Demat account openings hit a record 14.2 million in FY2021
Indian investors opened a record 14.2 million new paperless accounts in FY21, nearly three times the figure for the previous fiscal year, as the global pandemic and business disruption opened up new opportunities investment.
On the other hand, 4.9 million demat accounts were opened in fiscal year 20, with a three-year average of 4.3 million over the three fiscal years opened from fiscal year 2018, according to data from National Securities Depository Ltd (NSDL) and Central Depository Services Ltd (CDSL).
In March 2021 alone, 1.9 million demat accounts were created, the largest monthly increase on record, indicating that investors have shifted their savings from traditional instruments such as gold, real estate and deposits. banking towards alternatives such as equities.
A dematerialized or demat account is opened by an investor with a depositary member to invest in securities such as stocks and bonds. The titles are held in digital format.
As markets rallied strongly in FY21 after the crash that followed the nationwide lockdown in March of last year, appetite for equity trading has increased. In FY 21, the benchmark Sensex gained 68% while the BSE500 climbed 77%.
“The covid-19 epidemic has been a major influx point for the discount brokerage industry as a whole and we have seen record openings of demat accounts as a growing number of millennials begin to settle. steer towards dual or multiple sources of income, and the stock market seemed like a great investment option, ”said Prakarsh Gagdani, managing director of 5paisa.com, an online discount brokerage firm.
Policy changes such as easier know-your-customer (KYC) standards, greater internet penetration, and affordable devices and technologies have enabled easy access to services and increased the financialization of savings, said analysts.
A gradual decline in equity markets in recent weeks, with the Sensex down nearly 7% from its all-time high, is unlikely to shake retail investor confidence, market experts have said. mint.
“Markets are always cyclical in nature. With the huge amount of information available on the internet, new age investors and traders entering the markets are well aware of the ups and downs in the market, volatility. We are convinced that new age investors have a good understanding of the opportunities in the financial markets, especially in the long term, and will continue to take advantage of this financial instrument to grow and achieve their financial goals ”, said Jaideep Arora, CEO, Sharekhan by BNP Paribas.
“When it comes to markets, last year’s factors were unique; however, we expect moderate growth this year, but a critical time for investors to make the most of the volatilities we are seeing, ”added Arora.
Arora expects demat accounts to continue to grow this year. Factors such as digitization, growing awareness of equities, diversification of savings and a low interest rate environment will push more people into financial markets, he said.
Young investors as well as investors from Tier 2 and 3 cities such as Nashik, Jaipur, Guntur, Patna, Kannur, Tiruvallur and Nainital started trading in FY 21, Arora said.
“Since we launched our online account program, Tier 2 and Tier 3 cities have surprised us with how quickly they are adapting to the digital journey,” said Arora.
Even as the raging coronavirus pandemic spread to small towns in Wave 2, analysts believe trading will continue to attract more investors.
“Rather, the coronavirus was a factor that changed people’s approach to investing. They are now looking for high return investment options to have a cushioning amount that would support them in times of crisis or help them recover lost money. Right now, over 80% of 5paisa’s total consumer base includes consumers from Tier 2 and Tier 3 cities and we only see this increase in the near future, ”Gagdani added.
Gagdani sees the momentum of rising retailer participation in the stock markets continue into the coming year.