The rise of retail trading: How individual investors are shaping the market landscape

Retail trading platforms and mobile applications have witnessed a surge in popularity among . Different platforms have experienced exponential growth, providing easy-to-use interfaces and access to a wide range of financial instruments.

According to data from the National Stock Exchange (NSE), the number of demat accounts in India surpassed 100 million in 2024, with a substantial portion attributed to individual investors.

Changing investment behavior

The idea of investing being synonymous with the aristocrats or large institutions is slowly giving way. Main street traders as they are also known as the “retail investors” have captured the market with their own plans and biases.

Thus, based on 's online survey conducted in 2023 among the most active retail investors, the choice of direct equity investments mainly prevailed, with more than 70% of the respondents mentioning their preference for self-directed investment.

In addition, the level of risk-taking is still increasing due to more individuals taking part in the stock exchange. A snapshot of the BSE showed that the overall trading volume from the small investors’ population was 35% higher in 2024 than in the prior year.

This shows that more retail traders are willing to participate in trading activities in the markets arena in the hope of gaining high returns as well as due to the accessibility of trading platforms.

Influence of and information accessibility

Retail traders also use social media and discussion forums as topical forums for investment ideas and stock trading information and advice.

Moreover, ease of access to financial information is currently enhanced by the ability to interpret it with the help of analytical materials and research information sources that contributed to the rise of the significant number of individual investors.

Popular websites that people visit to get market related information provide a range of services: fresh information, special recommendations from top officials, and articles on trading.

According to a survey carried out by PricewaterhouseCoopers (PwC) India, more than 60% of small investors engage in financial news and analysis for investment decisions.

Challenges and opportunities

Hence, this growth of individual investors creates new opportunities for growth as well as challenges for regulators and market players. Some of the uncouth activities that may lead to issues in the markets include; market fluctuations or volatility, which has been attributed to retail trading mania and speculation.

The Indian market is regulated by SEBI which has promptly acted on various measures to protect investors, such as more insistence on surveillance of the markets and increasing awareness among potential investors.

In addition, the dynamic nature of the regulative environment and such measures as the Securities Contracts (Regulation) Amendment Act, 2023, adopted for the promotion of the securities market’s credibility and openness.

This paper entails a brief review of some of the major achievements of SEBI as a regulatory agency and the areas still requiring further reforms for improving market efficiency and investor protection: While undertaking this analysis, it must be remembered that SEBI’s commitment to reducing regulatory inconsistencies and improving overall enforcement is vital in the context of preserving the microstructure and investor confidence.

The takeaway!

New-generation individual investors are transforming the structure and nature of the equity markets in India in a new way. Quite often, the retail trader applies innovative tools and products as well as having broader and quicker access to information, thus contributing to more trading turnover in financial markets.

However, operating in this new capacity is not without significant responsibilities, including the need to educate the investing public, make markets fair and efficient and avoid financial crises.

With the Indian retail trading environment steadily developing, it must be pointed out that it is highly important for the regulators, trading intermediaries and investors in the Indian stock market to work hand in hand to create and establish a healthy and sustainable trading environment for all participants.

Thus, due to their involvement and changing investment activity, individuals not only influence the development of markets and the formation of new forms of investing but also promote financial inclusion in India.

(The author is MD, Findoc)

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