A growing number of middle-class Indians ventured into the stock market, enticed by high returns and financial influencers. However, a prolonged market downturn has left many struggling to recover losses, questioning their investment decisions.
The Indian stock market has seen a seismic shift in recent years, with millions of middle-class households shifting their savings from traditional bank deposits to equities. Once viewed as a playground for seasoned investors, the market became a mainstream wealth-building avenue, largely due to easy access via digital platforms and a booming financial influencer culture.
However, optimism has turned to anxiety as the market continues its downward spiral. Since its peak in September, the Indian stock market has wiped out nearly $900 billion in investor value. The decline, exacerbated by foreign investor withdrawals, weak corporate earnings, and global capital shifts, has overshadowed the once-thriving middle-class investment landscape.
A Financial Revolution and Its Aftermath
Just a few years ago, stock market participation in India was limited. In 2018, only one in 14 Indian households invested in equities. By 2024, this number had risen to one in five, fueled by attractive returns and widespread financial inclusion.
Systematic Investment Plans (SIPs) became a popular route for first-time investors, offering a structured way to invest in mutual funds with monthly contributions. SIP investors have tripled in five years, surpassing 100 million accounts. Yet, many entered the market with little understanding of risks, often influenced by social media financial influencers, or “finfluencers,” who promote stock investments as a fast track to wealth.
For months, optimism prevailed. Then, the tide turned.
Middle-Class Investors Struggle Amid Market Crash
The current market downturn has left countless middle-class investors in distress. Many who had shifted their life savings to stocks and mutual funds are now seeing red.
Rajesh Kumar’s Risky Shift from Bank Savings to Stocks
Rajesh Kumar, an engineer from Bihar, followed his bank adviser’s suggestion two years ago and moved most of his fixed deposits and savings into mutual funds, stocks, and bonds.
At first, his decision seemed wise as India’s market surged. But for the past six months, his investments have been steadily declining. With his son’s medical college tuition of 1.8 million rupees (£16,150) due in July, he now faces the painful choice of selling at a loss to cover the fees.
“I was confident the market would keep growing, but now I’m stuck,” he says. “Once things recover, I will consider returning some money to the bank.”
Tarun Sircar’s Retirement Woes
Tarun Sircar, a retired marketing manager, faced a similar dilemma. When his government-backed Provident Fund matured last year, he sought to secure his retirement by investing in mutual funds.
Having previously suffered stock market losses, he was initially hesitant. However, financial advisers and TV analysts convinced him that mutual funds were safer than direct stock investments. He moved 80% of his savings into equity mutual funds, leaving only 20% in his bank account.
Now, his portfolio is deep in the red. His financial adviser has warned him not to check his investments unless he wants a “heart attack.” Despite the losses, Sircar remains cautiously optimistic.
“Ignorant yet confident,” he says with a wry smile. “Confident because influencers make it sound easy, yet ignorant about why the market is behaving this way.”
Ramesh’s Costly Gamble with Penny Stocks
For some, the financial downturn has been catastrophic. Ramesh (name changed), an accounting clerk from a small industrial town, was lured by get-rich-quick YouTube videos during the pandemic.
Encouraged by social media influencers, he borrowed money to trade in high-risk penny stocks and derivatives. Within months, he had lost more than $1,800—more than his annual salary.
Now, unable to repay his debts, he has shut down his brokerage account and sworn off investing altogether.
“I was fooled into thinking I could make easy money,” he admits. “Now, my creditors are after me, and I have nothing left.”
What Triggered the Market Collapse?
India’s stock market decline began before U.S. President Donald Trump’s tariff announcements, but recent trade tensions have worsened the situation. Several factors have contributed to the downturn:
- Foreign Investor Withdrawals: Large foreign investors have been pulling money out of India’s stock market, redirecting capital to China and other markets.
- Overvaluation and Weak Earnings: Many stocks were trading at high valuations, making them vulnerable to correction. Corporate earnings have not met expectations, further dampening investor sentiment.
- Economic Uncertainty: Inflation, stagnant wages, and slow job creation have weakened consumer spending and private investment.
- Global Factors: Rising geopolitical risks, including conflicts in Ukraine and the Middle East, have led to increased volatility in financial markets worldwide.
The Illusion of Easy Profits
The rise of financial influencers on platforms like Instagram and YouTube has played a major role in shaping investment behavior. Many new investors were drawn in by promises of quick riches, unaware of the complexities of market cycles.
TV analysts and WhatsApp groups further fuelled the excitement. Even teenagers in apartment complexes started discussing stock tips.
However, financial experts warn that stock markets are not gambling arenas. Monika Halan, a financial educator, advises new investors to follow the “seven-year rule”—only invest in equities if the money will not be needed for at least seven years.
“The market correction is a wake-up call,” she says. “If you don’t understand markets, stick to bank deposits and gold. At least you have control.”
The Broader Economic Impact on Middle-Class Households
The stock market downturn has arrived at a challenging time for India’s middle class. Economic growth has slowed, job creation remains weak, and private investment has been sluggish.
Aunindyo Chakravarty, a financial analyst, explains that under normal circumstances, savers can withstand short-term market declines because their incomes allow them to continue investing. However, stagnant wages and rising living costs have left many middle-class families financially stretched.
“Incomes are not rising fast enough, while the real inflation faced by households is at its highest in recent memory,” he says. “At such a time, a stock market correction is disastrous for middle-class finances.”
Will the Market Recover?
Despite the current turmoil, some experts believe the worst may be over.
Ajay Bagga, a veteran market analyst, points out that foreign investor selling has slowed since February. He expects corporate earnings to improve, driven by government stimulus measures, including a $12 billion income-tax giveaway in the latest federal budget.
Lower interest rates could also provide a boost to businesses, potentially aiding market recovery.
However, global uncertainties remain. The ongoing conflicts in Ukraine and the Middle East, along with Trump’s tariff policies, continue to pose risks to investor confidence.
A Cautionary Tale for New Investors
For many, the current stock market downturn is a harsh lesson in financial reality.
While the market remains a powerful tool for wealth creation, blind optimism and speculative investments can lead to significant losses. Financial advisers are now urging clients to diversify their portfolios, avoid panic selling, and focus on long-term strategies.
For investors like Rajesh Kumar, Tarun Sircar, and Ramesh, the crash has been a painful experience—one that underscores the importance of financial literacy, risk management, and realistic expectations.
