Boom to Gloom: India's Middle-Class Feels the Heat Amid Market Slump

• Mar 7, 2025

From Savings to Stocks: A Financial Shift at Risk

Just two years ago, Rajesh Kumar, an engineer from Bihar, heeded his bank adviser's suggestion and moved his savings—including fixed deposits—into mutual funds, stocks, and bonds. Like millions of Indians, he saw an opportunity in the country’s booming stock market. In 2018, only one in 14 Indian households invested in stocks; today, that number has risen to one in five.

But the tide has turned.

Over the past six months, India's markets have faced a sharp decline. Foreign investors have pulled out, stock valuations remain high, corporate earnings are under pressure, and global capital is shifting towards China. The result? A staggering $900 billion in investor wealth wiped out since the market’s September peak. While the downturn began before former U.S. President Donald Trump’s recent tariff announcements, his policies have further rattled the market.

The benchmark Nifty 50 index, which tracks India’s top publicly traded companies, is in its longest slump in nearly three decades, falling for five consecutive months. Stock brokers report a one-third drop in trading activity.

“For over six months, my investments have been in the red. This is my worst experience in the last decade of stock market investing,” Kumar laments.

At 55, Kumar has little money left in the bank, having placed most of his savings in equities. With his son’s 1.8 million-rupee ($20,650) medical college fee due in July, he now faces the difficult decision of selling his investments at a loss. “Once the market recovers, I plan to move some money back to the bank,” he says.

His concerns mirror those of millions in India’s expanding middle class who embraced equity investments in recent years, drawn in by rising markets and easy access through digital platforms.

The Rise of Retail Investors and the SIP Boom

A major factor in this financial shift has been the popularity of Systematic Investment Plans (SIPs), where investors make fixed monthly contributions into mutual funds. The number of Indians investing through SIPs has surged past 100 million—nearly tripling from 34 million just five years ago. Many of these first-time investors, however, have little understanding of market risks, often influenced by financial influencers (“finfluencers”) on social media platforms like YouTube and Instagram.

Take Tarun Sircar, a retired marketing manager. When his government-backed provident fund matured last year, he sought a new investment avenue. Scarred by past stock market losses, he cautiously opted for mutual funds—encouraged by a financial adviser and a thriving market.

“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!”

Despite his concerns, Sircar remains hopeful. “I’m both ignorant and confident,” he admits. “Ignorant about market trends, yet confident because Instagram ‘experts’ make investing sound like a fast track to wealth. At the same time, I fear I may have fallen for hype and misinformation.”

Like many, Sircar was influenced by stock market discussions on television and WhatsApp groups. “TV anchors hype up stocks, and people in my group brag about their gains. Even teenagers in my apartment complex talk about investments. One gave me a stock tip during a badminton game!” he laughs. “So I gave it a shot, and then the market crashed.”

The Perils of Speculative Investing

While some investors remain optimistic, others have suffered heavy losses. Ramesh (name changed), an accounting clerk from a small industrial town, was drawn into the market by YouTube influencers. Borrowing money, he invested in high-risk penny stocks and derivatives during the pandemic.

This month, after losing over $1,800—more than his annual salary—he shut his brokerage account and vowed never to invest again.

“I borrowed money, and now creditors are after me,” he says.

Ramesh is one of 11 million Indians who collectively lost $20 billion in futures and options trading before regulators stepped in.

“This crash is different from the Covid-era slump,” says financial adviser Samir Doshi. “Back then, recovery was clear with vaccines on the horizon. Now, the uncertainty from Trump’s trade policies and global economic conditions make the future unpredictable.”

A Hard Lesson for India’s Middle Class

The rapid rise of low-cost brokerages and easy-to-use investment apps has made market participation more accessible. While this has expanded financial inclusion, many new investors lack a solid understanding of risk management.

“The stock market isn’t a lottery,” warns financial educator Monika Halan. “Invest only what you won’t need for at least seven years. If you take risks, understand the downside—ask yourself, ‘How much can I afford to lose?’”

This market downturn couldn’t have come at a worse time for India’s middle class. Economic growth is slowing, wage increases are stagnant, and job creation lags behind expectations.

“In normal times, people can absorb short-term stock market losses because steady incomes help rebuild savings,” explains financial analyst Aunindyo Chakravarty. “But now, the middle class is in crisis—white-collar job opportunities are shrinking, salary hikes are minimal, and real inflation for middle-class households is at its highest in years. A stock market slump at such a time is disastrous.”

Financial advisers like Jaideep Marathe predict that if volatility persists for another six to eight months, some investors will begin shifting funds back into safer bank deposits. “We’re spending a lot of time urging clients not to panic and sell,” he says. “This is a cyclical downturn.”

A Market Correction or a Deeper Crisis?

Despite the turmoil, many experts believe the market is in a phase of correction rather than collapse. Foreign investor selling has slowed since February, suggesting that the worst may be over. Valuations for many stocks have now dipped below their 10-year averages, making them more attractive.

Market veteran Ajay Bagga sees signs of hope. He expects GDP growth and corporate earnings to rebound, supported by a $12 billion income-tax relief package in the federal budget and falling interest rates. However, geopolitical uncertainties—ranging from Middle East and Ukraine conflicts to Trump’s tariff policies—continue to pose risks.

For new investors, this slump serves as a hard-earned lesson.

“This correction is a wake-up call for those who joined the market in recent years and got used to 25% annual returns,” says Halan. “That’s not normal. If you don’t understand markets, stick to bank deposits and gold. At least you’ll have control.”