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India's millennials are driving a surge in stock trading during the pandemic


India's youth population is driving a boon in the country's investment landscape as millions have been piling into stock trading during the pandemic. 

Mirroring trends seen in the U.S. and other major economies, millennials in India have been buying up stocks at a steady clip as pay losses, economic woes and increased time at home have spurred the hunt for new income streams.

In the six months since India imposed its first wave of coronavirus lockdowns, CDSL (Central Depositories Services India Ltd) — one of the country's leading securities depositories — saw a near 20% rise in new accounts (known locally as demats), hitting more than 25 million overall last month.

Of the country's new accounts, the vast majority were opened by millennials aged 24 to 39, according to separate data from markets regulator, the Securities and Exchange Board of India.

The pandemic and lack of competing asset classes has accelerated the shift to the equity market.
Ganesh Vasudevan
research director, IDC Financial Insights

The uptick points to young people's efforts to shore up their finances as the pandemic weighs on economic growth and interest rates in the country of 1.3 billion, Ganesh Vasudevan, research director at IDC Financial Insights Asia/Pacific told CNBC Make It. "The pandemic and lack of competing asset classes have accelerated the shift to the equity market."

And it's not just traditional trading services experiencing a boon. 

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India's various and growing online investment platforms have also seen a surge in demand, particularly among younger, less experienced investors, as they lower entry fees and ease access to overseas markets.

Online trading platform Zerodha — India's largest brokerage by client numbers — now claims to handle more daily transactions than the U.S.'s most popular platforms, at 5 million to 7 million orders per day versus Robinhood's reported 4.3 million. Meanwhile, Stockal, a platform that helps Indian investors buy U.S. stocks, saw a 50% jump in millennial investors from April to September as transactions surged 300% to $160 million.

"The ease of opening (a) trading account, seamless mobile platforms and above all availability of cheap internet is further encouraging retail investors to dabble into stock trading," said Vasudevan.

What are people buying?

In India, as elsewhere, technology stocks have emerged as major winners under the pandemic as remote working and social distancing measures have boosted demand for digital services. 

"Tech stocks and ETFs (exchange-traded funds) are seeing increased flows. Tesla is a crowd favorite," said Sitashwa Srivastava, co-founder and CEO of Stockal.

More than a quarter (27%) of Stockal users have traded in the electric vehicle maker, he noted. Other top picks include Microsoft, Apple, Amazon and SaaS (software-as-a-service) companies, according to platforms including Mumbai-headquartered Cube Wealth.

Start while you're young so you have time on your side ... Don't try to time the market or get rich quick.
Satyen Kothari
founder and CEO, Cube Wealth

Yet, demand for established investments also remains strong. 

India's domestic stock market is still the "dominant avenue" for retail investors, according to Vasudevan. Having fallen heavily in March's sell-off, some analysts suggest the country's major indices could be poised for strong gains in the coming months.  

Meanwhile, gold — a historic Indian investment favorite — has seen a surge in demand lately as investors have sought stability amid market volatility. However, the closure of physical gold stores under national lockdowns has prompted many to opt for digital alternatives to the precious metal.

Where are the risks?

A recent lull in global markets spooked some investors and left many wondering whether the months-long rally could be ending.

Stockal co-founder and executive Vinay Bharathwaj said he expects such market swings to continue in the near term, especially in the lead up to the U.S. presidential election, which could reduce the frequency of trading seen in recent months. However, he doesn't expect it to dampen the overall investor appetite.

"I don't think people will go slow on investing. There are more people booking profits today than there were two months ago," he noted.

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Indeed, Cube Wealth's founder and CEO, Satyen Kothari, said investors should not be put off by short-term fluctuations and rather invest for the long term. 

"Even a 20% market bump up or down is only a 2% delta when you are investing for 10 years," said Kothari, referring to markets' ability to weather fluctuations over time. "The market changes by 2% per day on many stocks, so timing the market is impossible."

Instead, he advised new investors to start slow, compile a diversified portfolio made up of different asset classes such as stocks, mutual funds and alternative investments, and grow it gradually over time.

"Start while you're young so you have time on your side. Build a perfect portfolio that's balanced for your life stage, near-term and long-term goals. Don't try to time the market or get rich quick. Wealth creation is a wonderful process where if you pick quality assets the magic of compounding can do wonders over time."

Don't miss: Millennials are piling into stock trading in Asia. Here’s how to make the most of your money

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