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Vikas Singhania

CEO, TradeSmart

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Will The Millennials And Gen Z Continue To Flock To The Market In 2022?

The phenomenal growth in the client base that the industry has seen over the last two years has a lot to do with the younger generation coming to the party.

The pandemic changed the world in many ways. Apart from a forced lockdown that restricted mobility, the event changed our lifestyle, our habits and made us explore new ways to occupy our minds. Many of us took to reading or watching movies, but the Indian youth decided to explore the stock and crypto markets.

Media reports and our experience show that the GenZ and millennial population discovered markets during the pandemic and took to it like fish to water. Nearly two-thirds of all new account additions have been from clients below the age of 30 who have never bought or sold a share in their life. The phenomenal growth in the client base that the industry has seen over the last two years has a lot to do with the younger generation coming to the party.

Fresh money brings with it a change in sentiment in the market, which we have seen over the last two years. Even as foreign investors have withdrawn from Indian markets, the steady inflow of money from the young participants has not only absorbed the outflow but also resulted in markets touching new heights.

Apart from direct investment, millennials and Gen Z have also been actively investing in mutual funds. Domestic mutual funds' systematic investment has now touched Rs 11,000 crore every month. On an annualised basis, that is more than what foreign investors have been bringing in the country on average.

The best part is that this is just the start:

Out of India’s 1.36 billion population, those investing in markets – direct or through mutual funds is only 3.7 percent. Compare this to 12.7 percent in China and 55 percent in the US and we can see that we are just at the start of the J-curve. Another advantage India has, which the other two countries do not, is the rising youth population.

India is home to a fifth of the world’s youth population and, with an average age of 29, it has one of the youngest populations in the world.

Some months back I remember reading a Bloomberg article that quoted Mark Mobius, a renowned investor who has a very good reading of Chinese markets saying “India could easily equal China’s market cap in the next five to 10 years because going forward, growth in India’s market will probably be faster.”

Increasing broking accounts is not an Indian phenomenon, we have seen a sharp surge globally. In the US, it is more pronounced where such investors have got a name – Robinhood investors.

However, Indian millennials and Gen Z, as per our record and media reports, were measured in their investment approach. Part of it is because Indian markets do not allow leverage in stocks, apart from a handful of them. Apart from the secondary markets, there was some good participation seen in IPO markets.

Equity markets aside, Gen Z and millennials and were active in cryptocurrencies. Indian crypto exchanges have seen a good rise in volume.

So are we likely to see the same trend in the current year?

The initial sign does show that we may see a repeat of the past two years. The conditions that led to millennials coming to the market continue even today. With interest rates remaining low, there are few investment options in front of them.

With the government contemplating legalising the crypto market, we may see the fence sitters trying the asset class.

The younger population is willing to learn and earn fast. They have already seen the benefit of it over the last two years. With the economy picking up, IT companies on a hiring spree, and services companies announcing about increasing their headcounts, we can expect the momentum of Gen Z and millennials joining the markets to continue. One tell-tale sign that is visible to the general public will be the growth in mutual fund SIPs.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house



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