Demat accounts surge past 171 mn, helped by investor interest in IPOs

There has been an average addition of 4 mn accounts monthly since 2024

The number of dematerialised (demat) accounts — used for holding shares and other securities electronically — rose by 4.2 million in August, reaching a total of 171.1 million.

It marks an average addition of 4 million accounts monthly since 2024.

The demat tally was boosted by record initial public offerings (IPOs) in August. Last month, 10 companies raised Rs around 17,000 crore via IPOs — the most amount in 27 months. This calendar year, more than 50 companies have raised Rs 53,419 crore until August 31.

A recent study by the Securities and Exchange Board of India (Sebi) showed a significant number of investors are opening demat accounts primarily to participate in IPOs.

Almost half of the total allotted demat accounts that applied for IPOs from April 2021 to December 2023, were opened in the post-pandemic period, according to the study.

It is also seen that investors open fresh demat accounts for family members to increase their chances of securing IPO allotments.

Almost 32 million demat accounts have been added in the first eight months of calendar year 2024. Despite market turbulence and headwinds, including hike in capital market taxes and concerns that the United States is headed for a recession, the Indian stock market continues to attract new investors. Market experts view the steady pace of demat additions as a positive sign for market stability. The incremental flows from these new investors will help offset any potential outflows from overseas funds or existing investors, and help keep volatility under check, they said.

The trend also suggests a growing channelisation of household savings into equities. According to a Sebi working paper, domestic household investments in equities stood at Rs 128 trillion in FY24, up from 84 trillion in FY23.

Digitisation and increased awareness about equity investing have made it easier to open accounts, contributing to the surge in demat accounts.

The gains in mid and small-cap segments, combined with a robust IPO market, have enhanced the appeal of equities for new investors. 

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