Reigning in Finfluencers amidst Increased Retail Market Participation

The absolute number of investors in India is higher compared to mature markets like U.S, China and others, while the per capita figures are still lower indicating enough headroom for growth. Younger generation in age group of 21 to 35 years are leading this wave of new investors. This massive growth in retail participation is multidimensional consisting of Economic, Structural and Behavioural drivers.

- Jyotirmoy Mukherjee

The assets under management (AUM) of Indian Mutual Fund industry has witnessed a six-fold increase in the past 10 years (64.9tn in July 2024 compared to Rs 10tn in July-2014). As per Economic Survey 2023-24 there are 9.5 crores individual investors having Rs 64tn invested directly or indirectly in the financial markets. (Rs 36 tn in direct equities and Rs 28tn through mutual funds). Consider the case of Mutual fund accounts, 91% is accounted for by retail investors. The absolute number of investors in India is higher compared to mature markets like U.S, China and others, while the per capita figures are still lower indicating enough headroom for growth. Younger generation in age group of 21 to 35 years are leading this wave of new investors. This massive growth in retail participation is multidimensional consisting of Economic, Structural and Behavioural drivers. Let us dwell into each of these categories of drivers.

Economic Drivers

Stable and high growth economy: India's political stability, size of economy coupled with GDP growth of 8% and future projected growth rate around 7% makes it a significant destination for businesses and investments.

Large Market and Consumption: India is a consumption-driven economy with private consumption contributing 60% to India's GDP. India's household consumption has been a significant economic propeller, doubling in value to reach 2.1 tn $ between 2013 and 2023.

Per Capital income: The per capita Net National Income of Rs 1.06 lakhs has shown a year-on-year growth of 7% this is higher than most advanced countries and continues to show promise.

Structural Drivers

Low returns from traditional products like Bank accounts and FDs: With Inflation hovering above 4% and food inflation around 8% to 9%, interest rate of 3% to 8% on bank accounts and FDs becomes a dampener.