India is Shaping as a Trading Nation in the World

Just a few years back, only a handful of people in India used to participate in the stock market. However, the pandemic changed it all. While the number of intraday traders a year preceding the pandemic (read 2018-19) stood at a mere 1.5 million, which spiked to a whopping 6.9 million, almost a 5x increase in just 3-4 years that is in 2022-23. While the uncertainty during the pandemic over jobs leads many to find a second source of income, what else can be more lucrative than the stock market, isn’t it? However, without digital evolution, this would not have been possible, so it plays a pivotal role too. This change in the trading landscape of India has been quite swift which actually turned the eyes but when a nation is growing economically, socially, and most importantly, literacy level is increasing, along with financial literacy, it is natural that more people will come to the markets leaving behind ages of myths and disbeliefs.

India's share market and its correlation with growing economy

While the pandemic and digital evolution are some of the factors driving India to become a trading nation, the fundamental reason has to be the growing economy. Growth in the stock market reflects the growth in the economy and vice versa.

In the past five years, from 2019 until date, the Nifty 50 has zoomed 125.81% while the BSE Sensex has gained over 119.05%. During the same period, the GDP of the country also surged significantly well and only dipped to negative during the pandemic year.

With the growing economy, the per capita income also increases, which in turn increases the disposable income, which many are using to trade in the stock market. A growing economy also boosts the investors’ confidence, and in trading as well as in investment, positive sentiment in the market drives it higher further attracting more people to take part.

Share traders in India

In India, trading may have picked up in recent times; however, few share traders are known as the pioneers of the Indian stock markets. Here are the top ten traders in India their net worth and the number of stocks in their portfolio.

Reason for a growing number of share traders

• Economic growth: As mentioned above as well, the primary factor driving people to the stock market and trade is the booming economy of India. The GDP is inching higher with overall inflation decreasing and currently below the targeted level of 4% making the economic condition favorable and household income rising.
• Financial awareness programs: Anyone can see the significant shift in the trading arena in the past few years and the credit goes to different financial awareness programs by financial institutions, educational institutes, and most importantly content available from individual contributors and experts over the internet. Financial literacy has picked up in India, which has been a crucial reason for the traders’ spike in the market.
• Digitalization: Earlier trading was not only expensive but also required a lot of time and management. However, now with digitization, one can trade with their smartphone, which was earlier not possible except for people having trading terminals at home. The ease of trading using the digital trading platforms offered by the brokerage houses has been another crucial factor in increasing the participation of traders in the Indian markets.
• Positive market sentiment: The stock market in India is continuously going up with minor corrections here and there. This inspires and attracts many to take part in the market and trade to generate wealth.
• Government policies: Earlier, the process of applying for trading and getting the trading terminals and other setups required multiple government stamps. Now, government policies have become less rigid and KYC verification has become easier.
• Abundance of IPO issues: The number of initial public offerings is rising every day. This year, in 2024 only, there are close to 272 IPOs of which most are launched, and many are in the pipeline. There has been a 66% surge in the number of IPO launches only between 2023 and 2024. The newly listed companies add more capital to the market and make it more attractive for traders to place their bets.

Merits and Demerits of India turning into a trading nation

Merits

• Increases liquidity in the market as more participants are there so the volume and the liquidity spikes
• This in turn makes the market more efficient and often reduces the gaps in the market.
• Businesses can raise money for their expansions and other plans easily from the market.
• When trading increases in the stock market, it indicates the growing economy and people’s faith in it.

Demerits

• Excessive trading can lead to extreme volatility in the market
• Speculation also increases with an increase in trading activities
• Without advanced technology, if excessive trading happens, it can affect the entire system and may shut it down leading to major loses
• People only focus on short-term gains without considering the long-term benefits or challenges in trading.

What is the future of share trading in India?

As the working-age population of India is in its growing stage, share trading will grow simultaneously. With the growing financial literacy and technology, trading in the Indian stock market is only moving upward for the upcoming years. Share trading in the future will be driven by technology, which is for sure. You may say it is already driven by technology, but the involvement of AI will be more in the future as it can help traders have control over their emotions while trading, which is one of the biggest curses for any trader.

By 2027 it is expected that India will become the third-largest economy in the world which will surely boost the stock market as well. The market value of the Indian stock market is also expected to be US$10 trillion in the coming six years that is by 2030.

Conclusion

India becoming a trading nation has been quite a dream for many and now this dream is coming to reality. The participation from retail traders increasing and the booming economy indicates some of the most prosperous years of the Indian stock markets. However, trading is quite a task and needs an eye for detail and demands all your focus and knowledge. So make sure, while you are trading stocks or any other asset classes, you have the required knowledge, tools, and assistance if required so that you can put your best foot forward.