India crossed 100 million Demat accounts, But will it change the market scenario?

India crossed 100 million Demat accounts

Indian Market
by 5paisa Research Team Last Updated: 2022-09-12T17:34:19+05:30

As of August 31, the count of Demat accounts had surpassed 100 million for the first time. Approximately 71% of these accounts were opened with Central Depository Services Ltd (CDSL), with the remainder with National Securities Depository Limited (NSDL). 

A remarkable 61.1 million new Demat accounts were opened between the end of 2019 and August 2022. Demat accounts have therefore been opened more frequently in the last 32 months than they were in the two decades before.

Since the beginning of 2020, there has been a surge in the number of people opening Demat accounts. The total number of Demat accounts as of December 2019 was 39.4 million. It is worth noting that this is the number of Demat accounts that have been opened and are still active since the mid-1990s when Demat accounts first became popular.

But What is the Reason behind this significant growth in the count of Demat accounts?

- The main reason is that in recent years there is a rise in discount brokerage firms, and now opening a Demat account is very easy due to the availability of opening Demat accounts online, earlier one used to visit a bank or a brokerage firm to open a Demat account.
- The low-interest rate environment that prevailed post covid also pushed people towards opening Demat accounts with the ambition of earning more gains than in savings deposits.
- During the pandemic, the stock market crashed in March 2020 after which the stock market gained momentum, which made the rise in the opening of entries in the stock market. By October 2021, around 3.5 million new demat accounts were opened.

Are these 100 million accounts really trading in markets?

- We need to understand one thing clearly, that an individual can create more than 1 Demat account from different brokerage firms. Therefore, these 100 million accounts aren’t unique.
- According to Industry estimates, 60 million Indians have opened more than 100 million Demat accounts, i.e. 4.3% of the population.
- RBI’s latest financial stability report published at the end of June suggests that around 13 million retail investors traded in May.

Have these 100 million Demat accounts changed the Market scenario?

Less than 30 million active Demat accounts with holdings totaling more than Rs. 10000 were available. At that time, there were 92.1 million Demat accounts overall. It's possible that not much has changed.

In India only 10% of the population earns Rs. 25000 per month i.e., 90% of the population earns less than Rs. 3 lakhs on an annual basis. Here the point to be noted is that most of the population doesn’t have enough money to invest in markets. 
 

So concluding to the point, just the 100 million count of Demat accounts is not enough to change the market scenario.


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About the Author

Our research team is composed of some highly qualified research professionals, their expertise range across sectors.

Disclaimer

Investment/Trading is subject to market risk, past performance doesn’t guarantee future performance. The risk of trading/investment loss in securities markets can be substantial. Also, the above report is compiled from data available on public platforms.

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