Demat account growth halves in 2025 amid muted returns in equity markets

The growth in the number of dematerialised (demat) accounts halved in 2025 amid muted returns in the equity markets. The number of demat accounts rose by 30.6 million during the year, translating into an average monthly addition of 2.6 million accounts. New demat additions increased by 17 per cent in 2025, compared with a 33 per cent rise in the previous year. This 17 per cent rise over the previous year brought the total to 216 million. Demat accounts are used to hold shares and other securities electronically.

 

Indian equities were turbulent in 2025 as investors grappled with a decline in corporate earnings and uncertainty over the trade deal with the US. The US last year slapped 50 per cent punitive tariffs on India, and since then there has been no favourable breakthrough for the country, even as trade talks continue. The benchmark Sensex gained 9.06 per cent while the Nifty rose 10.5 per cent in 2025. The broader Nifty Midcap 100 rose by 5.7 per cent while the Nifty Smallcap 100 declined by 5.62 per cent. But returns by indices mask a starker reality of rout in the broader markets. Nearly 60 per cent of the top 1,000 listed stocks have delivered negative returns. 

“Demat account growth is a function of two things: one is new investors coming to the market, and the other is existing investors shifting from one broker to another. The shifting from one broker to another, I think, reduced last year. Moreover, the secondary markets were in a time correction mode last year,” said Satish Menon, executive director of Geojit Financial Services.

 

The number of demat accounts has surged since Covid-19, fuelled by simplified account opening, widespread smartphone use, and favourable market returns. Demat accounts have more than quadrupled in the last five years, increasing from 50 million in 2020 to 216 million in 2025.

 

“We are already well-penetrated in terms of demand accounts, and additional spend by large brokers to acquire customers is not delivering value for money. Therefore, the acquisition directly impacted profitability. So, there are two problems with brokers' profitability. One is that the overall business is lower because of market conditions, and second, the acquisition cost went up,” said Prakarsh Gagdani, founder, Soaring Peaks Capital.

 

The only saving grace for demat growth was the 2025 boom in initial public offerings (IPOs). Last year, 103 firms raised ₹1.75 trillion from IPOs.

 

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.

 

Going forward, the growth in demat accounts will hinge on better equity returns.

 

“There has been a huge spike in demat accounts over the last four years. Maybe it will consolidate for a while, and then another spike will come in. The number of direct equity investors in India compared to the total population is lower than in other countries. Demat account growth may not be that great next year as we expect 10-12 per cent growth in the benchmark indices. But if there is a revival in corporate earnings, and a reversal in foreign portfolio investor (FPI) flows, we might be in for a surprise,” said Menon.