The number of dematerialised (demat) accounts — required to hold shares and other securities in electronics format — crossed the 150-million mark for the first time in March.
In March, 3.12 million new demat accounts were added despite a spike in market volatility, taking the total count to 151.4 million.
The milestone has come 19 months after the total number of demat accounts hit the 100-million mark, a sign that more domestic households are taking to direct equity investing.
In FY24 alone, nearly 37 million new accounts were added — the most for any financial year on an absolute basis — and an increase of 32 per cent over the previous financial year.
The encouraging returns delivered by the domestic markets over the past 12 months has ensured a steady influx of new investors.
During FY24, the benchmark Nifty 50 index gained 29 per cent — the best since Covid-hit FY21, while the Nifty Smallcap 100 and the Nifty Midcap 100 index gained 70 per cent and 60 per cent, respectively.
Hopes of rate cuts by the Federal Reserve and regime continuity, which are seen as beneficial to economic growth and better prospects in equity markets, are some of the factors boosting the equity markets.
“In March 2023, markets had made a low, and since then the market has gone up without any meaningful correction or drawdown.
"When there is a sell-off, retail investors tend to average out or look at it as an opportunity to buy.
"Those who have a fear of missing out will be tempted to capitalise,” said Jimeet Modi, CEO of SAMCO Securities.
Besides the broad-based gains, a steady stream of initial public offers (IPO) has also propelled the demat account.
Moreover, IPOs, seen as a new investors' lodestone, were robust in FY24.
Seventy-six companies raised Rs 61,921 crore in the last financial year through IPOs.
Given the lure of listing gains, investor sentiment toward IPOs has become more favourable.
Many existing investors are opening new accounts for their family members to enhance their chances of securing an IPO allotment.
“In the last financial year, Nifty, small, and midcaps gave excellent returns.
"Investors who could not participate in the post-pandemic bull run entered markets in the last 12 months.
"Many IPOs give decent listing gains when you already have 100 million plus demat accounts and active participation.
"It helps to spread word of mouth.
"A lot of times people who have not opened accounts earlier or those who invested through mutual funds get lured to direct investing.
"A small set of customers also came to trade in derivatives,” said Prakarsh Gagdani, CEO of Torus Financial Market.
The ease of opening accounts due to digitisation and more awareness about equity investing is also cited as the reason for this surge in demat accounts.
“Millenials and Gen Zs who have recently entered the workforce consider equities as their primary source of investment.
"Moreover, a demat account enables access to other products like mutual funds, which has added to their appeal.
"And in recent years, flat brokerages and low margin requirements are wooing investors,” said Sandeep Bhardwaj, chief operating & digital officer at HDFC Securities.
Demat account growth is likely to plateau next year.
"Now we are in a euphoric phase.
"In June, the elections will be over and other factors driving the exuberance will be factored.
"The demat account additions will be in the range of 2 to 2.5 million, and incremental growth will be difficult," said Gagdani.
The demat account doesn’t represent unique investors in the country as a single individual can open multiple trading accounts.
The unique investors (based on PAN) count in the country is pegged between 90 million and 100 million.
