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India’s ‘Robinhood investors’ are smarter than we think: Edelweiss CEO

By Vinu Lal

04:08, 9 November 2021

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Market influence of non-institutional investors has grown across the globe, says Edelweiss CEO Radhika Gupta – Photo: Shutterstock

Indian television viewers these days can scarcely spend an hour in front of their favourite shows without being bombarded with discount brokerage commercials.

Companies such as Upstox, Groww and KyaTrade are synonymous with an upsurge of this business model, which has helped hordes of millennials enter the country’s equity market in recent years – ‘Robinhood investors’, as Edelweiss Mutual Fund’s CEO Radhika Gupta likes to call them.

“We are all examining this new breed very closely for a while now, and they are more mature than we think,” Gupta said in an interview with capital.com. 

Edelweiss Mutual Fund’s CEO Radhika GuptaEdelweiss Mutual Fund’s CEO Radhika Gupta

First-time investors

Working from bedrooms during Covid-19 lockdowns, hundreds of thousands of first-time traders armed with their smartphones snapped up too-good-to-resist offers from discount brokerages, with their confidence boosted by a robust rally in Indian equities and increased awareness about online investing. Online broker Angel One said in a July report that over 72% of the 510,000 new accounts they opened in the final quarter of 2020 were first-time traders.

The market influence of non-institutional investors has grown significantly across the globe and India is no exception, according to Gupta.

Indian mutual funds currently receive about $1.5bn in monthly inflows into the so-called systematic investment plans, which targets individual customers, suggesting that the new breed of retail investors isn’t merely eyeing some quick returns and are instead here for the long term, she said

‘Eliminate irrational trading’

So, does this new breed of investors raise a challenge for financial services providers, who now need to understand their behaviour to gauge their influence and investment preferences?

To some extent, yes, according to Gupta.

“Not just me, all fund managers and asset managers, who belong to the highly regulated Indian ecosystem are trying to understand their trading patterns and we are trying to bring in new products that eliminate irrational trading patterns,” she said.

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India’s cryptocurrency craze

Are these investors also rushing into alternate asset classes like cryptocurrencies?

Indeed and Indian TV commercials are also flashing crypto product advertisements like never before. Despite the asset class’s characteristic high volatility and a lack of regulatory framework, several crypto exchanges including CoinDCX, WazirX, CoinSwitch Kuber and Zebpay have sprung up in the country.

Virtual-currency trading is definitely capturing the attention of India’s new breed of young investors, according to Gupta.

She, however, doesn’t see such emerging asset classes as a threat to India’s asset-management fund industry, citing the continued strong inflows into balanced funds and systematic investment plans as proof.

Stock market outlook

Gupta maintains a constructive view on Indian equities and expects robust earnings growth, higher dividend yields and rating upgrades over the coming quarters as India’s economy continues to recover from the coronavirus crisis.

“We are quite bullish on industrials as a sector, that will clearly carry the advantage of a reviving economy,” she said. “We don’t take huge sector bets as an investment philosophy, but broadly look for construction-oriented growth stocks. We have a muted view on information technology.”

In 2016, Edelweiss Mutual Fund bought out the Indian business of JP Morgan Asset Management, and it continues to use the US bank’s network for business in global markets.

“We have an existing tie-up with JP Morgan for our international fund and will continue to look for new opportunities in the global market,” said Gupta, adding that “we will always look for the right opportunity and the right reason” on any potential future acquisitions.

Read more: India’s no. 4 asset manager sees stocks staying upbeat in 2021

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