In recent years, India's middle-class investors have enthusiastically embraced the stock market, propelled by the allure of potential financial growth. However, the current economic climate has cast a shadow over this optimism. Notably, the number of Indians investing through Systematic Investment Plans (SIPs) has surged past 100 million, nearly tripling from 34 million five years ago. Yet, they now face an unprecedented challenge as India's benchmark Nifty 50 share index experiences its longest losing streak in 29 years, marking a decline over five consecutive months.
The downturn in the stock market began before former US President Donald Trump announced new tariffs. However, these tariffs have exacerbated the situation, further dragging down investor confidence. While foreign investor selling has eased since February, suggesting a potential end to the downturn, the damage is already significant. The market crash has wiped out a staggering $900 billion in investor value since its peak in September.
Many first-time investors entered the market with limited risk awareness, often influenced by social media "finfluencers" on platforms like Instagram and YouTube. The go-to investment route for these individuals is SIPs, which involve fixed monthly contributions collected by funds. Unfortunately, many investors are now feeling the pinch as valuations for numerous stock market indices have dipped below their 10-year average.
Economic challenges compound the issue: economic growth is slowing, wages remain stagnant, private investment has been sluggish for years, and job creation isn't keeping pace. Stock brokers report that their activity has dropped by a third, while 11 million Indians lost a combined $20 billion in futures and options trades before regulators intervened.
Ramesh, an accounting clerk, borrowed money to invest in stocks during the pandemic and lost over $1,800. He lamented, "I borrowed this money, and now creditors are after me." Tarun Sircar, a retired marketing manager, invested 80% of his savings in mutual funds and lost a similar amount. He shut his brokerage account and expressed his frustration: "I've put 80% of my savings into mutual funds, keeping just 20% in the bank. Now my adviser warns me – Don't check your investments for six months unless you want a heart attack!"
Meanwhile, Mr Kumar, a Bihar-based engineer who joined millions investing in publicly traded companies, now worries about selling investments at a loss to cover his son's medical college fees. He shared his dismay:
"For more than six months now, my investments have been in the red. This is the worst experience in the last decade that I have been invested in the stock market." – Mr Kumar
Despite these setbacks, Mr Kumar remains cautiously optimistic about the future:
"Once the market recovers, I'm thinking of moving some money back to the bank." – Mr Kumar
The market crash has hit India's middle class at an inopportune time, with many having invested their life savings in the stock market. Social media platforms have played a role in shaping investor perceptions. As Mr Sircar noted:
"Ignorant about what's happening and why the market is reacting this way, yet confident because Instagram 'experts' make investing sound like a fast track to millions. At the same time, I know I might be caught in a web of deception and hype." – Mr Sircar
While some remain hopeful for a recovery, others have become wary. Samir Doshi remarked:
"This crash is unlike the one during the Covid pandemic." – Samir Doshi
And Ms Halan offered prudent advice:
"If you don't understand markets, stick to bank deposits and gold. At least you have control." – Ms Halan
The current market turmoil serves as a cautionary tale for first-time investors unacquainted with market risks. The rapid expansion of SIPs reflects both an increasing interest in investment opportunities and a need for greater financial literacy.