India’s retail investor boom draws millions into stock market, but experts warn of risks

Indian authorities have stepped up efforts to educate investors, urging them to focus on company fundamentals rather than market hype.

SEBI, for instance, has expanded investor education and awareness programmes in recent years, to help retail investors better understand risks.

Despite these efforts, analysts say the surge in retail participation has also fuelled inflated demand for some IPOs and risky speculative activity.

One example is RRP Semiconductor, a stock that became a social media obsession and came under regulatory surveillance last year after an astronomical surge – rising 55,000 per cent in 20 months despite negative financials. 

“People are not going through the fundamentals and they are blindly following a few of the people and investing in the stocks,” said Mehul Koradia, senior vice president and head of equity sales and equity products at brokerage firm Mirae Asset Sharekhan.

“But from intermediaries’ point of view or regulators, they have been doing a very good job of educating people that it is always fundamentals which you need to focus on and we’re seeing the results.”

For new investors, the learning curve can be steep, said experts. But they believe India’s market is undergoing a structural change that is likely to continue as more people begin trading equities.