At 2.26 mn, February sees lowest demat account additions in 21 months

Worst rout in broader markets since Covid-19 impacts new investor influx

The influx of new investors into the stock market arena slowed to its lowest pace in nearly two years as the broader markets went through their worst-ever rout since the Covid-19 pandemic. In February, only 2.26 million new accounts were added, the lowest monthly addition since May 2023. The slowdown is attributed to the equity market correction and a decline in initial public offerings (IPOs).

 

The pace of demat account additions has been slowing down since July 2024, when it reached a high of 4.6 million. In January, 2.8 million accounts were added. The recent market volatility has severely dented investor confidence, leading to a decline in new account openings.

 

February's market selloff was brutal, wiping out a staggering ₹40 trillion in market value. The benchmark Nifty suffered its longest monthly losing streak in nearly three decades, and the broader markets plummeted to their worst decline since March 2020. The Nifty 50 fell nearly 6 per cent, while the Nifty Midcap 100 and Nifty Smallcap 100 indices declined 11 per cent and 13 per cent, respectively.

 

The market fall made a dent in trading activity, with the average daily turnover (ADTV) for the cash market dropping 10 per cent month-on-month to ₹91,661 crore in February, while the ADTV (on notional basis) for the derivatives segment was down 2 per cent to ₹188 trillion. From the peak, the ADTV for the cash and derivatives segment is down 44 per cent and 51 per cent, respectively.

 

"The fall in individual stocks has been much more sharply than the headline indices. In some cases, they have halved in the last five months. This impacts the sentiments,” said Prakarsh Gagdani, CEO of Torus Financial Market. The decline in IPOs in 2025 has also led to fewer new investors coming to markets. 

 

A significant number of investors open demat accounts primarily to participate in IPOs. Investors open fresh demat accounts for family members to increase their chances of securing IPO allotments. The average number of IPOs in a month has declined from eight in 2024 to five this year.

 

"The slowdown in returns and issuances from both mainboard and SME IPOs has made markets less attractive. But the biggest factor is the fall in markets,” said Gagdani.

 

Demat accounts are used to hold shares and other securities electronically. Demat account additions in the future will hinge on the improvement in market sentiment.

 

"Unless the market rallies, we will not see user additions pick up fast. The growth rate in the last few years has been exponential, and a bit of cooling-off time is not bad. The new investors need to adjust and understand that the market has a cycle. Because they came in during the extreme bull market, correction is scaring them a lot,” said Tejas Khoday, co-founder & CEO of FYERS.