How India’s market stoop is affecting small buyers – DW – 03/24/2025 | EUROtoday

It was FOMO, or Fear of Missing Out, that received Kanishk* to start out investing within the inventory market.

He informed DW that as India battled the second wave of COVID-19 in 2021, he began noticing adverts on Instagram that includes social media influencers giving money-making ideas.

“I didn’t want to miss out on this — the way people were making money. That, I would say, is the first thing that got me into the market,” Kanishk stated.

He defined how, after initially investing in mutual funds, he regularly moved to buying and selling on the inventory market.

Like numerous novice buyers, he had no clue in regards to the fundamentals of investing, he stated, however he stored up with the market developments, “especially on Reddit,” the US-based social media platform.

And at first, “everything was great.”

Stock market euphoria throughout COVID

Saloni Puj* And Ishan Shah Shared Similar Stories to Kanishk’s.

Both Puj, a media skilled from Kolkata, the capital of the state of West Bengal, and Shah, who runs a cultural middle that teaches artwork and music within the western metropolis of Ahmedabad, additionally began buying and selling within the inventory market someday throughout the pandemic lockdown.

“The market was doing so well it felt anyone who was making any money was making it in the markets,” Shah stated, who added that he purchased random shares, generally primarily based on the suggestions of others. “Weirdly, whatever I did, I kept making money.”

Puj took a extra guarded strategy. “I knew that the market [was] in a euphoria stage, I was very aware of the bubble that was happening,” she stated.

Then got here September 2024 and all three have been hit exhausting when the bubble burst. After months of rallying, the market finally corrected, adopted by a monthslong stoop.

Young retail buyers enter market

For most Indians who began buying and selling on the inventory markets, the rally after the pandemic stoop was a good time. It mirrored the $275 billion (€250 billion) financial stimulus package deal Indian Prime Minister Narendra Modi’s authorities had injected in 2020.

In lockdown, lots of people had extra time and disposable earnings, and lots of have been influenced by the thought of constructing some fast and straightforward cash.

“During COVID, people had surplus cash, and a large number of young investors entered the capital markets as retail investors,” stated Sagun Agrawal, a derivatives dealer within the Indian capital markets and a monetary literacy advocate for girls. “This was positive for the markets as it boosted liquidity and created investable funds for capital formation.”

Online buying and selling has change into extra well-liked due to new firms providing low brokerage charges and easy accessibility to credit score. One such possibility is Margin Trading Facility (MTF), which lets merchants purchase shares by paying solely a part of the fee upfront. The brokerage covers the remaining as a mortgage, with curiosity.

Why did the market fall?

National Stock Exchange (NSE) knowledge confirmed that between March 2020 and March 2024, the variety of registered buyers in India nearly tripled to 92 million.

India’s NIFTY 50 inventory market index went from about 8,000 factors in March 2020 to file ranges of greater than 26,000 factors in September 2024. For the retail buyers caught up within the euphoria, it felt like nothing might go mistaken — till it did.

In the months since September final 12 months, Indian equities have misplaced greater than $1.2 trillion in worth. In February, the NIFTY 50 benchmark index was down 16% from its peak, and on its longest shedding streak since 1996. It was the worst performing international market.

Small retail buyers have been among the many worst hit.

“Many of these [retail] investors were uninformed and chased hyped-up securities, leading to froth in the market. As corrections took place over the last six months, these investors faced major financial setbacks,” stated Agrawal.

Bijoy Peter, a senior associate at Bangalore-based Germinate Investor Services, stated one of many causes for the market correction was the disparity between the hovering valuations of company India and their declining earnings. India’s GDP development had additionally slowed to five.4% within the July-September 2024 quarter, he stated.

He additionally pointed to a scarcity of presidency spending in infrastructure and different sectors on the time, in addition to different international components.

Foreign Institutional Investors (FIIs) began pulling their cash out of India. China began implementing vital stimulus measures in its market, which contributed to cash shifting there, he stated.

This motion of cash out of India had a big impact.

“When such a large sum moves out, the effect is massive because investors have to sell their holdings. Selling at that magnitude has a huge impact on stock prices,” Peter stated. “As a result, the market began to fall.”

Peter added that numerous optimistic developments initiated by the federal government had been neglected by the market — together with a rise in tax limits, measures taken by the Reserve Bank of India to inject liquidity into the banking system, in addition to the announcement of elevated infrastructure spending.

Agrawal additionally famous that final September, the actual sellers have been Indian High-Net-Worth Individuals (HNIs) and high-value buyers. They sensed that the market was overvalued and had restricted scope for additional upside, she stated.

“The major investors pulled their money out of the market, causing the decline, while smaller investors were left to bear the losses,” one dealer, who requested to not be named, informed DW.

‘Trump presents India with distinctive alternative’

While Indian markets have been navigating stormy waters over the past 5 months, some stated the scenario was beginning to search for with the inventory market experiencing vital features final week.

However, buyers remained cautious amid US President Donald Trump’s threats to impose reciprocal tariffs on India from April 2, calling India “a very big abuser” of tariffs.

New Delhi has stated that it’s in negotiations with the US to determine a commerce framework addressing levies and market entry.

Economist Dr. Surjit Bhalla, former govt director for India on the International Monetary Fund (IMF) and a member of the Economic Advisory Council to the second Modi authorities, stated he was feeling bullish as Trump “has presented India with a unique opportunity for reform.”

“We’ve never had a chance like this before, particularly in areas like trade, foreign direct investment, and other key factors that drive GDP growth and profits.”

“For us, this is a crucial moment to implement much-needed reforms, both in the external sector and domestically, including areas like agriculture,” Bhalla stated. “This could be India’s opportunity to advance to the next stage of reforms.”

Small buyers smarter now

Meanwhile, retail buyers comparable to Kanishk, Shah and Puj, having survived exhausting instances previously few months, are bracing for the potential impression of Trump’s threatened tariffs, whereas protecting their fingers crossed.

Kanishk stated he was extra cautious now after the stoop and was “taking the words of the finance influencer with a pinch of salt.”

Shah stopped buying and selling a couple of 12 months in the past, generally reflecting on whether or not it was too early. “But seeing how stressed everyone is, I feel I might have dodged a bullet,” he stated.

Puj has reworked her funding technique altogether, she is staying put and shopping for solely in small portions when markets are down.

Having seen all her investments within the purple not too way back, she stated she is wiser now, including, “Going down is not so fun.”

*names modified on request

Edited by: Keith Walker