MUMBAI, India — India's stock market, once a soaring success story, is now headed for its worst month in years, with over $1 trillion wiped out from its market value. Despite the volatility, retail investors in the world's most populous country continue to pour money into the market, driven by a surge in online trading platforms and a growing middle class seeking higher returns.
The number of trading accounts in India has grown fourfold in the last five years, nearing 200 million accounts, with individual investors and mutual funds now owning roughly 18% of the market. This boom in retail participation has surpassed the share of foreign investors for the first time since 2006, with equity assets under management growing more than four times in the same period.
Experts liken the trend to the U.S. in the 1980s and 1990s, when the introduction of 401(k) retirement plans and desktop internet helped spread knowledge about investments to an eager American population. In India, the widespread adoption of smartphones has enabled people to access the internet, learn about investing, and start trading with ease.
The introduction of electronic know-your-customer (eKYC) protocols has also simplified the account-opening process, allowing new investors to register and start trading with as little as 100 rupees (approximately $1.30). Apps like Zerodha have contributed to the surge in signups, with many young investors like 23-year-old Joseph taking the plunge.
"I'm not worried at all about India's current market downturn," Joseph said. "In fact, I see it as a very good opportunity." Joseph, who started investing with his pocket money in college, now has around 90% of his total assets in the stock market, with a long-term investment strategy focused on companies he understands.
However, regulators are growing concerned about the risks associated with this boom, particularly the rise of scams targeting fresh investors. The Securities and Exchange Board of India (SEBI) has imposed rules to limit speculative trading, but the market remains volatile, with foreign investors selling over $15 billion worth of stocks in recent months.
As India's economic growth is expected to hit a four-year low, the rupee has slid to record lows against the dollar, and earnings growth is likely to remain muted. Despite these challenges, many investors remain bullish on India's long-term potential, but regulators face an increasingly difficult task in shielding markets from rising economic uncertainty.
