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In 2014-15, about 1.5 million demat accounts were opened, nearly double the openings in the previous financial year. The rise in new accounts is the steepest in the past four years.
As of February this year, the number of demat accounts with the two depositories — NSDL and CDSL — stood at 23.3 million, up 6.8 per cent compared to 21.8 million at the end of 2013-14. The account addition in 2014-15 was nearly twice that in the previous financial year. In 2013-14, about 880,000 new demat accounts were opened, even as the market rallied 18 per cent.
Between April 2014 and March 2015, India’s benchmark indices rallied about 25 per cent, the most in five years.
Experts say the spectacular upward movement in equities in the past year has managed to draw a lot of investors to the securities market. “The rise we have seen in the past year is something we haven’t seen in a long time. Last year, the market performance was very good and we expect that to continue this financial year. That would ensure more participation from retail,” said Vinay Agrawal, executive director (equity broking), Angel Broking.
For retail investors to return in large numbers, the initial public offering (IPO) market will have to be the driver, experts say. Analysts said large, well-priced and well-marketed issues would help bring new retail participants. They cite issues such as the Rs 15,000-crore Coal India IPO of 2010 and the Reliance Power offering in 2007, which led to mass accretion in retail demat accounts. According to analysts, between 2004 and 2008, when the IPO market was in a boom phase, demat account openings grew 20-25 per cent.
“IPO markets have always been the primary driver for demat account openings. One of the reasons why demat account openings had slowed in recent years is a lull in the IPO market,” said G V Nageswara Rao, managing director and chief executive, NSDL.
Experts say in FY15, new account openings would have been greater, had there been more IPOs. Last financial year saw a total of eight IPOs raise a combined Rs 2,500 crore.
“So, we can assume once the IPO market gains momentum, demat account openings will gain momentum. There is a lot of interest among people as long as the markets remain buoyant,” said Rao.
According to analysts’ estimates, the benchmark indices — the BSE Sensex and the National Stock Exchange Nifty — could rise 18-20 per cent in FY16. As prices have already surged and valuations are expensive in the case of some sectors and stocks, market participants believe investors yet to enter the market are waiting for a dip in prices.
“The mood in the market is a bit cautious and people are waiting for a correction. The outlook for earnings and, therefore, markets would be better in the second half, when the momentum on the ground is likely to pick up,” said Pankaj Pandey, head of research at ICICI Direct.
“In the next three-four years, we expect demat accounts to increase 13-14 per cent. Money has started flowing in and the interest level of retail is also starting to shoot up,” said Agrawal of Angel Broking.
