Amidst volatility, new demat accounts continue a strong surge

This is also a significant increase from 43.72 lakh in the previous month and 29.80 lakh a year ago in July.

The Indian stock market may well be seeing heightened volatility on the back of global economic and geopolitical concerns but that has not stopped new investors coming to the markets and betting big on equities.

The quantum of new demat account openings surged to a six-month high in July as data from the two depositories – CDSL and NSDL – shows that over 44.41 lakh demat accounts were opened in July, which was the highest since January 2024 when 46.8 lakh demat accounts were opened.

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This is also a significant increase from 43.72 lakh in the previous month and 29.80 lakh a year ago in July.

Further, this also marks the fifth instance of over 40 lakh new demat accounts being opened in a single month. The number of total demat accounts now exceeds 16.68 lakh, reflecting a 2.72 percent increase from the previous month and a 35.1 percent rise compared to July last year.

Experts attribute the trend to the market's rally in June – Sensex and Nifty gained 6.5 percent each -- and increased penetration in Tier 2/3 cities. They further believe that while volatility has increased in the markets, confidence over the long-term potential remains intact.

Additionally, digital reach has significantly improved, making it easy to open demat accounts from home and this convenience has contributed to the rapid growth in account openings, they say.

Sneha Poddar, analyst at Motilal Oswal Securities, believes that compared to global equity markets, Indian markets have not experienced a significant decline. She noted that while global data and potential sharp corrections could impact the number of new demat accounts, this effect would be short-lived.

Poddar further believes that Indian markets have not corrected as much as global markets and sees no reason for a substantial correction in India, citing strong domestic macroeconomic indicators. She attributes the recent fall to global events and advises monitoring the situation for further developments.

Indian markets have been declining over the last two sessions as global markets corrected sharply. This downturn is due to a disappointing job scenario in the US, raising recession fears, and concerns over a reverse Yen carry trade following an interest rate hike in Japan.

A section of analysts also believe that more new investors are likely to join after the market correction as historically, periods of volatility have provided opportunities for investors to realign their asset allocations.

They suggest, that if valuations become more reasonable, the current turbulent period can be strategically used to gradually increase exposure to equities with a long-term view. Despite current uncertainties, the long-term outlook remains positive due to strong fundamentals, government initiatives, and a stable banking sector, they say.

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