At 6.1 mn, pace of demat account additions slowest in 10 quarters in Q2FY23

The number of dematerialised (demat) accounts added during the September quarter for the 2022-23 financial year (Q2FY23) was the slowest since Q1FY21.

During Q2, 6.1 million new accounts got added, taking the total tally to 102.6 million. At 6.3 per cent quarter-on-quarter (QoQ) increase, the growth was slowest since the lockdown-hit Q1FY21, which had logged 5.7 per cent QoQ growth. In absolute terms, the growth was lowest since Q4FY21 when 5.3 million new accounts were added.

The highest growth — both in percentage as well as absolute terms — was during Q3FY22, when both the Nifty50 and Sensex had hit their lifetime highs. Spike in volatility, increase in investor base and negative returns this year have resulted in plateauing of growth, say industry players.

The equity markets have seen wild swings over the past one year, amid a pivot towards aggressive monetary tightening by global central banks to rein in inflation. The benchmark Nifty50 is currently 6 per cent below its lifetime high of 18,477 on October 18, 2021. Last month, the demat account tally had topped 100 million for the first time.

Market observers say brokerages have become less aggressive chasing clients, given the high cost of acquisitions and growing inactivity among retail investors. Moribund primary markets too have weighed on demat account additions. During Q2FY23, only four initial public offerings (IPO) hit the market, mobilising only Rs 2,965 crore.

Arun Chaudhry, director & chief business officer, Mirae Asset Capital Markets, said that an uncertain global environment has weighed on new account openings and retail flows but is confident that the broking industry will continue with its healthy pace of growth. 

“This is a temporary phase as we have already seen some light at the end of the tunnel. With mid- and small-cap indices coming-off lows, IPOs slowly coming back to the market and corporate earnings also showing strength. Retail participation will pick up and we will be able to see a 20-25 per cent year-on-year growth in the number of accounts over the next three years,” he said.