Why India’s youth is trading in the stock market like never before

A recent study by SEBI revealed that 7 out of 10 day traders in the cash segment of the stock market experienced losses in FY 2023-24. Further, 76% of the traders under 30 years old made losses, the highest for any age group. The proportion of traders under 30 years of age has grown to 48% in FY 2022-23 from 18% in FY 2018-19.

An earlier SEBI study found that 90% of traders in futures and options (F&O) markets also faced losses. Despite these statistics, the rate of demat account openings has soared, predominantly driven by young Indians under 40, many in their 30s or younger. The number of individual traders who traded intraday in the equity cash segment rose over 300% in FY 2022-23, as compared to FY 2018-19, the SEBI study revealed.

Despite the concerns over losses made and the awareness campaign by the regulator, over 42 lakh new demat accounts were opened in the month of June. Clearly, people’s interest in the stock market is growing day by day.

The staggering growth in retail participation is a testament to the increasing number of young Indians eager to create wealth by investing in financial instruments. The other very important thing is that they have money to invest—and potentially to lose or gain. However, this surge has caught the attention of policymakers and regulators, who are concerned about the risks involved. Will the regulators be able to curb the surge and save investors from losing money?

Let’s discuss the first thing first.

Why are people turning to the stock market like never before?

The data tells a different story on the paradigm shift in the Indian social landscape if you want to look at it that way. Who can lose money? The simple answer–those who have it. Why are they risking their money? Because they want to make money quickly, and in the process they tend to lose it too. That is a part and parcel of the game. Now the important question is why they seem to be in a hurry to earn fast. I have tried to answer this question below.

There is a desire among the youth to earn more and invest for the future. In recent years, especially after the Covid pandemic, the stock markets have given good returns and are seen as a great way to create wealth. There is a palpable uncertainty in everyone’s mind after the pandemic. People now want to have enough in their kitty to survive testing times. By trying their luck in stock markets, taking daily trades, they want to earn and invest to hedge against bad times.

The stock market is not the only thing the young Indians are trying their luck at. The story is not just stock markets or the derivative trades’ recent growth. It's part of a broader trend where people are exploring various avenues for potential financial gain. Another sector witnessing remarkable growth is fantasy sports. The market size for fantasy sports has expanded significantly in India, with more registered users on fantasy sports platforms than in stock markets. According to a recent report in Mint, a leading business newspaper, fantasy sports boast 18 crore users compared to 14 crore demat account holders in India. It indicates that people are going the extra mile to earn more, invest more and create wealth.

Young Indians want to retire early

When it rains in Mumbai, people gather in offices, waiting for it to end, chatting as they look out of gloomy glass windows, wondering if the rain will stop and they can go home. One such evening, a conversation with a young colleague in his early 30s revealed a common dream among young Indians: early retirement.

He confidently declared that he plans to retire before 40, a sentiment echoed by many others. As a 33-year-old professional, I too share his dream. I too want to make enough wealth so that I can retire early. I am always looking for opportunities to invest and create wealth, so that I can hang my boots as early as possible and do things that I would like to do in life. Financial independence is a key goal of my life. With a median age of 28.2 years, Indians are eager to create wealth and secure their futures so that they can live better and retire early.

This quest for early retirement drives many young Indians to seek wealth creation methods. This ambition contrasts sharply with older generations, who typically expect to work until 60. Whether these young people will be able to retire by 40 or if older people can continue working until 60 remains uncertain. However, the key question persists: why are young Indians investing in the stock market and fantasy sports like never before?

The answer, in my opinion, has four aspects:

What’s the way forward?

Despite regulatory concerns, the stock market will likely continue to grow, driven by technological advancements that make trading accessible to anyone with a smartphone. The democratisation of financial markets allows more individuals to participate, though many will face losses as part of the learning process. As these young investors gain experience, they will become wiser and make more informed decisions, potentially reaping the rewards of their investments.

In the evolving landscape of India's financial markets, young Indians are at the forefront, navigating risks and opportunities in their pursuit of financial freedom. The story will continue, despite the risks. We are a nation of 1.4 billion people, with only 14 crore demat account holders. There is a long way to go.