Middle India reposes faith in the markets

Amay Bhatnagar, 27, who works for a large corporate in Udaipur, increased his investments through an online platform in the beginning of March. The national lockdown to contain Covid-19 was announced later that month following which the markets tanked. Instead of panicking, Bhatnagar recognised the investment opportunity thrown up by the sinking markets. He not only continued with his higher investments but also encouraged his father to start three SIPs (systematic investment plans).

Bhatnagar’s friends, too, have increased their investment in the markets in these times. Like them, thousands of investors in Tier-II and Tier-III cities continue to repose faith in the markets despite the lockdown.

Big jump

“We have seen a huge uptake in Tier-II cities and their suburbs where we are operating. We grew our customer base by 100 per cent based on the new clients that came in from Tier-II cities in the last six months,” says Sousthav Chakrabarty, CEO and Director, Capital Quotient, a SEBI-registered financial advisor,

Online investment platform Groww also observed 10-15 per cent growth in the number of users in Tier-II cities during the lockdown. Harsh Jain, co-founder and COO at Groww, feels that investor awareness and increased exposure to investment strategies have a definite role to play in this growth.

“We frequently engage with our user base through our online communities, and educational campaigns like Ab India Karega Invest , which we are hosting online these days. Such content-sharing activities and online communities help Tier-II and Tier-III audiences get access to the right resources to plan out their investments properly and take maximum advantage of the situation,” he explained.

Mutual fund investment platform Goalwise.com, too, said it has seen a spike in net inflows in all the months of 2020 (January to May). “Our investors have continued with their SIPs. However, lumpsum investments, which had taken a hit in March and April, have also recovered to pre-Covid-19 levels in May,” says Ankur Choudhary, co-founder and Chief Investment Officer of the company.

Ladco Crest Wealth Management Services saw its investor base in Tier-II and III cities bumping up their investments by over 10 per cent during the lockdown. While they saw a 30 per cent increase in investors in Tier-I cities, they did not see any new investors in Tier-II or III cities, including in Hubballi, Dharwad, Gulbarga (all in Karnataka) and Erode (Tamil Nadu) during the lockdown. “However, our existing investor base has come back to us to bump up their investments by 10 per cent plus. The reason for that is, in anticipation of market turbulence caused by the NBFC crisis, we moved investor money from equity funds to arbitrage and gold funds early last year. Unlike equity funds that have slumped badly during the pandemic, arbitrage and gold funds are not in the negative despite the Covid-19 situation,” said Piyush Jain, Managing Partner, Ladco Crest Wealth Management Services.

The metro story

The story in the metros, too, seems to be one of confidence.

While Dalal Street experienced huge panic at the hands of foreign institutional investors, most of Capital Quotient’s clients with their “equity underweight portfolio” investments continued investing, with some even putting in incremental money. Ladco Crest has seen a 30 per cent increase in new investors from metros along with retention of existing investors, thanks to its strategy of moving their investments into arbitrage and gold funds early last year. However, traction remains near-constant at Goalwise, which has 80 per cent of its investors coming from metros and Tier-I cities.

“The trend that we are observing is that one segment of people is saving a lot more money than before. They continue to earn, while their spends on travel, restaurants, cinema and luxury purchases have gone down. This segment is likely to invest a lot more than they were doing earlier,” observed Harsh Jain of Groww.

Choudhary does not want to hazard a guess on the behaviour of the markets going forward due to the current uncertainty, but feels they will remain range-bound and not go back to pre-Covid-19 levels in a hurry. He sees this as a good opportunity for long-term investors to accumulate mutual fund units at lower prices through regular investments.

“The challenge is to guide new investors in uncharted territory and during unprecedented situations like Covid-19, which boutique firms like ours do with personal care and human touch,” pointed out Jain of Ladco.

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