Did the $130 billion loss on the Adani stock crash scare off small investors in India?
“The Hindenburg charges on Adani are serious, but I don’t think we should suspect India’s stock market,” said Qureshi, who began trading
Individual stock investors in India remain optimistic about the country’s $3.1 trillion equity market, despite a punishing selloff in Adani Group shares that threatened to derail one of the world’s best-performing indexes since the pandemic.
Hanoz Mistri is one of the small investors in India who believe the carnage that has wiped out about $130 billion from the value of Adani shares will not dampen the country’s equities’ long-term prospects. The shipbroker, who previously owned Adani group stocks, intends to continue investing in companies that benefit from India’s expanding middle class, such as commodity businesses.
“India is a great consumption story, and I am confident this journey will continue,” Mistri, who is based in Mumbai, said over the phone.
Mistri is part of a groundswell of retail investors who are changing the face of the world’s second-largest emerging market. Every month, approximately 1 million new trading accounts are opened, bringing the total to over 110 million, which is more than the populations of South Korea and Spain combined.
Whereas sentiment in the broad Indian market fell after US-based Hindenburg Research accused the Adani Group of share manipulation and fraud on Jan. 24 — charges the conglomerate denies — the selloff was brief. The country’s benchmark Sensex, which does not include Adani stocks, had recovered all of those losses as of Tuesday’s close.
Individuals are increasingly influencing the broader stock market through monthly investment plans offered by mutual-fund companies. These consistent flows have assisted the market in limiting losses caused by shocks such as the Adani selloff. According to Bloomberg data, Indian stocks have now seen inflows from mutual funds for 23 consecutive months.
“Investors in India are more information-centric, making data-driven decisions,” said Tejas Khoday, CEO of Bengaluru-based discount brokerage FYERS Securities Pvt. The pace of new client additions by Indian brokerages slowed in the second half of last year, but it’s picking up again, especially after the federal budget focused on capital spending, he said.
Parvez Qureshi, a 24-year-old student from the western Indian city of Surat, saw his 40,000 rupees ($483) investment nearly double in value as Indian stocks rallied from their lows in 2020 before halving earlier this year. However, he intends to continue investing in stocks that have the potential to increase earnings and benefit from the adoption of new technology, such as Tata Motors Ltd., an automaker.
“The Hindenburg charges are serious, but I don’t think we should suspect India’s stock market,” said Qureshi, one of the millions of Indians who began trading the country’s equities for the first time after the coronavirus pandemic in 2020.
Individual investing is booming everywhere, not just in India. In response to the pandemic, central banks and governments around the world implemented easy money policies and provided cash handouts, which encouraged retail investors worldwide. According to Jefferies Financial Group Inc., the proportion of equities in Indian household savings doubled to 5% last year.
Individual investors’ direct or indirect investments in Indian stocks are expected to grow further, according to Sundararaman Ramamurthy, managing director and chief executive officer of BSE Ltd. “India will continue to be a huge success,” he predicted.
