Indian Market Witnesses Surge In New Investors Despite Global Weakness

In June 2023, despite weak global cues, the Indian market experienced a strong influx of new investors, with the domestic market sentiment remaining positive.

According to a Moneycontrol report, citing Central Depository Services Ltd data, the number of demat accounts opened in June exceeded 2.36 million, marking the highest account opening rate since May 2022.

This is compared to 2.1 million additions in the previous month and 2.3 million a year ago. The total demat tally has now surpassed 120.51 million, representing a 2 per cent increase from the previous month and a 24.41 per cent increase from the previous year.

The robust economic outlook of India has led to a robust capital inflow by overseas investors, resulting in record-high domestic market benchmarks.

While major economies such as the US, UK, China, and many European countries are facing macroeconomic challenges, India's macro situation is comparatively better.

This instils confidence in investors that the Indian market will provide healthy returns compared to its global peers.

During market rallies, there is often a surge in new demat account openings, as highlighted by V K Vijayakumar, chief investment strategist at Geojit Financial Services.

Vijaykumar said, "This direct correlation between new demat account openings and market rallies holds good during the ongoing rally too. The sharp 15 per cent rise in the Nifty from the March lows and the news and stories surrounding the consequent wealth creation are attracting new investors. This trend will continue as long as the market remains resilient."

Vijaykumar further added, "There is a negative dimension to this retail exuberance. The new investors normally chase low-grade small-caps which slowly run into bubble territory. There are signs of this happening now. Seasoned investors normally take this as a sign of caution."

The domestic market has seen a bullish sentiment among retail investors.

According to data from Bombay Stock Exchange (BSE), the number of registered investors on BSE has increased by nearly 24 per cent year-on-year.

This indicates the growing interest and participation of retail investors in the market. The Indian market is receiving positive feedback from brokerage firms and analysts.

The optimism surrounding the market is based on various factors, including the ongoing rally, the rise in new demat account openings, and the increased participation of retail investors. This positive sentiment bodes well for the future of the Indian market.

According to a report from capital market group CLSA on 6 July, the Nifty performed exceptionally well during the April-June quarter, surpassing both the emerging markets and Asia ex-Japan benchmarks to become the fourth best-performing market in the world.

CLSA stated, "Nifty FY24 and FY25 EPS (earnings per share) was cut by one per cent and 1.4 per cent, respectively, during the quarter but India is still expected to be the highest earnings growth market. Limiting further cuts in the upcoming earnings season will be important."

CLSA's proprietary India Bull-Bear Index indicated a significant shift in investor sentiment. From a bearish reading of 8.2 per cent in mid-March 2023, the index swung to an extremely bullish reading of 95.9 per cent after the Nifty rallied by 14.5 per cent in just three months.