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COVID19 mayhem: wealth management apps witness 3x spike in new investors

The novel COVID19 (Coronavirus) pandemic continues to cause mayhem in the global markets. Investor sentiment remains shaken as equity markets wiped off trillions of dollars in just a week. The Indian benchmarks also registered a massive fall on March 18, thus making the investors more miserable by over INR 762 billion. However, the turmoil has turned out to be an opportunity for several online wealth-management or Robo-advisory platforms that witnessed a massive spike in new account openings and registrations and an increase in mutual fund SIPs (systematic investment plans) over the last few weeks.

The platforms also witnessed increased queries for advisory services as worried retail investors scrambled to protect their portfolios. At the same time, a few rushed to invest in MFs, gold, index funds, liquid funds, overnight funds, money market funds, and gilt funds.

Online wealth-management firms are platforms that use technology to help users research, invest and track the investment portfolios in simple and easy steps. In India, there are over two dozens of those including INDWealth, Cube, Kuvera, FundsIndia, Scripbox, Tavaga, and Paytm Money.

Most of the players claimed to have witnessed a record increase in traffic to their platforms in the last few days alone as markets continued to remain volatile following the stress caused due to the deadly COVID19 outbreak in China last September. Since then, the zoonotic virus has affected over which has that has so far claimed 9,844 people.

Zerodha, a leading brokerage firm, released a chart on social media, indicating a 50 % spike in the number of broking accounts opened recently.

Pravin Jadhav

Pravin Jadhav, CEO at Paytm Money, the financial services division of SoftBank-backed Paytm, told IBS Intelligence that, “Over the last two weeks we see the highest number of new investors on Paytm Money every day. It is encouraging to see that despite market volatility, new investors, of which we usually have heard stay away from markets in such times, are investing in mutual funds.”

Jadhav said that about six months ago, Paytm Money was processing INR 10 million every hour, and in the last few weeks, the amount has increased INR 50 million to INR 75 million every hour.

“Even adjusted for expected growth and seasonality, we have seen a significant spike in new signups on our platform in the last quarter. We are currently adding about 2x-3x our expected numbers,” said Gaurav Rastogi of Kuvera.in, a Robo-advisory app based out of Bengaluru that allows users to invest in direct mutual funds.

Mumbai-based wealth-management app Cube, which focuses on salaried professionals in the pay bracket of INR 1 million to INR 3 million, witnessed a significant jump in new users.

Satyen Kothari, the founder of Cube, said that while the current downturn has led to concerns, as well as a sense of potential wealth creation opportunity, the growing digital wealth management services sector has dramatically increased the retail awareness around investing in the past two years. “This means more people have investments in the market and hence are sensitive to global market changes,” he added.

cube wealth managementLately, India has witnessed a massive surge in the number of mutual fund investors and also the volume of investments going into these funds. Thanks to the technology-driven wealth-management apps that are not only helping retail investors educate on the benefits of equity investments and other matters related to financial planning. These apps are also proactive in reaching out to their users and customers during turbulent times and helping them make the right decisions. Earlier investors used to panic and stopped their MFs or pulled out their investments during any economic turmoil. But now things have changed.

Data from Computer Age Management Services (CAMS) shows that over the period February 15 to March 15 of 2020, there has been a 50% jump in new mutual fund folios compared to the monthly average since the start of this year. It is the period when the Indian markets fell by about 30% from its peak in January 2020 on account of Coronavirus and the YES Bank debacle.

“It’s amazing to see that even market crashes of this magnitude are not deterring new investors, it’s bringing more people to the markets. In the seven years, I have been following and involved in the markets; this is the first time I see this trend. A super positive sign that new investors today are more attuned to the long-term,” said Vasanth Kamath, Co-Founder, and CEO of smallcase Technologies. The company saw a 3.5x month-on-month increase in new leads and 1.5x in new investors in March.

Investors also panic in such situations. Nitin Mathur, the founder of Robo-advisory firm Tavaga, said, ” Our experience has been similar to our peers, we have also witnessed a few cancellations of client SIPs. Bias is towards fresh money inflows to benefit from the recent market correction.

He further added that the company endorses passive investments as a majority don’t try to time the market. Moreover, these turbulent times are the ones where clients appreciate the need of ‘advisors’ more, Mathur said adding that it would lead to positive momentum in the advisory business.

Similarly, the Walmart-owned digital payments player PhonePe that is transforming itself into a full-fledged financial services firm saw excellent traction on its platform. The company, with over 200 million users, had launched liquid MFs in January this year to help users earn higher returns on their savings with the ability to withdraw their money instantly.

PhonePeTerence Lucien, Head of Mutual Funds, PhonePe ” Our users across India have immensely appreciated the product, and we are seeing a significant number of investors who are new to Mutual Funds.” PhonePe, however, clarified that these were usual spikes and not necessarily because of Coronavirus scare.

Meanwhile, most of the platforms are witnessing high traction for Index funds along with secure SIP registrations, for example. Paytm Money said that it had the highest ever SIP registrations in February despite being a shorter month. It further noted that the existing equity MF investors are making more lumpsum investments in the current portfolio than choosing new schemes. Daily investments were up 3-4 times in the last few weeks.

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