The financial year 2020-2021 saw the opening of the highest number of Demat accounts in a single year. More than 14 million accounts were opened between 1 April, 2020 and 31 March, 2021. This figure is thrice the number of accounts opened in 2019-20, which, as per a recent report in The Hindu, was around 4.9 million.
It further reported that the majority of new accounts were opened by the people of the age group of 18–35 years.
The financial year 2020-2021 saw a nationwide lockdown. The world was facing something unprecedented. There was a mass exodus from metro cities to smaller towns. Those who were well-off managed a mode of transport and some unlucky ones died while walking back to their homes in search of food and safety.
Markets were closed, offices were shut down and there was nothing except some date and some ever-changing directives about “who can go out” and “who cannot”. Spending on consumption and other casual expenses now required a second thought. And the tussle with China at the LAC only made the situation worse.
Despite all the above situations, BSE SENSEX continued its bullish run. It rose from 29,505 points on 1 April, 2020 to 49,509 points on 31 March, 2021. A gain of 20,000 points in a single financial year, that too when the country was facing an extraordinary economic contraction.
The rise was mainly because of two reasons. First, the market had already crashed from 41,500 points in January 2020 to 29,468 on 31 March, 2020. It was a fall of 12,000 points and the big bulls of the market bought some really good stocks at an extraordinary discount, raising the index.
Second, the inertia of the rising market pulled lakhs of first-time investors to Dalal Street. Most of them were saving a good amount of money due to the lockdown. Stocks were giving extraordinary returns due to earlier fall in their prices. Additionally, the positive word of mouth brought even more investors to the market.
The discount brokers like Paytm Money, Zerodha, Groww, etc., that provided for paperless account opening, mainly through video KYC, only facilitated the opening of more Demat accounts.
Most first-time investors depend on YouTube or someone they know to understand the basics of the stock market. But in reality, there are only two general rules of making money in the stock market. First, buy when everyone else is selling. Second, take the risk, as 90% of the traders initially lose money in the market.
Traders and investors are different people. An investor buys a stock after paying its full price. They then sell it as per their will. This is known as delivery. On the other hand, a trader is allowed to buy stocks just by paying 10–15 % of the stock price. But they must sell their stock or pay its full price before 3 p.m. on the same day. This is known as intraday.
Some brokers also provide an option known as position. Here you pay 25% of the share price and sell it between a period of 3 to 5 days.
Most of the new investors rely on their savings or their parents’ income to fund their stocks. So, knowing which stock will make money becomes even more important. This valuable piece of information in the world of the stock market is called a tip.
Some brokers like SBICAP Securities, who charge for their brokerage as a percentage of the transaction, provide these tips. Yet, most people rely on groups on Telegram or, again, YouTube channels for the “tips”.
Above mentioned delivery or simply buying and holding stocks is a less risky option than intraday trading. An unreasonably high appetite for risk has washed away the wealth of many ace players along with many new ones in the stock market. Due to this fear, many people have been sceptical about this space.
Raghav (24), a first-time investor and a journalism student, has a strategy of investing a part of his pocket money in blue-chip stocks. He says, “I have a strategy of investing and forgetting about it then. When I start understanding the dynamics of the market, maybe then I will try my hands at trading.”
Deepak (27), an IT professional, has decreased his savings in the Recurring Deposit. “I believe that the interest rates are so less that I will have no real gains on withdrawal. So, I just invest a part of my savings in stocks after proper study of the investment horizon of those stocks,” he says with a proud smirk on his face.
Anand (28), a businessman in the hardware and sanitary industry, finds the stock market an option of income when the market is down. He has a high appetite for risk. When asked to comment, he said, “My strategy is of keeping 90% value as the investment and using rest of the 10% in aggressive trading. I believe that losses are a part of the business. And careful picking and proper market analysis are the tools to make good money with intraday trading.”
Today, young adults are more informed about the stock market. They are trying to understand the associated risk, and thus, planning to stick with their investment plans. Most of them, and perhaps rightly so, want to make a fortune for themselves and their family with the help of proper financial management.