The number of demat accounts rose to 10.4 crore in October, 41 per cent higher from a year earlier, on attractive returns from the equity markets, even as incremental additions of such accounts have been on a declining trend for the past few months.
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According to an analysis by Motilal Oswal Financial Services, incremental additions of demat accounts have been continuously declining since August. The additions stood at 26 lakh in August, fell to 20 lakh in September and further dropped to 18 lakh in October 2022.
The incremental addition in dematerialised (demat) accounts was 36 lakh in October 2021.
The primary reason for the declining trend in additions of new demat accounts is the market volatility seen in the current calendar year due to global factors and relative under-performance of broader markets compared to frontline indices, said Roop Bhootra, CEO Investment Services, Anand Rathi Shares and Stock Brokers.
Lesser number of new initial public offerings (IPOs) hitting markets this year compared to 2021 has also contributed to the lower number of demat accounts being opened in the last few months, he added.
Nitin Aggarwal, Senior Group VP, Research-Banking & Insurance, Institutional Equities, Motilal Oswal Financial Services, said since January, additions have been slowing down as the market volatility increased post the Russia-Ukraine conflict.
“Also, there has been increasing noise about rising inflation and interest rates around the globe. Given such uncertainties, there has been a conscious strategy by brokers to spend less on customer acquisition in this phase. This is to ensure an efficient conversion ratio of leads,” he added.
The decline in incremental addition in October from the preceding month could also be due to the festive season as there were effectively only 18 working days in October 2022 as compared to 22 working days in September.
However, Aggarwal believes that the momentum will come back along with the strength in equity markets in the longer term given the deep under-penetration.
The number of demat accounts rose to 10.4 crore in October 2022 from 7.4 crore in October last year, registering a gain of 41 percent.
“The overall reasons for the Y-o-Y increase in number of demat accounts are an increase in smartphone usage, easier digital onboarding of customers, and attractive returns delivered by the equity markets in the last couple of years,” Anand Rathi Shares and Stock Brokers’ Bhootra said.
Also, the pandemic taught everyone across India to reconsider their spending and investment habits.
On a month-on-month basis, the number of demat accounts grew by just 2 per cent during the month under review from 10.3 crore in September.
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Also, active user clients for the industry as a whole rose 30 per cent year-on-year but fell 1.9 per cent month-on-month to 3.6 crore. This was the fourth consecutive month of decline.
The top five discount brokers accounted for 59 per cent of overall NSE active clients during the month under review, as against 58.6 per cent in September.
