Online brokerages see growth in new investors, trading activity in Mar-June

Online brokerage houses such as Zerodha, Upstox, and 5paisa.com have seen a spurt in the addition of investors and trading activities during the March-June period amid coronavirus pandemic.

Apart from these, Sharekhan by BNP Paribas also witnessed a growth in the onboarding of new clients and trading activities. Interestingly, a substantial number of these new investors are from smaller towns and the average age of such investors is between 25 years and 30 years, according to brokerages.

"Retail investors, after a long time, seem to have come into the markets after a crash, buying large-cap bluechip equity and are seeing substantial returns," said Nikhil Kamath, co-founder, and CIO of Zerodha.

He said the pandemic has created a unique set of circumstances where people are looking at generating new sources of income, and additionally have more time to partake inequities.

Jaideep Arora, the CEO of Sharekhan by BNP Paribas said traders, investors and new entrants are looking at this pandemic situation with both caution and opportunity.

"One of the things we can definitely conclude from this is the return of the retail segment," he added.

Zerodha said it has seen remarkable growth when it comes to opening of new accounts during March to June period. It has seen 100 per cent growth at an average month-on-month basis, and a significant proportion of these are new adopters.

The average ticket size of investment stood about Rs 80,000.

Besides, Upstox said it has on-boarded more than 340,000 customers between March and June, 2020 and an increase of 2 times in trading volume compared to pre-Covid time.

The firm said it has crossed 1 million customer mark in last month and aim to reach 2 million by December 2020, with even deeper penetration in Tier 2-Tier 3 cities.

"These growing numbers represent the trust and confidence that traders and investors are showing in us," said Ravi Kumar, co-founder of Upstox.

Currently, around 80 per cent of Upstox's customer base is from Tier 2& 3 towns including Nashik, Jaipur, Guntur, Patna, Kannur, Tiruvallur and Nainital.

5paise.com said it has seen a significant rise in both volume and investors on its platform. It added 160,000 customers in April-June period. New customers have increased by more than 100 per cent.

The company's customer base is predominantly young (age group of 25-35) and come from Tier II and Tier III markets.

"India was traditionally known as nation with high rate of savings. But in the last 5-7 years our saving as percentage of GDP went down from 37 per cent to 30 per cent. I strongly feel that this pandemic has made people realize the importance of savings and investing. The trend of investing in stocks either directly or through mutual fund will continue for retail investors as there are hardly asset classes left to invest and earn decent returns," said Prakarsh Gagdani, the CEO of 5paisa.com.

New client acquisition in May and June 2020 was up by 54 per cent, Sharekhan by BNP Paribas said. Of the accounts opened in May and June, almost 95 per cent of customers were new to market with no prior capital market experience.

In terms of trading activity, it has seen the average number of daily trades in April-June rising by 30 per cent as compared to preceding three months.

"We have seen quite a number dormant (inactive) customers return to ... this has been even more pronounced during this lockdown period. Since March we have seen almost 20,000 customers return to trade/invest with Sharekhan which is a healthy sign," the company said.

Kamath noted that investors are moving away from small-cap and penny stocks, ignoring SMS tips among others, which generally are a recipe for disaster. This is extremely positive for the market as tipsters typically erode significant investor wealth and often serve an ulterior motive.

Going ahead, he said markets will remain cyclical with different trends dominating over the short term, fundamental research, and buying blue-chip companies that are not levered or expensive, in high growth industries and markets with significant room to grow.