Despite a struggling economy, what is drawing people to the stock markets?

 Brokerages are seeing a boom of sorts when it comes to opening of new investor accounts. In the past four months, more than 4 million new accounts have been opened, taking the total to 44.3 million. Despite economic growth taking a hit, widespread job losses, and salary cuts, what is it that is driving people to the stock markets? We explore the reasons:

Ease of account opening, zero charges

Gone are the days when opening trading and dematerialised account used to take 70 signatures. Now an investor can open an account sitting at home thanks to e-KYC and savvy brokerages. A simple Google search leads to a slew of brokerages vying for your attention with offers such as zero-broking fees and no account opening charges. Some even promise to allow you to begin trading in just five minutes.

Market rally

The new account openings have been underpinned by a sharp rally in the stock markets. From the March lows, the benchmark Sensex and the Nifty have rebounded more than 40 per cent. Several stocks in the broader markets are doubling in a matter of days. After the March selloff, the market direction has largely been upwards thanks to the aggressive stimulus measures taken by the global central banks, particularly the US Federal Reserve. This means, majority of whom who have entered the market post March, there is a high probability that they made handsome gains. This has prompted then to invest more and nudge others also to open trading accounts.
Improved mobile apps

Fast internet and smartphones have become ubiquitous. Brokerages have been quick to tap into this opportunity. Mobile trading apps have become user-friendly and intuitive. The new-age apps have led to the gamification of stock market trading. It has become an in-thing for investors to post snapshots of the mark-to-market gains they make on their investments. Also, many apps show real-time gains an investor makes. This gives many the adrenaline rush to increase the wager, without necessarily giving too much importance to the fundamentals of the stock. Experts say people across age groups who are equipped to use a smartphone are being drawn to trading.

Work from home

One often-cited reason for the traction in new account openings is the ‘work from home’ phenomenon. Staying at home has given people more time, which many are using to trade with the intention of making a quick buck. This is also reflecting in the numbers. In July, the share of non-institutional investors in trading volumes surged to 72 per cent in July—highest in more than a decade. Experts say this data point suggest that small investors are not just opening new accounts but are actively trading.

Access to stock tips

Now this is the potentially most risky element but a driver nevertheless. Whatsapp, Telegram and other social media platforms are flooded with groups that dole out investment tips every second. Joining many of these groups is free and a lot of young generation is seen seeking advice from this medium. “When you have an active trading account all you need is actionable tips. Which groups on Telegram provide. Also, as the market has been buzzing, most of the tips are generating returns. The bubble is intact but is only getting larger,” says a market expert.