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Factors driving millions of millennials towards the Indian stock markets

08 Feb 2024

Introduction:

The current state of global equity markets is more dynamic than ever, playing a significant role in shaping a nation’s economic landscape and serving as a crucial foundation for its economic stability. Over the years, the growth of the global stock markets has consistently outpaced the overall GDP (Gross Domestic Product) growth, resulting in increased liquidity in the markets.

In the context of India, the country’s equity markets have been witnessing a notable upswing. Ever since the 1990s, when India’s economy was opened for public investment, the Indian equity market has gone through a significant structural transformation. Today, the nation proudly hosts two of the world’s largest stock exchanges – the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) – and is one of the most favoured destinations among foreign investors.

Investors continue to flock to India’s equity markets

Ever since the COVID-19 pandemic in 2020, investors have flocked to the Indian equity markets in great numbers. Going by the Government data and news reports, the number of active Demat accounts with the two depositories – NSDL and CDSL – rose to 12.7 crores at the end of August 2023. This figure stood at 10.1 crores a year earlier.

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Out of the 12.7 crore Demat accounts, 3.3 crores were registered with the National Securities Depository Limited (NSDL), while 9.35 crores were registered with the Central Depository Services Limited (CDSL).

If you compare these figures with the pre-COVID era, there were only 4.09 crore active Demat accounts by the end of March 2020. It means that the number of Demat accounts in India has almost tripled within three fiscal years. And considering India’s population of over 140 crores, this is only the tip of the iceberg. The penetration into the Indian equity markets can increase further in the upcoming years.

Factors driving millennials towards the Indian stock markets

A majority of investors that have joined the growing list of participants in the Indian equity markets are millennials and Gen Z, i.e., those born after 1981. Below are the key factors behind the millennial influx into India’s stock markets:

  • Digital revolution and financial literacy

The advent of the digital age has played a pivotal role in transforming the investment landscape for millennials. With smartphones and the internet becoming ubiquitous, access to financial information and investment platforms has never been easier.

Millennials are leveraging online stockbroking platforms to trade stocks with just a few clicks on their smartphones. Further, they are using educational apps and social media platforms to enhance their financial literacy. This newfound knowledge empowers them to make informed investment decisions and navigate the complexities of the stock market seamlessly.

  • Demonstrated success stories

Success stories of young investors who have made substantial gains in the stock market have served as powerful motivators for millennials. High-profile entrepreneurs, celebrities, and social media influencers openly sharing their investment strategies and successes create a sense of FOMO (Fear of Missing Out) and inspiration. These role models demonstrate that you can make significant gains from the stock markets with careful research, strategic planning, and patience.

  • Ability to take more risks

Millennials increasingly embrace a more proactive approach to risk in their investment decisions. The traditional preference for fixed deposits and conservative investments gives way to a willingness to explore higher risk-reward investment options such as stocks. The desire to achieve long-term financial goals and accepting short-term volatility are becoming integral parts of the millennial investment mindset.

  • Exemplary market performance

Another factor that has driven millennials towards the equity markets is their exemplary performance in the last two to three years. After the slump of COVID-19, the markets have rebounded in some fashion to provide excellent returns to investors. In 2023, both Nifty and Sensex constantly breached their all-time high marks. Seeing this as an opportunity, several promising companies launched their Initial Public Offerings (IPOs), which also garnered significant attention from investors.

To conclude

India’s equity markets are set for a take-off in the upcoming days. Factors such as digital empowerment, increased financial literacy, easy accessibility, changing risk attitudes, and exemplary market performance have propelled millions of millennials to start investing in India’s stock markets.

As this demographic continues to redefine the investment landscape, stockbrokers and other stakeholders in the industry need to adapt and innovate to meet the evolving needs and expectations of this dynamic generation. Motilal Oswal offers free Demat accounts with innovative facilities to make investing a breeze for young Indian investors.

 

Related Articles: How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account | Factors to Consider When Opening a Demat Account 

 

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