InvestorQ : How did Indian demat accounts grow from 4 crore to 10 crore in the last 2 years? What were the triggers?
Mary Joseph made post

How did Indian demat accounts grow from 4 crore to 10 crore in the last 2 years? What were the triggers?

Arusha Ray answered.
4 weeks ago

In the last 30 months since the COVID lows of March 2020, the number of demat accounts have grown 2.5X times from 4.09 crore to a little above 10 crore. In the month of August 2022 alone, more than 22 lakh demat accounts were added. As of August 2022, CDSL had 7.16 crore demat accounts while NSDL had 2.89 crore demat accounts. However, NSDL dominates the assets under custody or AUC with Rs320 trillion ($4 trillion) compared to just Rs38.50 trillion ($480 billion) AUC in case of CDSL. NSDL dominates institutional clients.

Several factors triggered the surge in demat accounts. There have been thousands of millennials entering the equity market and demat account is the first step for them. Secondly, debt and other asset classes have not given competitive returns so investors, especially the younger ones, are gravitating more towards equities. Then there is also the surge in IPOs in the last 1 year. The IPO mania of 2021 also triggered a large number of fresh demat account openings in India, with the most prominent being the LIC IPO.

There have been other micro reasons too. For instance, the sharp surge in the index and substantial lean hours due to the lockdown and mobility restrictions resulted in a lot of equity trading and that added to demat accounts in a big way. Also shifting to work-from-home models encouraged equity trading and demat account opening due to spare time available. In addition, the factors like ease of account opening, data penetration of a high order and sharply competitive brokerage rates also led the demat surge.

While the unique demat accounts would be around 7 core, it is still a good number. One more observation is a strong correlation between market robustness and the number of demat accounts opened. More demat accounts tend to get opened when markets are robust and rising. But 7 crore is still a small percentage of India’s population. More so when you consider that India has a population of 135 crore, more than100 crore mobile connections, over 45 crore bank accounts and nearly 27 crore insurance policies.