Retail stock investments will pay off only if investors stay invested

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₹63.8 billion. This jumped to ₹385.3 billion and ₹486.1 billion in 2020-21 and 2021-22, respectively. In 2022-23, it stood at ₹230.4 billion.

A similar jump can be seen in the net investment in equity mutual funds, which invest a bulk of the money they collect in stocks. Third, much of this jump is possibly a function of the times we are in. In the last few years, opening a demat account has become much easier than was the case before.

Also, the user-interfaces of some of the newer stock brokerages are much friendlier than those of the legacy stock brokerages backed by banks. The entire process of buying and selling stocks is now less intimidating than it used to be. Further, interest rates fell sharply in the aftermath of covid, pushing people towards investing in stocks, in search of higher returns.

Also, the work-from- home phenomenon made it easier for people to trade in stocks, something that may not have been possible if they continued going to their offices regularly. Fourth, the search for higher returns has led to stock markets rallying big time, attracting many newer investors. This explains why the flow of retail money into stocks was very high in 2021-22, when the price-to-earnings ratio of the 30 stocks that make up the BSE Sensex, India’s premier stock market index, stood 29.5, the highest it has ever been, looking at data which goes back to as far back as 1998-99.

The net investment into equity mutual funds in 2021-22 stood at ₹1,644 billion, the highest it has ever been. Clearly, many retail investors bought stocks—directly and indirectly—when prices were at their peak. Now, hopefully they will stay invested for a while to be able to draw decent returns from their investment.