India embraces equity investing as local market skyrockets
NEW DELHI — Indian stocks have risen more than any other major market in the world this year, prompting millions of local investors to invest their savings in stocks, further boosting the market.
Indian markets were closed on Friday for a public holiday. On Thursday, the Indian benchmark of 30 S&P BSE Sensex stocks was up 28% this year and the Nifty 50 index was up 31%, with both ending at record closing highs. In contrast, the broader MSCI Emerging Markets Index fell around 1.9% over the same period, while the S&P 500 gained around 18%.
The bull market is accelerating a decade-long shift in the way Indian families, who are historically big savers, invest. Household savings “are moving from cash, gold and real estate to market instruments, including debt and stocks,” said Nilesh Shah, managing director of Kotak Mahindra Asset Management Co., a fund manager.
As part of this transition, many Indian individual investors are using mutual funds for the first time. Many also venture directly into the stock market to place bets on individual stocks, often using smartphone trading apps.
Two new mutual funds launched in June and August raised the equivalent of about $ 1.9 billion and $ 1.3 billion, respectively. Both rank among the top five largest new fund offerings in Indian history, according to data from Value Research India Pvt. One is an equity fund; the other has the option of buying both stocks and bonds, but intends to invest primarily in stocks.
Raj Kumar Sarath Chandra Bose, 40, bought his first equity mutual funds in September, based on suggestions from investor groups on Facebook and Instagram.
In the past, he said he invested in bank term deposits and postal deposits, but now they carry low interest rates. Mr. Bose, from a small town in the southern state of Tamil Nadu, began by investing 26,000 rupees, the equivalent of about $ 347, per month in two equity funds.
“After 10 years, it will be useful for the education of my daughters,” Mr. Bose said.
Over the past decade, millions of investors like Mr. Bose have invested in equity and bond funds through Systematic Investment Plans, or SIPs. These plans periodically take money from bank accounts and deposit the money into a fund.
SIP’s monthly collections hit a record high of $ 1.4 billion in September, according to the Association of Mutual Funds in India. The number of mutual fund investors has doubled over the past four years to 24 million in June, according to the association.
More broadly, local investors have bought net $ 9 billion in equity-focused mutual funds since March, after months of selling their holdings.
Meanwhile, online trading apps allowing individuals to buy and sell individual stocks as well as funds have attracted millions of new investors to the market.
Between April and July, around 5.1 million new investors were listed on the National Stock Exchange of India Ltd., one of the country’s two major stock exchanges. This compares to the 2 million new registrations in the same period a year earlier.
Mutual funds were previously sold in small towns primarily through distributors. But as fast mobile broadband smartphones have spread, small investors no longer need to rely on agents to buy stocks and funds.
“The mobile phone basically takes the market into their hands, which makes it easier for them to invest,” said Deven Choksey, managing director of brokerage firm KRChoksey Shares and Securities Pvt.
The rise of the market is based on growing confidence in India’s growth prospects, as the economy has reopened and recovered from a devastating wave of the Covid-19 pandemic in April and may.
At least half of India’s 1.4 billion people have received at least one dose of a Covid-19 vaccine and around 19% are now fully vaccinated. The Indian economy is expected to grow 9.3% in the current fiscal year, which ends next March, estimates Moody’s Investors Service.
“Covid is history from a markets perspective,” said Prashant Khemka, founder of Singapore-based White Oak Capital Group, which manages $ 5.5 billion in Indian stocks.
Individuals and institutions in India are also turning to equities due to the “low interest rate regime in effect and unattractive returns on traditional asset classes like term deposits, gold, real estate. Said Gautam Duggad, head of research at brokerage firm Motilal Oswal. Institutional titles.
The booming market is also encouraging a boom in initial public offerings, including some of fast-growing tech startups. Oravel Stays Ltd., which manages the Oyo hotel brand and which is almost half-owned by SoftBank Group Body
Vision Fund, recently filed a prospectus for a $ 1.1 billion IPO.
The wave of domestic buying is strengthening Indian mutual funds and insurers, which in turn now hold a larger share of the broader stock market. Indian institutions held around 27% of the free float of companies listed on the National Stock Exchange at the end of June, up from 22% seven years earlier, according to Prime Database, a research firm in New Delhi.
India is like the United States in the 1960s, when mutual funds, insurers and pension funds quickly accumulated assets and invested them in stocks and bonds, said Mr. Choksey, the director. brokerage.
He said only a small portion of India’s population has so far invested in the stock market.
“We have only just started the journey and we will only be able to reach higher numbers afterwards,” he said.
Write to Shefali Anand at email@example.com
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