Investors add 41 lakh demat accounts in a year

The recent volatility in the stock market hasn’t deterred new investors from trying their luck in equities. In the one year ended June 30, a good 41 lakh investors opened demat accounts with the depositories, taking the total number of stock market investors in the country to 3.65 crore.

This is the highest number of demat accounts added in a year since 2011 when market regulator the Securities & Exchange Board of India (Sebi) started disclosing the data.

Interestingly, this growth in the demat accounts comes even as markets remained shaky during the period. The benchmark Sensex has given only 7 per cent returns since last June, and smaller stocks have done even worse with the BSE mid-cap and small-cap indices falling 6 per cent and 13 per cent, respectively.

The total number of accounts has increased by nearly half in a span of four years, indicating the growing preference for equities among investors. The markets added 35 lakh and 25 lakh investors in the previous two years, data showed.


Market participants said increasing financial literacy in the country is drawing more investors to equities. The share market has outperformed other asset classes, including real estate and gold, in the past five years. The benchmark Sensex has risen 70 per cent since 2016, implying an average yearly return of over 20 per cent.

The data includes accounts being added for direct market investments, purchase of mutual fund units and subscriptions to non-convertible debentures (NCDs).

“We are seeing a sharp rise in the number of new investors coming to the markets for direct stock investments and purchase of MF units,” said Prashant Prabhakaran, chief executive officer at Yes Securities. “The ease of opening new accounts has also improved significantly in the past two years, thanks to the use of digital KYC and electronic signature for opening new accounts. Investors no longer need to wait for weeks together to open a trading account,” he said.

Although Mumbai continues to be the largest hub for stock market investors, other major cities are fast catching up with the equity culture, especially in the information technology (IT) hubs, like Bengaluru and Hyderabad.

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While the geography-wise split of demat accounts is not publicly available, these cities have seen a sharp surge in their contribution to the cash market volumes. For instance, the share of Bengaluru in the total cash market volumes has gone up from 0.3 per cent in FY13 to 4.2 per cent. Similarly, the share of Hyderabad in equity markets has risen from 1.4 per cent in FY13 to 3.3 per cent at present.

“Stock markets have caught the fancy of several first-time investors in these cities who work for emerging sectors like startups,” said Nitin Kamath, chief executive officer of Zerodha, a Bengaluru-based discount brokerage.

“These investors are very different compared to the traditional investors as they are eager to learn about markets and spend time researching.”

On the other hand, the share of Mumbai, the largest city by market volumes, has dipped from 63.8 per cent to 63.6 per cent since FY13.

The sizeable contribution of Mumbai to the overall turnover is because of large institutional investors being based out of Mumbai.

Not just the number of investors, the quality of flows has also improved significantly, said experts. During the past one year, markets witnessed at least three major sell-offs with Sensex falling over 13 per cent in one of the corrections that happened between August and October 2018.

However, retail investors have stayed on with their investments. This is also evident from the fact that homegrown mutual funds witnessed steady inflows at an average of Rs 8,000 crore a month despite the market turbulence.