Gen Z investors shouldn’t worry, Zerodha’s Nithin Kamath explains why
At a time when the global stock markets were going through a lean period, Indian stock exchanges hit their record highs capitalizing on the influx of investment driven by the rapidly expanding investor base. This sudden increase in the number of new investors has been facilitated by the emergence of new generation digital brokers who have gone through the investment process earlier for the first time or new investors, especially those under the age of 30, have Bloomberg reported. CEO of India’s largest online broker Zerodha, Nithin Kamath, estimates his platform serves around 10-20 million orders daily which continues to peak with next-gen investors.
While the stock market has undergone some correction lately, Indian retail investors have continued their buying streak even amid mounting risks of volatility.
Encouraged by new investment from retail investors and RBI’s policies to increase cash flow, India’s benchmark S&P BSE Sensex reached over 20% in the first 10 months of 2021, hitting its high historic level in October. However, it subsequently plunged and is currently trading on average almost 10% lower than its all-time high.
But Kamath believes that young investors have little to lose – there is still time to learn about the market. “They have a long road to future earnings. You make mistakes, you learn and you bounce back, ”Kamath told Bloomberg.
Market volatility forecasts gained in validity as Indian markets opened to a sharp shock for the trading week on Monday. Even strong stocks across all sectors fell sharply as the market benchmarks NIFTY and Sensex fell more than 3% before showing some improvement. Sensex has lost over 1700 points while Nifty has lost over 550 points.
The panic in the market was seen as a global slowdown as several markets registered a decline amid the growing threat from the new variant of COVID-19 Omicron.
A few days ago, Kamath, in a post on LinkedIn, expressed concern about the rapidly declining stock prices of new age tech companies. Zerodha’s CEO has advised next-gen tech companies to prioritize long-term volatility over short-term gains. He argued that the net worth of core teams in most new-age companies was attached to ESOPs, and the more the company tried to talk about the value of its stocks, the risks of large drops and volatility to long term increases.
Kamath added that when a company’s valuation is based on what it “projects, counterintuitively, it may make sense to talk down rather than raise the price.” ideal for new investors.
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