Demat account openings rise in May, total count at new high of 118.2 mn

2.1 mn new accounts added, up 32% MoM from 1.6 mn in April, and in line with previous 12-month average of 2 million

The buoyancy in the markets has been boosting new account openings at brokerages. In May, 2.1 million new dematerialised accounts–required for trading and holding shares in an electronic format—were opened with two depositories, CDSL and NSDL. The total count has hit a fresh high of 118.2 million. The new additions in May were up 32 per cent month-on-month and in line with the previous 12-month average of 2 million.

In May, the benchmark Nifty gained 2.6 per cent on the back of strong inflows from foreign portfolio investors (FPIs) and encouraging March quarter earnings. The Nifty Midcap 100 rose 6.2 per cent, and the Nifty Small-cap 100 rose 5.1 per cent. FPIs bought shares worth Rs 43,838 crore in May, the highest buying in nine months.

Market experts said a combination of gain in the mid- and small-cap segments and some excitement due to the initial public offering (IPO) of Mankind Pharma led to the uptick in the opening of new demat accounts.

"The lower number of working days in April was one of the reasons for the drop in numbers in April. In May, a bit of active trading returned because of the fewer holidays. Mid and small caps had a healthy up move in May. Account opening is correlated to the fortunes of mid and small-caps. April was a month of recovery after March markets had taken a beating. May we build on recovery and start showing some momentum. Moreover, every time a huge issue of a known brand comes, new accounts get opened for IPO applications," said Jimeet Modi, founder and CEO of Samco.

Officials at brokerages are saying they are once again witnessing a rise in retail participation and rise in active clients. In February, the share of individual investors in overall trading turnover had declined to a 34-month low. In May, cash market turnover too had risen to an eight-month high.