The Economic Survey 2024 report was released by the government on Monday. The Economic Survey has cautioned about the increasing number of retail investors in the stock market, saying that investing money expecting higher returns without understanding the real conditions of the market is a matter of concern. The Economic Review of 2023-24 presented in Parliament on Monday also said that the increased participation of retail investors provides stability to the capital market. According to the news of Bhasha, the review has also noted the increasing interest of these investors in futures and options (derivatives) trading.
Increase in participation of retail investors
According to the report, activities in the Indian capital market have increased in the last few years. People are directly buying and selling shares in the market through demat accounts or indirectly investing in the market through mutual funds. According to the Economic Survey, the share of retail investors in equity cash segment business was 35.9 percent in FY 2023-24. The number of demat accounts with both the depositories increased to 15.14 crores in FY 2023-24 from 11.45 crores in 2022-23.
If we look at the participation of investors in the market, the number of registered investors in NSE has increased almost three times as compared to March 2020 to 9.2 crores as of March 31, 2024. This means that now 20 percent of Indian families are investing their domestic savings in the financial markets.
Need to look at the number of retail investors
The Economic Survey has cautioned that there is a need to look at the rapid increase in the number of retail investors in the stock market. This is important because overconfidence promotes speculation and also the expectation of higher returns. Which may not be according to the real market conditions. This is a matter of serious concern. The factors that have facilitated the entry of investors into the market include technological integration, government measures for financial inclusion, growth in digital infrastructure, rapid penetration of smartphones, the rise of low-cost brokerage companies, the desire to generate income from alternative sources, and low returns from traditional asset classes such as real estate and gold.
Call to increase awareness among investors
According to the Economic Survey 2024, retail investors have capitalized on their advantages in the financial markets and are investing in real estate. It also states that the increasing participation of retail investors in the Indian capital market is welcome and brings stability to the capital market. Also, this has helped retail investors earn higher returns on their savings. Looking at the interest of retail investors in the derivatives market, the review said that derivatives are used by investors as a speculative product. India is also probably no exception to this. The review has called for increasing awareness among investors. So that they can be warned about the advantages and disadvantages of derivatives trading.
