4 million new demat accounts opened in 2018, a 10-year high
MUMBAI: Indians are making a rapid shift in their saving patterns from traditional instruments such as gold, real estate and bank deposits to alternatives like stocks, showed data from the Securities and Exchange Board of India (Sebi).
The number of dematerialized (demat) accounts opened in 2018 was the most in at least a decade at 4 million, a 13% increase from the previous year, the data showed. More households in India began to prefer the stock markets after demonetization in November 2016 when the Union government banned high-value currency notes.
According to capital markets regulator Sebi data, the total number of demat accounts rose to 34.8 million in 2018 from 30.8 million in the previous year. There were a total of 16.8 million demat accounts in India in 2009, an indicator of the sharp increase in retail investors in equity markets. A demat account is opened by an investor with a depository participant to invest in securities such as stocks and bonds.
Nikhil Kamath, co-founder and chief investment officer of Zerodha, an online discount brokerage firm said, “With the push towards financial inclusion, a new set of participants have bank accounts now. We see a considerable influx in the middle-income groups which are now diversifying from gold and real estate into the financial markets. Along with easier access to stock markets, we see the number of accounts opened in India increasing each year exponentially.”
Kamath, however, said India as a market is still at a very nascent stage with a very small part of the population having any kind of access to financial markets. “In India, less than 10% of the population has any exposure to the stock markets as compared to developed economies where this number is closer to 90%,” he added.
Others agree. Prakarsh Gagdani, chief executive officer of 5Paisa Capital Ltd, an online discount brokerage firm and part of the IIFL group, said retail investors flocked to equities after the massive returns in 2017. “Retail always participates, when they see the market going up. Seeing previous years’ returns, retail investors flocked to the market in 2018. Also, with the rise of discount brokers offering easier and faster digital account opening, the demat number additions are higher. For example, we clocked over 300% growth in client acquisitions last year,” Gagdani added.
Gagdani also said that retail investors have also become more active in secondary markets and are accessing more knowledge platforms than ever before.
In 2017, the equity benchmark index Sensex jumped 27.91% followed by a muted 5.91% return in 2018 which did not curb enthusiasm of retail investors.
The primary markets also cooled off last year with 24 initial public offerings (IPOs) hitting the markets which raised a total of ₹30,959.07 crore in 2018. In 2017, 36 IPOs hit the markets garnering ₹67,147.44 crore. Mutual funds also attracted retail investors, with money collected through SIPs showing a growth trend.