Learning The Tricks Of The Trade

Sandeep Sahal, a third-year BCom student from the University of Calcutta, recently started trading in the stock market after finishing a six-month certification course in research trading and advisory from online learning platform Elearnmarkets. A chartered accountant aspirant, Sahal took up the course as he hopes to make some extra money through trading even after he starts working.

Sahal is among a new breed of stock market investors who started online trading during the lockdown. As they worked or studied from their smart devices and saved on discretionary and travel expenses, they took to stock trading with the extra money and time in hand.

According to figures released by the capital market regulator, the Securities and Exchange Board of India (Sebi), close to 15 million new investors entered the market between April 2020 and August 2021. Data from the Central Depositories Services India Ltd, one of India’s largest and only listed securities depositories, reported a nearly 20 per cent increase in its demat accounts over the same period.

Most of these investors are young, educated and in the age group of 18-35 years, according to experts.

Talking about the participation and enthusiasm of Gen-Z in the stock market, Vivek Bajaj, one of the founders of Elearnmarkets and Knowledge Head, says, “The term stock market doesn’t bring a sense of fear among Gen-Z. Unlike the previous generation, they are better connected and better informed. They take their own decisions and small calculated risks in the markets. The entire stock market ecosystem has evolved in the last five years and is conducive for new young participants.”

A cross-section of people is now participating in the market. “If you look at our records of new users onboarded, you will be surprised to know that around 25 per cent of the total users are women, which is another healthy trend emerging in the financial markets during and after Covid-19,” says Bajaj.

Even Indians settled abroad are investing in the Indian market. Prateek Singh, founder and chief executive officer of LearnApp.com, another online platform for learning trading and investing, says, “Over 90 per cent of our users are from India, followed by the US, UAE, Germany and Singapore.”

Online Learning

The rush to participate in the stock market has spawned huge interest in financial literacy regarding the capital market. The ongoing bull run in the market has only encouraged the do-it-yourself (DIY) generation to consume more information about trading to be able to put it into practice. More and more investors are looking to educate themselves in the nuances of stock trading either through online certification courses or other material available on various learning apps.

Convey, a start-up engaged in creating awareness about financial literacy, saw more users in 2020 than ever before. “A new door of opportunity opened up and, eventually, we were able to offer new things to a large number of customers,” says Prasad Lendwe, founder-director, Convey. The start-up recently launched its stock market practising platform Convey Simulator, where people can start putting the theories of investment to practice. It is available free of cost to Convey’s YouTube subscribers.

“India’s most popular fintech platforms have about 1 million to 3 million users among themselves. It is expected that at least 30 million more people will start learning about investing and trading in the next few years. For people who are interested in trading, the first step is not going to be opening an account, it is going to be learning,” says Singh.

A Growing Market

The financial literacy landscape in India is still in a nascent stage. “In India, only around 6 per cent people invest in equities. Financial literacy initiatives have the potential to improve these figures and, hence, the opportunity is huge,” says Lendwe. He adds that cumulative effort from all the content creators across the platforms has started changing the game.

According to a study conducted by the Global Financial Literacy Excellence Centre, an incubator for financial literacy research, policy and solutions, only 24 per cent of the Indian adult population is financially literate.

The scope for growth is huge as maximum people in India may still not be investing. Sample this: in the US, the mutual funds’ assets under management (AUM) is more than 100 per cent of its about $23 trillion gross domestic product (GDP). For Brazil, the AUM figure is 59 per cent of the $1.49 trillion GDP. Comparatively, the AUM is just 14 per cent of India’s current estimated GDP of $3 trillion. However, it has slightly improved from 7 per cent of $2.30 trillion GDP five years ago, according to Sebi data.

“Financial education is not something that is taught in the mainstream curriculum, but with the pandemic onslaught, and the surge in digital adoption, it has become easier for people to access materials and courses to equip themselves with the knowledge on how to invest and trade,” says Singh.

Word Of Caution

It is imperative to be extra careful and not fall for channels that offer tips in the name of offering financial literacy. “There are innumerable websites and channels that have cheat sheets to become rich, but the market for knowledge on how to trade and invest is tapped only by a few players in the industry,” says Singh.

So, if you are a novice in the stock market, what should you be looking for? Lendwe says that first-time investors should look at platforms that can simplify complex market concepts for them. “Choose a platform that has practical market learning coupled with a strong theoretical base,” says Bajaj. Ensure that it provides you market-related information and news and financial data of companies.

Even though there’s a section of people that is seeking to become financially literate, there are several others who are entering the market without any prior experience or training. However, doing that may not be the best idea as stock investing is highly risky and is not meant for amateurs. One wrong decision can erode your savings.

yagnesh@outlookindia.com