing a loss in the market due to the recent downfall, retail investors and high net-worth individuals (HNIs) have withdrawn investments from the market.
Uttar Pradesh has close to 500,000 dematerialised account (demat) holders.
“We have seen almost 50 per cent decline in the opening of demat accounts in the past 5-6 months,” Mridul Verma, associate vice-president, ShareKhan, Lucknow, told Business Standard.
The company at present has about 40,000 demat account holders in the state.
“We used to open about 500 demat accounts per month previously, and that has come down to 250 since the markets started going down,” Verma said.
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Even the pan-Indian overall market volume, which used to be almost Rs 100,000 crore per day, had come down to Rs 50,000 crore, he said.
“During the latest market slowdown, we have witnessed a decline in retail participation. Last year, overall demat account growth was 30 per cent and this year it has gone down to 15-18 per cent,” said Nikhil Daxini, executive director (sales & marketing), Angel Broking.
“The volumes have dropped drastically,” said Sanjive Gupta, regional director, Systematix Shares and Stocks (I) Ltd.
Experts say instead of investing in accordance with trends, investors should hunt for stocks of fundamentally sound companies that generally perform steadily.
“Education is a must before entering this trade, else one cannot avoid losses,” Verma said.
He further cited a number of reasons for the downfall in the market.
Economic recession in the US, crude oil fluctuations, the political situation and recent domestic inflationary trends are major factors affecting the stocks.
“The galloping inflation and lower industrial growth have resulted in the downfall of the market,” Gupta said.
“It is time to invest for the long term. Still we see a shortage of investors mainly because of decrease in investing capacity,” Daxini said.
The slump in the stock market has not only resulted in a lower participation by investors, but adversely affected the broking companies as well.
“Some of the companies are reducing staff to cope with losses,” Verma said.
There are about 20 top stockbroking companies in Lucknow, including Sharekhan, Motilal Oswal, Karvy, Anandrathi, and Angel Broking.
“The golden rule is to look out for blue-chip companies and invest for the long term. Only then can the investors expect good returns,” Verma said.
Experts say the downtrend will continue for another year.
“Over a period of time, the number of knowledgeable investors has gone up. They are waiting for the market to settle down and show recovery. Retail participation is very much expected once the market gives signs of stability,” said Daxini.