Faith or Forethought? Newbie Investors Are Taking Big Risks

India's retail investment revolution requires policy-level attention

- Mihir Sharma

The Indian stock market has had a difficult few months. The NSE Nifty 50 Index declined for 10 straight days recently—an unusually sustained dip. Policymakers in New Delhi tend to maintain a lordly indifference to turbulence in equities. But, on this occasion, they need to pay closer attention.

America's whipsawing tariff policies might have unsettled international markets. But India's sell-off has deeper and more disturbing roots—such as global funds heading for the exit. They have taken out over $15 billion so far this year. Indian stock markets have lost $1.3 trillion in value since last September and the Nifty 50 is down about 14%.

The slide in the index would be far worse if not for the fact that domestic investors have been on the other side of this trade. They have been steadily buying what foreigners sell—and that's exactly why we should worry.

India is in the middle of a share-buying revolution. Between 2023 and 2024, the number of retail brokerage accounts increased by a third. The National Stock Exchange said in January that new investor registrations are thrice as many as before the pandemic. A country that has about 320 million households now has some 110 million unique investors.