Online brokerages see uptick in new investors even as markets crash

Ease of account opening due to e-KYC, tempting valuations after the market crash, work-from-home and SBI Card mega IPO are reasons for the spurt

Online brokerages are witnessing an uptick in new client registrations despite the meltdown in the market. Most leading players say additions over the past one month have been as much as 80 per cent higher than their past monthly average. Ease of account opening thanks to e-KYC, tempting valuations after the market crash, work-from-home directives and mega IPO of SBI Cards are some of the reasons cited by broking houses for the spurt in account openings.

Zerodha, India's largest brokerage firm in terms of clients, says it has had an 80 per cent jump in average monthly new client additions over the last three months. The Bengaluru-based firm has added about 120,000 unique sign-ups so far in March.

IIFL Group-backed platform 5paisa.com, too, said its number of new clients doubled this month compared to their monthly average. Ratan Tata-backed Upstox was on track to add 130,000 to 140,000 fresh demat accounts in March. Self-funded platform FYERS' client base has risen 30 per cent compared to February.

These new investors are entering the equities segment at a time when it is undergoing its worst-ever selloff. So far this month, the benchmark Sensex has plunged more than 10,000 points, or 30 per cent.

But what is driving these new participants even as existing investors’ faith in the market is shaken?.

"This is not normal behaviour as markets have fallen sharply. But it's scary as well," said Nithin Kamath, founder and CEO of Zerodha.   "Historically when markets fall, existing clients stop their active trading and they typically stop opening new accounts."

One reason is onboarding is getting added at a faster pace is that people are working from home due to the coronavirus outbreak so they have more time to experiment, he added.

Agreed, Tejas Khoday, co-founder and CEO of FYERS. "Unlike 2008, which was a financial crisis, people are working from home and now can invest really widely."  

Most of the people who are opening accounts are first-timers and millennials, said Prakarsh Gagdani, CEO, 5paisa.com.

"They are smart enough to seize this opportunity to invest when the prices are low." Agreed, Ravi Kumar, co-founder at CEO of Upstox, saying that the tech-savvy young India had a better risk appetite who can now open an account and start trading in a day.

According to the latest Securities and Exchange Board of India data, the number of investor accounts stood at 39.5 million in January 2020, 12 per cent jump in one year.

Zerodha said there was one spike was ahead of the SBI Cards IPO but the "intensity" has further increased after the IPO got closed. The country’s first credit card IPO closed on March 5 before the turmoil in the markets intensified. The Rs 10,300-crore issue, India’s fourth biggest, saw a whopping 3.9 million investor applications.

The new signups are largely focussed on equities and mutual funds and traction in derivatives segment were very little, say market players. Some said they are advising new investors to stay away from the derivatives segment for the time being given the volatile movements in stock prices.

Bengaluru-based FYERS, whose core client base is active daily traders, however, said the volumes in equity and commodity segment was 30-40 per cent higher this month. 

Spurt in account openings
 

• Zerodha: 80% jump in average monthly new client additions
• FYERS: 120,000 unique sign-ups in March
• 5paisa.com: The number of new clients doubled this month
• Upstox: On track to add 130,000 to 140,000 fresh demat accounts
• Sharekhan: The number of daily trades increased 25% this month
• smallcase Technologies: 1.5x jump in new investors over a month