Just a day after Holi, India woke up to the two good news. First was related to Current Account Deficit hitting the lowest percentage of 1.1% of GDP, and the second was Mumbai dethroning Beijing as the city with largest number of billionaires in Asia. Not without reasons, India is making new records in terms of sales of luxury houses, be it private builders or DDA and residential plots scheme in Noida-Greater Noida region receiving on average 50 applications for each plot!
So, what is the source of this new found wealth?
You don’t have to go far or dig out a lot of data, all you need to do is look around – the number of millionaires YouTube is producing and the sheer number of boys, girls, men and women hooking up on screens from Monday to Friday between 9:15 am to 3:30 pm and analyzing the charts and digging up the fundamentals.
The numbers are simply overwhelming
As per an article published by Business Today in April 2011, only 18 million Indians invested in share market in 2010, with just 10 cities contributing 80% of trading volume. The same number has increased to more than 16.61 cr. But the more interesting part is de-concentration. From Maharashtra and Gujarat contributing to about 80% trade volume, the retail investors from Maharashtra and Gujarat combined now account for a bit above 28%! Once referred to as BIMARU (Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh) aggregately make up of approx 26% retail investors now, with Uttar Pradesh (1,76,56,822) toppling Gujarat (1,57,83,709) from second position and the rest of the three BIMARU states featuring among Top 10 list!
Further, the growth rate among these states is foretelling what lies ahead and where the new form of wealth is shifting. The yearly growth rate i.e. the rate at which retail investors are opening DEMAT accounts is hovering around 24% for both Mahrashtra and Gujarat, while the same is above 45% for Uttar Pradesh, 35% for Rajasthan and Madhya Pradesh and 46% for Bihar.
Once touted as the wealthiest state of India and a land of 5 rivers, Punjab is doing worse than even to much smaller Haryana and Telangana and a little better than Odisha with 14th position in the list. The capital of India, though at 9th place currently, the time is not far when Bihar will overtake it considering the yearly growth rate of over 46% Vs approximately 27% of Delhi.
So, is the dynamics of wealth distribution changing in India with the rising economy in last 10 years, or it is mere the rising numbers of gullible retail investors contributing to the bottom of share market pyramid only to be sucked up by top 10%?
The data presents two divergent pictures. On the one hand, the supposedly “naive” and “incompetent” retail investors own stocks worth Rs. 30 Lakh Crore, (7.7% of total value of all listed companies) in steady performers blue chip companies and their share in well-managed mutual funds AUM is now above 60%, on the other hand, 89% of retail investors in equity F&O make losses, as per a SEBI study.
Though there is no data yet on how much wealth retail investors generate from the main segment i.e. cash of the equity market, however, given the various indicators, some of which discussed in the beginning, plus the sheer number of retail investors joining the share market, it can be safely assumed that they are not only making money, but also India is inching towards “developed” nations where on an average 50% of population participate in the most popular form of non-traditional wealth.
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