Demat accounts light up for early Diwali in August, September

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As the stock markets have risen in India, pulling dollars from foreign investors and rupees from domestic ones, more and more Indians have joined the rising crowd of investors marching towards Dalal Street, sending the number of demat accounts sky high.

Demat accounts are necessary to hold shares, bonds, and other securities in electronic format.

Significantly, though FPIs have turned out to be net sellers of Indian equities in September, thanks to the bond yields in the US markets, more than 30 lakh demat accounts were opened in the country for the second consecutive month, sending a strong signal that the more and more investors are falling to the lure of the stock markets in their search for inflation-beating returns.

Central Depository Services and the National Securities Depository, the country’s two depository firms, cumulatively added 31 lakh new accounts. While the month of August recorded a higher number of demat additions.

The total number of demat accounts has zoomed to 13 crore. In other words, it is about 10% of the country’s total population. However, the total number of investors might be fewer than this number since a person can open more than one demat accounts.

Significantly, despite the heavy FPI selling in September, both the Sensex 30 and the Nifty 50 set new records of all-time highs set in December. The buoyant markets also attracted a record number of initial public offerings (IPOs) and all these factors combined to the fast growth of demat accounts.

In August, the NSE said that more than 8 crore distinct investors participate regularly in the stock markets. What is of significance is that the founder and chief executive officer of Zerodha, Nithin Kamath, said that most of these 8 crore plus investors have entered the market in the past three/four years.

Kamath posted on social media: “NSE just announced that there are 150 million investors registered, of which 80 million are unique. Much of this growth has come in the past three/four years. The pace of financialisation is crazy, and this is in no small part thanks to the exchanges, especially NSE. This is vital for India to grow….”

The fact that India is supposed to be one of the fastest growing economies in the world for the next few years and the consumption potential and expanding middle-class story have boosted the confidence of the common man in the equity markets.