New demat a/c openings double in FY15

Around 1.5 million new accounts opened amid robust rally in equities

Investor demat accounts in 2014-15 have grown by about 1.5 million, almost double the amount of openings seen in the previous financial year. The increase in new accounts is also the highest such increase seen in the last four years.

The total number of demat accounts as on February 2015 with the two depositories NSDL and CDSL, stood at 23.3 million, up 6.8%, or 1.5 million, compared to 21.8 million at the end of last financial year. The country’s benchmark indices rallied around 25%—most in five years—between April 2014 and March 2015. The account addition in 2014-15 was nearly double that witnessed during previous financial year. In 2013-14, around 880,000 new demat accounts were opened even as the market rallied 18%.

Industry experts said that the spectacular one-way upward movement in equities in the last one year has managed to draw a lot of new investors towards the securities market.

“The rise that we have seen in the last one year is something which we have not seen in a very long time. The market performance has been very good last year and we expect the performance to continue in this fiscal. This will only bring in more participation from the retail,” said Vinay Agrawal, executive director-equity broking, Angel Broking.

For retail to come back in hoards, experts say the initial public offering (IPO) market will have to be back in full-swing. Analysts said that large, well-priced and well-marketed issues would help bring in newer retail participants.

Experts cite the example of issues like the Rs 15,000 crore Coal India IPO in 2010 and Reliance Power offering in 2007, which led to mass accretion in retail demat accounts. As per industry analysts, between 2004 and 2008 when the IPO-market was in a boom phase, demat account openings grew at the rate of 20-25%.

“IPO markets have always been the primary driver for demat account openings. One of the reasons why demat account openings had slowed down in recent years was because of the lull in the IPO market,” said G V Nageswara Rao, managing director and chief executive officer, NSDL.

Experts point out the new account opening in FY15 would have been even greater had there been more IPOs. Last financial year, saw a total of eight IPOs raise a total of Rs 2,500 crore.

“So, we can assume that once the IPO market gains momentum, the demat account openings will further gain momentum. There is a lot of interest among people as long as the markets remain buoyant,” said Rao.

According to consensus analysts’ estimates, the benchmark indices BSE Sensex and NSE Nifty could rise 18-20% in FY16. Since prices have already surged and valuations are already expensive in case of some sectors and stocks, market participants believe that those investors who are yet to enter the market are waiting for a dip in prices.

“The mood in the market is a bit cautious and people are waiting for a correction. The outlook for earnings and therefore, markets would be better in the second half when the momentum on the ground is likely to pick up,” said Pankaj Pandey, head of research at ICICI Direct.

“In the next 3-4 years, we expect demat accounts to grow by 13-14%. Money has started flowing in and the interest level of retail is also starting to shoot up,” said Agrawal of Angel Broking.