The Indian stock market has the immense capability to cater to all investors' needs. However, there was a time when investments in the stock market were frowned upon and seen in a bad light because of their volatility and the possibility of losses. Now, when financial literacy is easily available, more investors are learning about researching securities and investing accordingly, resulting in more profits than heavy losses. This has created a shift from passing investing to active investing, where investors like to invest frequently, taking an interest in investing, rather than investing once for the long-term in such a way that they don’t have to monitor their investments.

If you are a stock market investor, it is beneficial to know how active investing is thriving in India. This blog will help you understand the dawn of active investing in India and how it has surpassed passive investing.

• Active investing involves frequent buying and selling of assets to outperform the market through strategic decisions.
• Passive investing focuses on long-term growth by holding a diversified portfolio that tracks a market index with minimal buying and selling.
• The Indian stock market is witnessing a shift from passing investing to active investing.

Active investing is an investment strategy in which an investor actively buys and sells stocks or other securities with the goal of earning higher returns than the market average or a specific benchmark. This approach involves continuous research, market analysis, and informed decisions to maximise returns. On the other hand, passive investing is a long-term strategy where investors aim to match, rather than beat, the market by investing in index funds or ETFs (Exchange-Traded Funds) that track a specific market index. The idea is that the overall market tends to rise over time, so holding a diversified portfolio of assets will lead to steady growth with minimal trading.

If you look at the US stock market and investments, a majority of investors still rely on passive investing. However, in the last decade, there has been a shift in India from passive to active investing. Market indices such as Sensex and Nifty have reached record highs, and there have been increased investments in mutual funds, which are actively managed by fund managers.

Here are some reasons why active investing is still thriving in India:

Market volatility

The number of demat accounts is the highest it has been in 2024, increasing the number of buyers and sellers. Initial Public Offerings (IPOs) have become immensely popular, and investors are applying to multiple issues almost every week. With the increase in demand, the stock market has become volatile and witnesses frequent price fluctuations, providing trading opportunities and making active investing attractive to investors.

High sectoral growth potential

India is the fastest-growing economy worldwide, and it is because of its sectors that are performing immensely well. With sectors like technology, pharmaceuticals, renewable energy, and fintech experiencing rapid growth, active investors are identifying and investing in companies with high growth potential. Active investments in these sectors offer the potential for high and quick returns, making them ideal for active investment.

Diversified range

One of the main reasons for the growth of active investing in India is that it is not limited to one investment style. Active investors can choose from a host of investment styles suitable for active investing, such as growth investing, dividend investing, intraday trading, and swing trading. This flexibility allows active investors to adapt their strategies based on economic conditions or investor preferences, making active investing attractive and profitable.

Mutual fund growth

Mutual funds have become one of the most widely invested investment instruments because of their SIP and compounding features. The growth of the Indian mutual fund industry, which heavily relies on active investment, is also contributing to the growth of active investing in India. Since there are numerous types of mutual funds, such as equity, debt, hybrid, balanced, etc, they are ideal for active investors who want to diversify their portfolios.

Active investing is thriving, mainly because of the immense growth of India’s economic condition and included sectors. Although many investors still passively invest for low-risk and steady returns, most investors invest a major portion of their capital through active investing strategies, allowing them to earn profits through personalised investment decisions. Now that you know why active investing is thriving in India, you can make better adjustments to your investment strategies.

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