The benchmark indices have witnessed a sharp rally since their March lows, partly fuelled by the increase in retail investors, according to experts. And, the BSE data shows that this spurt in registered users was aided by huge increases in states like Manipur, Telangana, and Arunachal Pradesh.
Manipur saw the steepest rise in client base in the past year. At 33,901 registered clients as of October 12, the base grew a massive 183 per cent year-on-year (YoY). Telangana with 1.38 million (152 per cent rise), Arunachal Pradesh with 8,385 users (90 per cent), Mizoram with 3,876 users (86 per cent), and Lakshadweep with 305 users (up 73 per cent) make up the top five states in terms of increase in registered client base over the previous year, the BSE data shows.
A million new demat accounts were opened for a third straight month in August, taking the total retail accounts tally to 44.46 million. Over 6 million demat accounts have been opened since the beginning of the year, which is a record. The registered investor base as of October 12, according to the BSE, has hit over 550 million — up over 37 per cent YoY.
This rise in new demat accounts was particularly sharp after the nationwide lockdown was imposed to check the spread of Covid-19, said A K Prabhakar, head of research at IDBI Capital. “Since the country was in lockdown mode, a number of people took to stock trading to generate better returns than the traditional avenues such as fixed deposits. Ease of opening an online trading account helped. Also, these states earlier had lower penetration/lower number of people who were trading, so the sudden spurt in trading activity magnified the overall picture,” added Prabhakar.
Thanks partially to this increase in user base, the Nifty touched the 12,000-mark intra-day on Monday, after nearly eight months, before closing at 11,930.95 points.
However, the increase in geographical spread had little impact on the overall ranking of states. Maharashtra still accounts for the largest client base by far, with around 12 million registered users and it saw the largest absolute increase of users at 3.15 million (35.33 per cent). Gujarat was second, with 7.4 million registered users, and saw an increase of 1.47 million users (24.64 per cent). Uttar Pradesh retained the third spot, with 3.91 million users, recording a rise of 1.22 million (45.61 per cent) YoY.
The only change in the top five was Tamil Nadu (TN) beating West Bengal (WB) to the fourth spot. TN had 3.59 million users (33.95 per cent rise) and WB 3.38 million users (25.89 per cent increase).
“New equity investors seem to be driving up the overall market valuations. Traditionally states like Gujarat and Maharashtra have large equity investor base. However, the YoY jump in the investor base in the non-traditional states is quite surprising,” says G Chokkalingam, founder and chief investment officer at Equinomics Research & Advisory.