Two years ago, following the advice of his bank adviser, Rajesh Kumar, a 55-year-old engineer from Bihar, decided to take a bold step and shift his savings into mutual funds, stocks, and bonds, pulling out from fixed deposits. With India’s stock market experiencing a massive boom at the time, Mr. Kumar, like millions of others, became part of the growing trend of middle-class Indians channeling their savings into publicly traded companies.
Back in the day, only one in 14 Indian households had ventured into the stock market. However, now, one in five households is investing in the market. This shift was fueled by an emerging financial revolution, with the middle class increasingly eager to build wealth. The rise of online platforms, low-cost brokerages, and greater financial inclusion provided more people with the tools to invest. But, after years of growth, the tide has turned, and the market is facing a prolonged downturn.
For the past six months, India’s stock markets have been in decline, as foreign investors pulled out their capital, valuations stayed high, earnings weakened, and global capital flowed into China. Since the market’s peak in September, a staggering $900 billion has been wiped off the market’s total value. This downturn is a stark contrast to the optimism that surrounded the Indian stock market just a few years ago.
India’s benchmark Nifty 50 index, which tracks the country’s top 50 publicly traded companies, is on its longest losing streak in 29 years. The index has been declining for five consecutive months, marking a significant slump in one of the world’s fastest-growing economies. Stock brokers are reporting a 30% drop in activity, reflecting the widespread concerns among retail investors. The exuberance of the past has turned into disappointment for many, as even seasoned investors feel the strain.
Mr. Kumar, who once had a thriving portfolio, says, “For more than six months now, my investments have been in the red. This is the worst experience in the last decade that I have been invested in the stock market.” His situation is all the more pressing, as his son’s private medical college fees, amounting to 1.8 million rupees ($20,650; £16,150), are due in July. He is now worried about having to sell his investments at a loss to cover these fees.
“Once the market recovers, I’m thinking of moving some money back to the bank,” Mr. Kumar adds, reflecting the growing uncertainty and caution in the minds of many investors. His concerns mirror those of millions of other middle-class Indians, who had poured their savings into the stock market, believing that the booming market would secure their future. As the market fluctuates, however, many are now finding themselves in a precarious financial position.
Systematic Investment Plans (SIPs), where individuals make fixed monthly contributions to mutual funds, have become a popular investment route among the middle class. The number of Indians investing through SIPs has surged to over 100 million, nearly three times the 34 million investors five years ago. However, many first-time investors have entered the market with limited knowledge and risk awareness, often influenced by social media “finfluencers” on platforms like Instagram and YouTube. These self-proclaimed experts, though often well-meaning, contribute to a growing sense of optimism that may not be entirely grounded in reality.
Tarun Sircar, a retired marketing manager, represents the new breed of Indian investors. When his public provident fund matured last year, he decided to shift his retirement savings into mutual funds, guided by an adviser and the prevailing positive sentiment surrounding the stock market. Mr. Sircar says he invested 80% of his savings in mutual funds, keeping only 20% in the bank. Yet, now, with the market’s recent volatility, he’s not entirely sure whether this was the right decision.
“I’ve put 80% of my savings into mutual funds, keeping just 20% in the bank. Now my adviser warns me – Don’t check your investments for six months, unless you want a heart attack!” Mr. Sircar admits with a wry smile. “I’m both ignorant and confident. Ignorant about what’s happening and why the market is reacting this way, but confident because Instagram ‘experts’ make investing sound like a fast track to millions. At the same time, I know I might be caught in a web of deception and hype.”
Mr. Sircar explains that he was drawn to the market by the glowing reports on TV and excited discussions in his WhatsApp groups, where people boast about their gains. “The TV anchors talk up the market, and people in my WhatsApp group boast about their stock market gains,” he says. “Even teenagers in my apartment complex are discussing investments, and during a badminton game, a teenager gave me a hot tip on a telecom stock. When you hear all this around you, you start thinking – why not give it a shot? So I did, and then the markets crashed.”
Mr. Sircar remains hopeful, believing the market will recover. “My fingers are crossed. I am sure the markets will recover, and my fund will be back in the green,” he says, although his confidence seems more wishful thinking than based on a clear understanding of the market’s mechanics.
Not all investors are as fortunate as Mr. Sircar. Some have taken even bigger risks and already lost significant amounts of money. Take Ramesh (a pseudonym), an accounting clerk from a small industrial town in western India, who borrowed money to invest in stocks during the pandemic. He was lured by get-rich-quick videos from YouTube influencers and decided to dive into penny stocks and derivatives trading. However, after losing over $1,800 (more than his annual salary), Ramesh shut his brokerage account and vowed never to return to the market.
“I borrowed this money, and now creditors are after me,” Ramesh says, reflecting the grim reality for many inexperienced investors who borrowed to invest. Ramesh’s story is part of a larger trend, with around 11 million Indians collectively losing $20 billion in futures and options trades before regulators stepped in to prevent further losses.
According to financial adviser Samir Doshi, this crash is different from the one experienced during the Covid-19 pandemic. Back then, the market had a clear path to recovery with vaccines on the horizon. But now, the situation is more uncertain, especially with the economic impact of US President Donald Trump’s tariff plans and the broader global political instability.
The rise of digital platforms, low-cost brokerages, and the government’s push for financial inclusion has made investing in the stock market more accessible. Smartphones and user-friendly apps have brought the market to millions of new, younger investors looking for alternatives to traditional assets like bank deposits or gold. However, many of these new investors still lack the basic knowledge of market dynamics.
Monika Halan, a financial educator and author, urges caution. “The stock market isn’t a gambling den – you must manage expectations,” she says. “Invest in equity only what you won’t need for at least seven years. If you’re taking on risk, understand the downside: How much could I lose? Can I afford that loss?”
The timing of this market crash couldn’t have been worse for India’s middle class. Economic growth is slowing, wages are stagnating, private investment has been sluggish for years, and job creation is not keeping pace with the growing labor force. In such an environment, many new investors, who were drawn to the market by its previous highs, are now faced with unexpected losses.
Aunindyo Chakravarty, a financial analyst, notes that in normal times, savers can absorb short-term setbacks because they have steady incomes that keep adding to their savings. However, the current situation is far from normal. “We are in the midst of a massive economic crisis for the middle class. On one hand, white-collar job opportunities are reducing, and raises are low. On the other, the real inflation faced by middle-class households – as opposed to the average retail inflation that the government compiles – is at its highest in recent memory. A stock market correction at such a time is disastrous for middle-class household finances,” he says.
Financial advisers like Jaideep Marathe warn that if volatility persists for another six to eight months, many investors might start moving their money from the market into safer bank deposits. “We are spending a lot of time telling clients not to liquidate their portfolios and to treat this as a cyclical event,” he says, holding out hope for a market recovery.
On the positive side, some believe that the market is simply correcting itself after reaching unsustainable highs. Ajay Bagga, a veteran market expert, suggests that the worst of the downturn may be over. “Foreign investor selling has eased since February, suggesting the market downturn may be nearing its end,” he says. He expects GDP and corporate earnings to improve, buoyed by a $12 billion income-tax giveaway and falling interest rates.
In the end, this market meltdown may serve as a wake-up call for the many new investors who entered the market during its boom. As Monika Halan puts it, “This correction is a much-needed wake-up call for those who entered the market just three years ago, enjoying 25% returns – that’s not normal. If you don’t understand markets, stick to bank deposits and gold. At least you have control.” For those still invested in the market, the key question will be whether they can weather the storm until conditions improve.
