Retail investors rush to open new trading accounts as markets fall

In Tier-III cities and beyond, even the lockdown has not dampened the mood of some retail investors, who are absolutely new to equities. (Representative image)

By Urvashi Valecha & Malini Bhupta

Ahead of a big ticket IPO (initial public offer), typically there’s always a rush of new account openings that broking firms witness. So was this March expected to see new account openings, ahead of the SBI Cards public issue, but what has come as a big surprise is the rush of retail clients in the midst of the market carnage.

Retail brokerages are seeing anywhere between 50-70% jump in new accounts as retail investors are looking at investing in the market after a nearly 40% fall.

So far in March, India’s largest discount broker Zerodha said that it had added 1,30,000 accounts against 70,000 accounts it adds every month. “This is an abnormal phenomenon which I cannot explain,” said Nithin Kamath, founder & CEO, Zerodha. The number of new account openings has shown an uptick in March 2020 compared with the previous month. “We can say that the interest in having a new investment account with us has seen an increase of about 50% till the lockdown began.”

In Tier-III cities and beyond, even the lockdown has not dampened the mood of some retail investors, who are absolutely new to equities. For instance, 5paisa.com, which has 80% of its client base from Tier-III and beyond cities, is continuing to see a spike in new account openings despite its skeletal support staff. In March, so far, 5paisa.com has added 60,000 new accounts. Prakarsh Gagdani, CEO of 5paisa.com, said: “This is a great trend as 80% of these new clients are new to equities.

This is a great trend as retail investors enter the markets at the peak. We are seeing people not only opening accounts but they are also investing.” Even as seasoned investors are busy buying gold, new-to-equities are braving the market’s fall.

While most of the interest that discount and smaller brokerages is seeing is from new-to-equities, those who are under-invested in equities are also coming out to increase exposure to equities. Sandeep Nayak, ED & CEO of Centrum Broking, said: “Those who are under-invested are using the current opportunity with discounted valuations to selectively enter the market. There are also new accounts from a segment that has not invested in equities earlier, and these individuals are completely new to the market.”

Most of these brokerages are offering these new-to-equities segment training and information online to inform them better on markets. Centrum is advising clients to build a portfolio of largecap blue chip stocks that have seen a significant correction.