20% of households are channeling savings into capital markets: Eco survey

Annual net SIP flows have doubled in the last three years, from Rs 0.96 lakh crore in FY21 to Rs 2 lakh crore in FY24

Data paints a clear picture of the retail investor boom in India. In FY24, individual investors accounted for a whopping 35.9 per cent of the equity cash segment turnover, a significant jump compared to previous years. This enthusiasm is further reflected in the near tripling of registered investors with the National Stock Exchange (NSE) since March 2020, reaching  92 million by March 2024. This translates to approximately 20% of Indian households potentially channeling their savings into the financial market, a remarkable shift in financial behavior.

"The individual investor's share in the equity cash segment turnover was at 35.9 per cent in FY24. The number of demat accounts with both depositories rose from 1,145 lakh in FY23 to 1,514 lakh in FY24. The impact of this influx of individual investors in the market is also reflected in new investor registrations with the exchanges, their share in total traded value, net investments, and ownership in the listed companies," said the Economic Survey, that was tabled on Monday. 

 

While direct trading is gaining traction, retail participation through mutual funds remains a dominant force. FY24 witnessed a phenomenal year for mutual funds, with Assets Under Management (AUM) registering a 35% YoY growth to a staggering Rs 53.4 lakh crore. This phenomenal rise can be attributed partly to mark-to-market (MTM) gains and the overall expansion of the mutual fund industry. Additionally, the total number of mutual fund folios (investor accounts) jumped from 14.6 crore at the end of FY23 to 17.8 crore at the end of FY24, showcasing a broader investor base.

The growing popularity of Systematic Investment Plans (SIPs) within the mutual fund space is another indicator of a maturing retail investor base. SIPs allow investors to invest a fixed amount regularly. Annual net SIP flows have doubled in the past three years, surging from Rs 10.96 lakh crore in FY21 to a commendable Rs 2 lakh crore in FY24.  

The total SIP Asset Under Management (AUM) accounts for approximately 35% of the AUM for equity-oriented schemes in the mutual fund industry. Consequently, ownership of Indian equities by mutual funds climbed to an impressive 9.2% as of December 31, 2023, compared to 7.7% just two years prior.

"The MF segment presently has about 8.4 crore systematic investment plan (SIP) accounts through which investors regularly invest in schemes," noted the Economic Survey. 

Several factors have contributed to this influx of retail investors into the Indian stock market:

• Online platforms and mobile apps have significantly simplified investment processes. 
• User-friendly interfaces and readily available information have made investing more accessible and convenient for a broader audience.
• The government's focus on financial inclusion initiatives and the growth of digital infrastructure have facilitated investment access for individuals in smaller towns and cities.
• The widespread adoption of smartphones has been a game-changer, allowing individuals to monitor markets, research investments, and conduct transactions readily.
• The emergence of low-cost brokerages has made direct stock market participation more affordable, especially for younger investors.
• With traditional asset classes like real estate and gold offering lower returns, individuals are seeking alternative avenues to generate income.